ETH Returns to Sub-$1,200 as Contagion Fear Sends BTC into the Red

Key Insights:

• Bitcoin (BTC) and ethereum (ETH) saw modest gains on Saturday, with BTC extending its winning streak to three sessions.
• A quiet session lacking contagion news provided modest price support at lower trading volumes.
• This morning, sentiment deteriorated as fears of further bankruptcies reignited contagion risk.

Ethereum (ETH) rose by 0.41% on Saturday. Following a 1.00% gain on Friday, ETH ended the day at $1,216. Notably, ETH visited sub-$1,200 for the fourth consecutive session.

A bearish start to the day saw ETH fall to an early low of $1,196. Coming within range of the First Major Support Level (S1) at $1,195, ETH rose to a late high of $1,232. ETH broke through the First Major Resistance Level (R1) at $1,229 before falling back to sub-$1,220.

On Saturday, bitcoin (BTC) rose by 0.06%. Following a 0.01% gain on Friday, BTC ended the day at $16,695. Notably, BTC rose for the third consecutive day while falling short of $17,000 for the fourth time since 2020.

A mixed start to the day saw BTC fall to an early low of $16,538. However, steering clear of the First Major Support Level (S1) at $16,495, BTC rose to a late high of $16,811. Coming up short of the First Major Resistance Level (R1) at $16,926, BTC slipped back to end the day at $16,695.

Following a range-bound Friday, a lack of crypto events left BTC and ETH range-bound for a second day. Contagion and regulatory risk left BTC and ETH within tight ranges as investors awaited news of more crypto platforms impacted by the collapse of FTX.

However, market sentiment soured this morning. Fear of Digital Currency Group (DCG) bankruptcy surfaced, sending the crypto market into negative territory. DCG is the parent company of Genesis Global and Grayscale.

NYU professor Nouriel Roubini took to Twitter over the weekend, warning of a more significant BTC discount.

Roubini tweeted,

Many – 3AC, Alameda – tried that trade and went bankrupt. Discount can get bigger given bankruptcy risk for DCG (given its exposure to Genesis) and no proof that GBTC has the assets it claims to have. Crypto is the Mother of all Scammy Houses of Cards. And it is imploding now!”

The tweet was a stark reminder of what could lie ahead for investors going into the Monday session.

Roubini’s comments came as Grayscale announced it would not share proof-of-reserves, citing BTC security risk.

With trading volumes on the decline, self-custody moves could leave BTC holders at risk of sizeable losses if another FTX goes down.

Investors need to monitor the crypto news wires going into Monday to identify any increased contagion risk. However, investors also need to differentiate between actual contagion risk and speculative chatter.

Ethereum (ETH) Price Action

At the time of writing, ETH was down 1.76% to $1,195. A mixed start to the day saw ETH rise to an early high of $1,225 before sliding to a low of $1,189.

ETH fell through the First Major Support Level (S1) at $1,197.

Technical Indicators

ETH needs to move through S1 and the $1,215 pivot to target the First Major Resistance Level (R1) at $1,233. An ETH return to $1,230 would signal a bullish afternoon session. However, the crypto news wires and the NASDAQ mini will need to provide support.

In the event of an extended rally, ETH would likely test the Second Major Resistance Level (R2) at $1,251. The Third Major Resistance Level (R3) sits at $1,287.

Failure to move through S1 and the pivot would leave the Second Major Support Level (S2) at $1,179 in play. However, barring another extended afternoon sell-off, ETH should avoid sub-$1,100. The Third Major Support Level at $1,143 should limit the downside.

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 $1,242. The 50-day EMA fell back from the 200-day EMA, with the 100-day EMA easing back from the 200-day EMA, delivering bearish signals.

A move through R1 ($1,233) would bring the 50-day EMA ($1,242) and R2 ($1,251) into play. However, failure to move through the 50-day EMA would leave ETH under pressure.

Bitcoin (BTC) Price Action

At the time of writing, BTC was down 0.44% to $16,621. A mixed morning saw BTC rise to an early high of $16,742 before falling to a low of $16,553.

Technical Indicators

BTC needs to move through the $16,681 pivot to target the First Major Resistance Level (R1) at $16,825. A move through the Saturday high of $16,811 would signal a bullish session.

In the event of an extended rally, BTC would likely test the Second Major Resistance Level (R2) at $16,954 and resistance at $17,000. Crypto news updates need to be BTC-friendly to support a return to $17,000.

The Third Major Resistance Level (R3) sits at $17,227.

Failure to move through the pivot would leave the First Major Support Level (S1) at $16,552 in play. Barring another extended sell-off, BTC should avoid sub-$16,000. The Second Major Support Level (S2) at $16,408 should limit the downside. However, negative FTX-related news could send BTC to sub-$16,000.

The Third Major Support Level (S3) sits at $16,135.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bearish signal. This morning, bitcoin sat below the 50-day EMA, currently at $16,944. The 50-day EMA eased back from the 200-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

A BTC move through R1 ($16,825) would give the bulls a run at the 50-day EMA ($16,944) and R2 ($16,954). However, failure to move through the 50-day EMA would leave BTC under pressure and S1 ($16,552) in view.