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Ethereum forming a double top? ETH price loses 12.5% amid Evergrande contagion fears

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ETH price loses 12.5% amid Evergrande contagion fears. On Sept. 20, the price of Ethereum’s native asset, Ether (ETH), fell amid a widespread selloff in the cryptocurrency market, fueled by fears of a growing property bubble catastrophe in China.

On the Coinbase platform, the ETH/USD exchange rate fell as much as 12.52% to $2,911, its lowest level since August 2021. Bitcoin (BTC), Binance Coin (BNB), Cardano (ADA), Solana (SOL), and other prominent tokens all fell in lockstep.

The performance of top ten crypto assets in the past 24 hours. Source: Messari

Following a day of red in both the Asia-Pacific and European indices, the dip mirrored the sentiment in the broader market, with US shares plunging. On the other hand, haven-buying boosted the value of the US dollar and government bonds.

A liquidity problem at Chinese property developer Evergrande was at the heart of Monday’s sell-off. More than $300 billion in debt is owed to creditors by the world’s most indebted property developer. This includes a crucial interest payment date on its offshore debts, which is set for September 23.

According to DW, if the Evergrande collapses, it might pull down a slew of other banks with it. Just like the Lehman Brothers did during the US housing bubble crisis of 2008.

Despite the fact that Ether does not trade in lockstep with global markets, its 30-day correlation with Bitcoin, the most widely traded digital asset with macroeconomic characteristics, is at 0.85. As a result, the cryptocurrency looked to be suffering from a side effect of China’s impending housing crisis.

Bearish pattern triggered

The most recent round of selling in the Ethereum market also generated a traditional bearish pattern, which has a 75% success rate in achieving its downward goals.

The “Double Top” pattern emerges after a strong rally, followed by a pullback, a climb towards the previous peak, and a correction — all while standing above the so-called neckline support. Finally, the price drops below the neckline, aiming for levels as deep as the gap between the peak of Double Top and the neckline.

While painting a Double Top design, Ether looks to be halfway done. The chart below indicates that the cryptocurrency peaked near $4,385 on May 12, dropped to $1,984 at the neckline support, and then climbed to a new sessional high of $4,030 on September 3.

ETH/USD weekly price chart. Source: TradingView.com

If the Double Top pattern holds, the ETH/USD currency might continue to fall toward $1,984 before breaking down. However, a sharp plunge below the $1,984 neckline of ETH/USD does not appear to be possible.

The level is also close to Ether’s 50-week exponential moving average (EMA) (the velvet wave). Which is now at $2,118, providing another level of support for Ether’s bullish leaning. Previously, following greater ETH/USD pullbacks, the wave served as an entry point for bulls.

On a daily timescale, the next support line for Ether occurs at $2,536 near its 200-day EMA (the orange wave). As a result, a sudden pullback from the mentioned level might throw the Double Top setup off.

ETH/USD daily price chart featuring 200-day EMA support. Source: TradingView.com

Fundamentals

Ether is pursuing acceptance in the face of Ethereum’s support for the burgeoning decentralised finance (DeFi) and nonfungible token (NFT) industries. Cathie Wood, the CEO of Ark Invest, suggested at the recent SALT conference that investors should devote at least 40% of their crypto portfolios to Ether.

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