ETH Tumbles to Sub-$1,400 to Give the Bears a Look at $1,250

Key Insights:

• On Thursday, ethereum (ETH) tumbled by 6.20% to end the day at $1,437.
• Shanghai upgrade silence left the White House to send ETH and the broader crypto market deep into the red on new tax crypto rules.
• Technical indicators turned more bearish, with sub-$1,300 in view.

Ethereum (ETH) slid by 6.20% on Wednesday. Following a 1.92% fall on Wednesday, ETH ended the day at $1,437. ETH ended the day at sub-$1,500 for the first time since January 13.

A range-bound start to the day saw ETH rise to an early morning high of $1,546 before hitting reverse. Falling short of the First Major Resistance Level (R1) at $1,561, ETH tumbled to a late Thursday low of $1,407. ETH fell through the Major Support Levels to end the day at $1,437. On Thursday, the Third Major Support Level (S3) at $1,446 delivered late resistance.

Fed Fear, Lawmakers, and the White House Return ETH to Sub-$1,400

It was another quiet session on Thursday. There were no updates on the delayed Shanghai upgrade to distract investors from the crypto news wires.

On Thursday, the US administration delivered a blow to ETH and the broader crypto market. The White House announced plans to end a crypto tax strategy in the 2024 budget. According to the announcement, the White House plans to save $24 billion by removing a crypto tax subsidy relating to crypto-related transactions. According to the White House Fact Sheet,

“A crypto investor – unlike an investor in stocks or bonds – can sell a cryptocurrency at a loss, take a substantial tax loss to reduce their tax burden, and then buy back that same cryptocurrency the very next day.”

Fed Fear added to the bearish mood, with news of another Main Street bank in trouble pushing investors into the safe havens. On Thursday, SVB Financial Group (SIVB) announced a $1.75 billion share sale to address balance sheet woes, spooking investors following the demise of Silvergate Bank.

On Thursday, the NASDAQ Composite Index slid by 2.05%, with the Dow and S&P 500 seeing losses of 1.66% and 1.85%, respectively. This morning, the NASDAQ mini was down 32 points.

The Day Ahead

US economic indicators will influence the afternoon session. The all-important US Jobs Report will be in the spotlight. Following hawkish Fed Chair Powell’s testimony on Tuesday, another spike in nonfarm payrolls would fuel bets of a more aggressive Fed interest rate trajectory to bring inflation to target.

Beyond the stats, investors need to track the crypto news wires. We expect heightened sensitivity to regulatory activity and US lawmaker chatter. A quiet session would leave Binance, FTX, Silvergate Bank, and SVB Financial Group updates and news from the ongoing SEC v Ripple case to move the dial.

Further comments relating to the classification of ETH as a security could also test investor sentiment. On Thursday, the New York State filed a case against KuCoin for breaching securities laws by offering tokens, including ETH.

Ethereum (ETH) Price Action

At the time of writing, ETH was down 2.10% to $1,407. A bearish start to the day saw ETH slide from an early high of $1,438 to a low of $1,392.

Technical Indicators

ETH needs to move through the $1,463 pivot to target the First Major Resistance Level (R1) at $1,520 and the Thursday high of $1,546. A return to $1,500 would signal a bullish session. However, Shanghai upgrade news and the crypto news wires should be ETH-friendly to support a breakout.

In the event of an extended rally, the bulls would likely test the Second Major Resistance Level (R2) at $1,602. The Third Major Resistance Level sits at $1,741.

Failure to move through the pivot would leave the First Major Support Level (S1) at $1,381 in play. However, barring another broad-based crypto market sell-off, ETH should avoid sub-$1,300. The Second Major Support Level (S2) at $1,324 should limit the downside. The Third Major Support Level (S3) sits at $1,185.

Looking at the EMAs and the 4-hourly candlestick chart (below), it was a bearish signal. Ethereum sat below the 50-day EMA, currently at $1,554. The 50-day EMA pulled back from the 200-day EMA, with the 100-day EMA falling back from the 200-day EMA, delivering bearish signals.

A move through R1 ($1,520) would give the bulls a run at the 50-day EMA ($1,554). A breakout from the 50-day EMA would send a bullish signal. However, failure to move through the 50-day EMA ($1,554) would leave the Major Support Levels in play.