Ethereum forming a double top? ETH price loses 12.5% amid Evergrande contagion fears

The prices of Ethereum’s native asset Ether, (ETH), plunged on Sept. 20, amid a wide selloff in cryptocurrency markets. This was due to concerns about a possible housing bubble crisis in China.

On the Coinbase exchange, the ETH/USD exchange rate fell as much as 12.52%, to $2,911, hitting its lowest level since August 2021. Other top crypto tokens fell in tandem with Bitcoin (BTC), Binance Coin(BNB), Cardano [ADA], Solana (SOL), etc.

The past 24 hours performance of the top ten cryptocurrency assets Source: Messari

The market mood was mirrored in the US, as equities fell following a day of red for both the Asia-Pacific indexes and the European indexes. However, haven-buying led to a surge in the U.S. Dollar and government bonds.

The liquidity crisis at Evergrande, a Chinese property developer, was the driving force behind Monday’s sale-off. The obligations to creditors of the world’s largest property developer are more than $300 billion. This includes the Sept. 23 deadline for interest payments on its offshore bonds.

DW pointed out that if Evergrande falls, it could bring down many banks with it, just like the Lehman Brothers did in 2008’s housing bubble crisis.

While Ether trades in sync to global markets, its 30-day correlation to Bitcoin, the most prominent digital asset, is near 0.85. The altcoin appears to have suffered an indirect consequence of China’s housing crisis.

Bearish pattern triggered

A classic bearish pattern was also created by the latest Ethereum market selling. It has a 75% success rate in hitting its downside targets.

The “Double Top” pattern is a result of a strong rally, which pulls back and rises again towards its previous peak. It then corrects all the while remaining atop the neckline support. The price eventually falls below the neckline, and targets levels as far as the distance between Double Top and the neckline.

Ether seems to be half-way through while painting a Double Top. Below is the chart of Ether’s cryptocurrency. It reached a high of nearly $4,385 in May, fell to $1,984 as neckline support, and then rose again to $4,030 in September.

Weekly chart of the ETH/USD exchange rate. Source: TradingView.com

The Double Top pattern could continue to flourish, and the ETH/USD rates may extend their selloff towards $1,984 in order to make a breakaway move. It is unlikely that ETH/USD will drop below the $1,984-neckline.

This level is also close to Ether’s 50 week exponential moving average (EMA), which is the velvet wave, currently at $2,118. This support layer helps protect Ether’s bullish bias. The wave was an entry level for bulls after sharper USD/ETH pullbacks.

Related: Are Ethereum killers real or pretenders? Ether is still the king of cryptocurrency for now

On a daily basis, Ether’s next support line appears to be near its 200-day EMA (the Orange Wave) at $2,536. A sharp pullback from this level could result in the end of the Double Top setup.

Daily price chart for ETH/USD with 200-day EMA support. Source: TradingView.com

Fundamentals

Ether is still focusing on adoption to counter Ethereum’s support for the booming nonfungible token industry (NFT), and decentralized finance (DeFi). Ark Invest CEO Cathie Wood stated that investors should allocate at most 40% of their crypto portfolios for Ether during the recent SALT conference.

Ark Investment CEO @CathieDWood is growing in confidence in Bitcoin and Ethereum. The firm projects a 10x increase in crypto exposure over the next five year. It will likely split its crypto exposure to 60% BTC and 40% Ethereum. https://t.co/VQCZhVCD3m
— Cointelegraph (@Cointelegraph) September 15, 2021

Exempts from Wood’s Statement:

“I am fascinated by what is happening in DeFi. It is collapsing financial infrastructure costs in a way I know the traditional financial sector does not appreciate right at the moment.” You should do your research before making any investment or trading decision.
https://cointelegraph.com/news/ethereum-forming-a-double-top-eth-price-loses-12-5-amid-evergrande-contagion-fears

Charles Griffin

Charles Griffin – Business and Transportation I am Charles Griffin with more than 10 years of experience in the Stock market industry, I am energetic about Finance and Business news, started my career as an author then, later climbing my way up towards success into senior positions. I can consider myself as the backbone behind the success and growth of Magnewspress.com with a dream to expand the reach out of the industry on a global scale. I am also a contributor and an editor of the Business News category. I experienced a critical analysis of companies and extracted the most noteworthy information for our vibrant investor network.  

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