The whole market saw ETH push to a recent high… before plunging into its worst week of the year. This was termed one of the largest occurrences in market history.
The Merge came with the might of a hundred suns, but it quickly petered out. In anticipation of this momentous occasion, ETH prices surged by about 130% from their June lows to their current August highs. However, the enthusiasm surrounding ETH has quickly dissipated, with the token falling by almost 25% last week to settle at roughly $1,3k. We’re not saying it wasn’t a success overall, but we do have some worries.
Decentralization is one of the most significant ones. alternatively, lack. In the wake of the Merge, only two addresses—Coinbase and Lido—have contributed to the network, accounting for over 40% of all blocks added; nearly 300 blocks have been validated; and nearly 50% of the nodes are hosted on Amazon Web Services, all of which are centralized institutions subject to government control.
There is apprehension that the network’s centralization might increase since a small number of addresses hold a disproportionately large amount of staked ETH. There is concern that ‘transaction censorship’ would affect blockchain networks. Time will tell how this plays out, but if prices are any indicator, it might be a rough ride.
Before the Merge, Ether futures financing rates on the biggest derivatives platforms dropped below zero. BitMex hit -0.6%.
The funding rate is a percentage of short and long position charges. The difference between the perpetual futures contract price and the spot price determines the fee. If the financing rate is positive, traders consider the market bullish. A negative funding rate shows market pessimism. An example:
Ether funding averages -0.1%. Short ETH traders are willing to pay long positions $1,000 every eight hours (based on when platforms recalculate the funding rates). This shows traders’ confidence in a post-Merge Ether price drop.
Negative financing rates increase the risk of a short squeeze. A short squeeze occurs when an asset increases and short traders cover their position or are forced to by margin calls, boosting the asset’s price.
Ether faces downside threats from Bitcoin (BTC), the biggest cryptocurrency by market capitalization, and negative financing rates.
ETH/BTC decreased to 0.078 BTC on September 15 after touching 0.085 BTC a week earlier. The pair’s price rose 75% in less than 3 months before dropping.
“ETH’s underperformance before the merger shows that some traders are front-running a hypothetical “sell-the-news” scenario,” stated Arcane Research.
Other technical analysts think that the long-term chart of Ether, which shows a symmetrical triangle, shows that the price could drop by 50% in the next few weeks.
After a time when the price is stable, symmetrical triangles often lead to the price going in the same direction as before. Ether’s price action looks like the shape of a negative symmetrical triangle, especially when the cryptocurrency’s price dropped by 80% from its high point in November 2021 to its low point in January 2022.
If you take the triangle’s breakdown point and subtract its highest point from it, you can figure out where it’s supposed to go down. Based on this analysis, the revenue goal for ETH in 2022 is $850.
CoinShares reported a large drop in Bitcoin and Ethereum-based investment products in the following weekly report. Ether withdrawals were $61.6 million for the week ending September 9, compared to Bitcoin’s $13 million.
Recent increases in Ethereum’s balance on crypto exchanges imply sell-the-news. The Exchange received 22,723.289 ETH, a one-month high (7-day MA). When traders plan to sell bitcoin, they enhance exchange deposits. Increasing ETH on exchanges increases risk.
Cover image: Melting Ethereum coin – Universal Public Domain.
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