Two days after its successful proof-of-stake (PoS), rehearsal on Ethereum’s longest-running testnet, “Ropsten,” Ether (ETH), Ethereum’s native token (ETH) began its decline against Bitcoin.
On June 10, the ETH/BTC declined by 2.5% to 0.0586. The downside movement of the pair was part of a correction that began a day earlier when it reached a peak of 0.0598. This suggests that there is less bullish sentiment than the optimistic “Merge” update.
Chart of the four-hour price of ETH/BTC Source: TradingView
The selloff took place near ETH/BTC’s 50-4H exponential moving mean (50-4H EMA, the red wave) at 0.06. As shown in the chart, this technical resistance has been a cap to the pair’s bullish efforts since May 12, as you can see.
What is Stripped Ether doing behind ETH/BTC’s weakness?
The strong bearish technicals of Ethereum appeared to have overcome its PoS testnet breakthrough. Delphi Digital suggests that the problem could be due to the continuing imbalance between Ether, its supposedly-pegged token Staked Ether(stETH), or both.
The crypto research firm added that “Testnet Merge failed, but the ETH market didn’t react.”
“Concerns about the ETH-stETH connection are swirling as the well-being of financial institutions post Terra is being questioned.”
If the Merge is delayed, DeFi platforms that stake Ether in Ethereum’s PoS smart contracts will not be allowed to access their funds. As they try to repay their stakeholders, they run the risk of running into ETH liquidation problems.
These DeFi platforms could be forced to trade their stETH holdings in order to get ETH. If they run out stETH, then the selling pressure could shift to other holdings like ETH.
Swissborg could exit their entire stETH portfolio if they wanted to. This would also consume 25% of the remaining ETH liquidity. Swissborg also contributes a few thousand Eth to this pool… 6/ pic.twitter.com/sWIdzMWNvU
— Dirty Bubble Media (@MikeBurgersburg), June 8, 2022
Ether prices have more downside
Technically, Ether’s recent decline against Bitcoin pushed ETH/BTC lower than a multi-month support of 0.0589. This exposes the pair to correction in June and Q3/2022.
As shown in the chart below, the now-broken support level is coincident with the Fibonacci Retracement graph’s 0.382 Fibline. If ETH/BTC continues to correct, its next downside target is around the 0.5 Fib graph line — approximately 0.0509, a new low in 2022.
Weekly price chart for ETH/BTC Source: TradingView
The 0.0509-level is located near ETH/BTC’s 200-week exponential moving mean (200-week EMA, the blue wave) as well its multi-year ascending trendsline support. This support confluence could be the point where ETH/BTC ends its bearish cycle and allows it to focus on 0.0589 as its interim rebound target.
Related: Why Bitcoin is regaining its crypto-market dominance
A further drop below the confluence could cause Ether to look at 0.043 BTC (nearly the 0.618 Fib Line) as its next downside target. This would be down nearly 25% since June 10.
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