Yesterday in the morning, we could witness the most spectacular upgrade in the history of cryptocurrencies. The huge Ethereum ecosystem transitioned to a proof-of-stake consensus protocol. Cryptocurrency users and traders waited for this moment for years as the final date of the upgrade and moving it to the production environment were postponed several times.
Many things could have gone wrong, but they didn’t. The operation went smoothly and was a huge engineering success. So what happened to the ETHUSD and ETHBTC? It crashed…
The Ether price dove over 10% on Thursday to $1,453 when writing this article. The slide continues. Despite improving its efficiency and speed and reducing power consumption by 99.99%, ETH failed to gain any traction against BTC.
ETHBTC fell 7.8% yesterday and another 1.1% today, approaching a critical support level at 0.0727 we mentioned in our Trading Idea last week.
Veteran traders would say that the Merge was priced in, meaning traders already included the possibility of great success in the current market value of ETH tokens. Still, the scale of the sell-out is impressive. Ethereum bulls should only hope that the support at the lowest levels since August hold.
What’s worrying is the complete panic at the Ethereum futures market. The funding rates at many platforms dropped below zero, a clear indicator of a bear market.
The technical analysis shows that ETHUSD may drop 50% in the upcoming weeks. If a double-top pattern materializes, the price may fall by 50% in the next month or so. The world of finance expects the most significant interest rate hike in 40 years. The benchmark interest rate may go to 3.5%.
Suppose the cryptocurrency price dips low enough, and the panic continues. In that case, we may even experience the market going up on the day of the Federal Reserve decision against the equity markets, which would be a big surprise and could spark a new stage for crypto.
ETHUSD may continue to fall as the symmetrical triangle pattern formed in November 2021 (at the peak of crypto markets so far) still fits the reality after ETHUSD has lost 80% of its value. If this scenario happens, ETHUSD may drop as low as $900 or even $800 in 2022.
Of course, bitcoin maximalists are cheering for Ether to crash, as it’s the main competitor for becoming the future of money and the leading cryptocurrency. Both blockchains are becoming more and more different, and since yesterday they have operated under a completely different philosophy.
Today it seems obvious that we watched a classic “buy the rumors, sell the news” example. For several years the Ethereum price was driven by the promise of adopting the more efficient PoS protocol, which is more scalable, more secure, and could make ETH a deflationary currency. No, the bears took over, and until Ethereum proves that after the upgrade, its substantially more helpful and its intrinsic value increased, the disappointment may continue.
On the other hand, its main rival, the very conservative bitcoin, wins the race. The story of being the original cryptocurrency, founded by an anonymous genius who gave away its invention to the community, is still the most compelling narrative in the cryptocurrency markets.