It’s another bumpy day in the cryptocurrency space as headlines continue to fly and as uncertainty remains high.
Ethereum is down 10.5%, while Bitcoin is off 7%. The group is suffering its worst decline since last month. Bitcoin is now testing into prior support, while Ethereum is clinging to its rising trend line.
As we’ll go over in a minute, the technicals showed signs of waning momentum. However, Tuesday’s news doesn’t seem to be helping.
Specifically, federal agents were able to seize most of the Colonial Pipeline ransom payment. Then there’s also reports out that the IRS has been asking Congress for permission to regulate cryptocurrency.
Recovering ransom money seems like a positive, even if it dents the security thesis of Bitcoin. Increased regulations should be a positive too, as it equates to more acceptance.
But it’s not the news that matters as much as the reaction, and clearly the market is having none of it right now.
Ethereum is trading a little differently than Bitcoin – perhaps better – but the price action isn’t all that encouraging.
The waning momentum has been clear. Ethereum is below its 10-day, 21-day and 50-day moving averages, telling us that all of its short- and intermediate-term trends have been to the downside. Further, $2,900 continues to act as resistance.
Tuesday’s break lower shouldn’t be a surprise.
On the plus side, $2,900 is a static level of resistance vs. the lower highs that Bitcoin has been putting in during the same time. Additionally, Ethereum is still above uptrend support, while Bitcoin is now below that same measure.
In any regard, what’s next for Ethereum?
We’re seeing a solid bounce from today’s low and uptrend support. If that level is taken out, we could revisit the $2,100 support area and the 21-week moving average. Below sends Ethereum down to the $2,000 breakout area.
An overshoot could put the 200-day moving average on the table.
On the upside, I’m looking for some sort of smaller timeframe rotation, such as a close above the prior day’s high. But what I really want to see is a move over the 10-day and 21-day moving averages, paving the way for a test of the 50-day moving average and $2,900.
A close above $3,000 and Ethereum could see a strong upside move.
For now, we must play this one defensively as sellers still seem to have momentum over the buyers.