Ether Takes a Hit Amid Wider Crypto Market Downturn and Increased Bond Yields
Summary:
Ether, the native cryptocurrency of Ethereum, has declined by 1.66% to $3,700, reflecting a wider downturn in the crypto market. This has been attributed to increased bond yields due to weaker demand for short-term Treasury notes and a trend of large-scale Ether holders reducing their stake. The rise in bond yields has triggered a move from riskier investments to more stable options like secured investments and a stronger dollar, leading to a decrease in Ether demand. The appearance of certain market patterns suggests potential future downsides unless a decisive rebound occurs.
Ether (ETH), the native cryptocurrency of Ethereum, has experienced a decrease, falling 1.66% to $3,700 on May 30. This is reflective of a wider downturn in the crypto market, which saw total capitalization reduce by around 2.50% on the same day. The slump in Ether value has been driven by increased bond yields reflecting weaker demand for short-term Treasury notes, as well as a trend of large-scale ETH holders reducing their stake.
Following a disappointing auction of U.S. Treasury notes, where the $183 billion in 2-, 5-, and 7-year notes saw lukewarm interest, bond yields rose sharply. This climb in bond yields has appeared to correspond with the downward motion of Ether's market. The high bond yields, which promise higher returns paired with the belief that the Federal Reserve will only cut interest rates once in 2021 have placed a burden on the crypto market.
Typically in times of a stronger U.S. dollar and rising yields on secured investments like Treasuries, investors tend to move their money from riskier investments like cryptocurrencies to more stable options, resulting in the drop in Ether demand and subsequently its price.
Looking at the internal dynamics of Ethereum, a notable reduction in ETH owned by the wealthiest members of the scheme has been observed. Specifically, Ethereum held by entities with 1 million to 10 million ETH have dropped by 1% in the last day, a contrast to the increasing stockpile for those holding between 100,000 and 1 million ETH, illustrating the move of assets from larger to smaller stakeholders.
Ether's decline on May 30 as part of a correction process that initiated on May 29 when Ether's four-hour relative strength index (RSI) approached the overbought area mark of 70. This is usually followed by a consolidation or correction phase, which we see playing out now. Further to this, the decreasing correlation between Ether’s price and its RSI, suggesting a loss in buying momentum, has surfaced as the price creates higher highs but RSI forms lower peaks.
The presence of the double top pattern, defined by two consecutive high points with a minor drop in between, indicates potential future negatives for Ether, especially when the price breaches below the neckline support. Applying this concept to the current situation gives a neckline support target of $3,684. If it goes beyond this level, the price could drop to $3,400 in June, a level matching another ETH support line – the 200-4H exponential moving average (200-4H EMA). However, a decisive rebound from the neckline support could nullify the double top pattern, with ETH's value potentially climbing back to its early May resistance point of around $3,850. This article doesn't provide investment advice or recommendations, investing and trading involve risk, and readers are encouraged to conduct their own research before making a decision.
Published At
5/30/2024 3:31:11 PM
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