Source: PaxForex Premium Analytics Portal, Fundamental Insight
Traders poured into Bitcoin and Ethereum over the past few weeks amid the regional banking crisis in the US and banking woes in Europe. Contagion fears have eased during the past trading days, but the issues that caused the collapse of the second-biggest and third-biggest bank in US history remain. Market participants should brace for more bank failures, as cryptocurrency traders have their structural problems to worry about, like the failure of Signature Bank and problems with stablecoins that broke parity.
Ethereum saw its supply on exchanges plunge by 90%+ to the lowest level since 2015, the year it launched. Regulators struggle to classify Ethereum as a security or a commodity, adding an unnecessary headwind to the cryptocurrency sector. Uncertainty resulted in a mass exodus of Ethereum from exchanges and into private wallets. The SEC claims Ethereum is a security, while the CFTC labels it a commodity. It appears that neither of the US regulators cares about Ethereum other than wanting regulatory oversight.
The SEC lawsuit against Binance, the biggest cryptocurrency exchange globally, and its founder Changpeng Zhao add downside pressure on the entire sector. Adding to bearish fundamental developments are comments by Nvidia that cryptocurrencies add nothing useful to society while consuming massive amounts of power. While Nvidia makes chips powering crypto mining, its shift to the artificial intelligence sector brought a shift of allegiance. It echoes what many regulators believe, which could result in counterproductive regulations in many countries.
More bearish news for Ethereum comes from decentralized derivatives exchange (DEX) dYdX, which plans to leave Ethereum for Cosmos, citing the lack of stability of Ethereum. It follows SushiSwap, which left Ethereum last month and could lead to more projects leaving Ethereum, which struggles with issues that third-generation blockchains have already solved. The longer-term outlook for Ethereum remains bearish, and traders should sell the rallies.
The forecast for the ETH/USD remains bearish after a horizontal resistance area rejected a continuation of the 500+ point rally. Volatility could increase due to conflicting fundamental forces, the flat Kijun-sen and the ascending Tenkan-sen. Adding to downside pressures is the slowly contracting and flattening out Ichimoku Kinko Hyo Cloud. Traders should also monitor the CCI after it has recorded a lower high in extreme overbought territory followed by a breakdown. This technical indicator has plenty of downside potential, and a move below zero could spark an acceleration of the current contraction in price action. Can bears pressure the ETH/USD to the downside and force price action into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the ETH/USD remain inside the or breakdown below the 1,685 to 1,780 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,725
- Take Profit Zone: 1.460 – 1,520
- Stop Loss Level: 1,810
Should price action for the ETH/USD breakout above 1,780, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,810
- Take Profit Zone: 1,855 – 1,900
- Stop Loss Level: 1,780
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