With the successful completion of “The Merge,” the transition to a Proof-of-Stake (PoS) consensus, Ethereum has achieved one of its most important milestones. Market investors expected significant price activity during this event, but the outcome is quite disappointing.
The Ethereum Market Turns Bearish
Although excitement during and immediately after the merge, as the changeover is often known, drove Ethereum above $1,643, the upswing was fleeting, and prices quickly fell below the $1,600 level.
At the time of publication, Ethereum had a market valuation of about $185 billion and a 24-hour trading volume of $27 billion, up roughly 53% from the previous day. According to chart analysis, investors might have anticipated a price drop after the merge. Hence, they might have sold their holdings before the prices went down.
Meanwhile, according to CryptoRank, an analytics platform, there was a significant inflow of Ethereum during the days before the merger. In the days before the merger, around 700,000 to 1.7 million ETH were traded on various exchanges. This type of inflow usually occurs when investors are selling their assets.
“The Merge” Was A No Event For Ethereum
Despite surpassing the $1,600 price level, Ethereum was rejected due to various factors. One of these was the lack of activity in the market before The Merge as trading firm QCP Capital recorded.
The event went from being a potential price catalyst to a volatility killer. The most significant factor that affected the market was the emergence of PoS miners and the ETH forks. These two groups attempted to take a portion of the cryptocurrency’s market share.
The emergence of the ETH forks was considered a disappointment as the proponents could not convince the market that they could be the replacement for the ETH PoS. According to QCP Capital, the group considered the release of the whitepaper of the ETHW as a potential disaster as nine pages were intentionally left black. The chain ID controversy also added to the negative effects of the event.
Despite the various factors that affected the market, the short-term outlook for cryptocurrency remains positive. QCP Capital also notes that the market is still expected to experience volatility as large players exit their positions. However, they are not expecting a quick move in the market following the merge.
ETH Price Technicals Hint at a 50% Breakdown
The price of Ether is expected to drop by 50% in the coming weeks as it faces a symmetrical triangle formation on its longer-time frame chart.
A symmetrical triangle can signal that the price will continue moving in the same direction following a significant decline. That is the case with Ether, which has already suffered a significant decline since its November 2021 highs.
A downside target for Ether is determined by taking the maximum height of the symmetrical triangle from its breakdown point. That means that its profit target in 2022 is around $850.
BTC Capital Rotation
Bitcoin, the world’s leading cryptocurrency, is expected to gain further support from a renewed buying interest. On the daily chart of ETH/BTC, the pair dropped to around 0.078 BTC on September 15, after it had topped out at 0.085 BTC. This correction came after the pair enjoyed a strong bull cycle, with its price rising by more than 75% within three months.
According to a report by the research firm Arcane Research, the underperformance of the pair ahead of the proposed merger suggests that some traders are positioning themselves for a possible sell-the-news event. However, it noted that the exact nature of the deal remains unclear.
Another report by the investment management firm, CoinShares, revealed that the capital of cryptocurrencies such as Bitcoin and Ethereum has significantly decreased. In the week ended September 9, the total withdrawal from funds related to Bitcoin was $13 million, while that of Ethereum was $61.6 million. More sell-the-news sentiment emerged after the increase in the balance of Ethereum on various exchanges. The total inflow of over $22 million into the exchange was the highest since the beginning of the month.
When these types of transactions occur, the rising balances on exchanges increase the risks associated with this practice. In other words, if the ETH balance on the exchange goes up, then the price of the asset could fall.