Bitcoin lost over 2,000 points in market value in the last 24 hours. Likewise, Ethereum took a 7.5% nosedive, erasing recent gains. The downturn puts BTC and ETH at risk of a steep correction.
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Volatility struck the cryptocurrency market ahead of Ethereum’s transition to Proof-of-Stake. As the Merge approaches, it appears that Bitcoin and Ethereum are preparing for a significant price movement.
Bitcoin and Ethereum at Risk
Bitcoin and Ethereum have retraced more than 7% over the past 24 hours, increasing the risk of a stepper correction.
The recent sell-off may have surprised investors as more than $220 million worth of long positions were liquidated. The report that US inflation fell by less than analysts’ expectations in August appears to have overweighted the mounting speculation about Ethereum’s transition to Proof-of-Stake. Now, it remains to be seen whether “the Merge” could become a “sell the news” event.
The 50-day moving average rejected the pioneer cryptocurrency’s uptrend. As prices continue to decline, the nearest support level appears to be the lower boundary of a parallel channel developed over the past month on the daily chart. If this level at $18,700 fails to hold, a downswing towards June 2019’s high at $13,880 can be expected.
Bitcoin needs to gain the 50-day moving average at $22,000 as support to have a chance of invalidating the pessimistic outlook and advancing to the 200-day moving average at $29,000.
Ethereum also spells trouble as it appears to create a head-and-shoulders pattern on its daily chart. A spike in selling pressure that sends ETH below $1,500 will likely validate this bearish formation. If this were to happen, a 30% correction to $1,000 could be triggered.
It is worth noting that Ethereum needs to make a U-turn and print a daily close above $1,800 to invalidate the bearish thesis. If this were to happen, ETH would likely gain the strength to advance towards the 200-day moving average at $2,100.
Given the amount of anticipation surrounding the Merger, a spike in volatility can be expected. It is imperative to wait for Ethereum’s transition to Proof-of-Stake to better understand where the trend will resolve.
Disclosure: At the time of writing, the author of this piece owned BTC and ETH.
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