ETH at Risk of a Slide to Sub-$1,700 on the Ongoing US Debt Crisis

Key Insights:

• On Friday, ETH ended a six-day losing streak, rising by 0.72% to end the session at $1,808.
• Post-Shapella upgrade staking statistics supported a bullish session, though the ongoing US debt crisis and US economic indicators capped the upside.
• However, the technical indicators remained bearish, signaling a return to sub-$1,700.

Ethereum (ETH) rose by 0.72% on Friday. Partially reversing a 2.60% loss from Thursday, ETH ended the day at $1,808. Significantly, ETH ended a six-day losing streak. However, ETH fell short of the $1,850 handle for the second consecutive session.

After a mixed start to the day, ETH fell to a mid-morning low of $1,738. ETH fell through the First Major Support Level (S1) at $1,763 before rising to a late-session high of $1,817. However, falling short of the First Major Support Level (R1) at $1,835, ETH eased back to end the session at $1,808.

US Economic Indicators and the Debt Ceiling Crisis Tested Sentiment

US consumer sentiment and expectations numbers for May drew interest as the markets monitored debt ceiling updates from Capitol Hill.

The Michigan Consumer Sentiment Index fell from 63.5 to 57.7, with the Expectations Index down from 60.5 to 53.4. Economists forecast more modest declines to 63.0 and 59.8, respectively.

Consumer jitters about the economic outlook and the US debt crisis weighed. Inflation expectations were mixed. While consumers expect year-ahead inflation to soften from 4.6% to 4.5%, consumers project long-run inflation expectations to rise from 3.0% to 3.2%.

The lack of progress toward raising the US debt ceiling contributed to the bearish mood. On Friday, the NASDAQ Composite Index fell by 0.35%, with the S&P 500 and the Dow seeing losses of 0.16% and 0.03%, respectively.

However, staking statistics delivered a bullish Friday session.

Staking Stats and a Surplus Staking Balance Signaled a Bullish Session

According to CryptoQuant, staking inflows eased modestly on Friday, falling from 216,704 ETH to 215,712. Significantly, staking inflows were above 200,000 for the third consecutive day.

The total value-staked continued rising, with an ETH return to $1,800 supporting the upward trend. However, the latest surge in staking inflows was the driving force behind the current acceleration in total value staked.

Overnight, the withdrawal profile was relatively bearish. Principal withdrawals climbed to above-normal levels. Withdrawal projections for the morning session are also bearish, with principal ETH withdrawals expected to trend higher.

Despite the bearish withdrawal profile, the surge in staking inflows supported a higher-than-normal staking balance. On Friday, the net ETH staking balance slipped from a surplus of 199,119 ETH to a 190,440 ETH surplus, equivalent to $345.35 million. Deposits totaled 221,590 ETH versus withdrawals of 31,150 ETH.

According to TokenUnlocks, total pending withdrawals stood at 72,790 ETH, equivalent to approximately $130.89 million.

The Day Ahead

Investors should continue to monitor the staking statistics and the withdrawal profile. A spike in principal withdrawals and a sharp decline in staking inflows would be bearish.

However, the US debt ceiling crisis will also provide direction, with a US debt default still plausible.

The crypto news wires will continue to influence. SEC v Ripple case-related chatter will move the dial, with Binance and Coinbase (COIN) also in focus.

On Friday, Binance announced plans to withdraw from the Canadian market, saying,

“Unfortunately, today we are announcing that Binance will be joining other prominent crypto businesses proactively withdrawing from the Canadian marketplace.”

Binance.US and Coinbase are currently facing lawmaker and regulatory scrutiny in the US.

Ethereum Price Action

At the time of writing, ETH was down 0.51% to $1,799. A mixed start to the day saw ETH rise to an early high of $1,817 before falling to a low of $1,798.

ETH Technical Indicators

Resistance & Support Levels

ETH needs to avoid the $1,788 pivot to target the First Major Resistance Level (R1) at $1,837. A move through the Friday and the morning high of $1,817 would signal a breakout session. However, ETH staking statistics and US debt ceiling-related news must support a breakout.

In the event of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at $1,867 and resistance at $1,900. The Third Major Resistance Level (R3) sits at $1,946.

A fall through the pivot would bring the First Major Support Level (S1) at $1,758 into play. However, barring another risk-off-fueled sell-off, ETH should avoid sub-$1,700. The Second Major Support Level (S2) at $1,709 should limit the downside. The Third Major Support Level (S3) sits at $1,630.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bearish signal. Ethereum sat below the 50-day EMA, currently at $1,840. The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

An ETH move through R1 ($1,837) and the 50-day EMA ($1,840) would give the bulls a run at the 100-day ($1,863) and R2 ($1,867). However, failure to move through the 50-day EMA ($1,840) would leave S1 ($1,758) in view.

A breakout from the 50-day EMA would send a bullish signal.