The native token of the Ethereum blockchain is trading near $1,758 at the time of writing, down 6% on a 24-hour basis. The cryptocurrency hit a three-week low of $1,721 early today, peaking above $4,000 in May, according to CoinDesk 20 data. Other prominent altcoins like XRP, gimbal, uniswap, chain link, and stellar his nursing declines around 10%. Bitcoin, the crypto market leader, is down 5% to $29,700.
“We’re seeing risk-off moves in stocks, FX and commodities,” said Edmond G., head of trading at B2C2. “Crypto is not immune to traditional market sentiment and is also stuck in the lower legs. So far we see little movement [higher in ETH] as we move towards the Ethereum Improvement Proposals (EIP) 1559 upgrade proposed [for] Aug 4.”
Global stock markets came under selling pressure on Monday, as the dollar rose on concerns that a rebound in coronavirus cases would derail the global economy. As a result, bitcoin and crypto, which are at the far end of the risk curve, suffer losses.
According to some analysts, Ethereum’s imminent upgrade aims to burn some of the transaction costs and make ether less inflationary.
“The ether feed burn would be significant even with the growth of the tier 2 scale solutions,” said Noelle Acheson, head of Market Insights at Genesis Trading. “Whatever amount is burned will be more than what is currently being burned, so the upgrade will reduce supply growth.”
Acheson said that while the upgrade won’t directly reduce ether transaction costs, a sour spot for DeFi protocols and merchants, it will make them “more transparent and manageable.”
However, Delta Exchange CEO Pankaj Balani said markets had priced in the bullish EIP story earlier this year.
Ether nearly doubled to $4,000 in the four weeks to mid-May, even as bitcoin traded between $50,000 and $60,000. The disconnection of Ether was mainly driven by the optimism surrounding the EIP upgrade.
“Crypto markets are now on a slow grind lower and vulnerable to negative macro news,” Balani said in a WhatsApp call. “Ether and other altcoins will see carnage as bitcoin slides to $20,000.”
The chances of bitcoin falling that low and destroying the broader market have increased, with the cryptocurrency looking to gain a foothold below $30,000. “When a price falls and stays flat at the lows, it forms a ridge,” trader and analyst Alex Kruger says the market is doomed. “You can see that in most of the charts over the past 24 hours.”
According to Patrick Heusser, head of trading at Crypto Finance, $29,000 and $1,700 are critical supports for bitcoin and ether, respectively. “How low can it go? Probably up to $20k,” he said. “If you look at the liquidity pool structure, there wasn’t much trading on the way up, except for a little bit around $23,000.”
Ether could face stronger selling pressure as blockchain data shows greater flow of coins to exchanges. “We see lending platforms like BlockFi sending large amounts of ETH to Coinbase, possibly for liquidation,” said Alex Svanevik, CEO of blockchain data company Nansen.
The only positive news for crypto bulls is that the market is seeing low volumes as they grind lower. “It may indicate that sellers are exhausted and that the market is waiting for positive news,” Heusser said.
Furthermore, equity markets are showing signs of stability at the time of going to press. European markets are trading higher and futures linked to the S&P 500 are pointing to a positive open with a gain of 0.60%. “It could be a bounce time for crypto as the stock market panic appears to be over,” said Kruger. “It makes sense to move stop loss on bitcoin shorts higher to $31,000.”