Ethereum Price Correction Amid Market Concerns
The cryptocurrency market is currently facing uncertainty due to concerns about Grayscale’s potential sale of its Bitcoin holdings. This has led to a sell-off in the market, including the second-largest cryptocurrency, Ethereum, which has entered a correction phase after reaching a local top at $2700.
Within two weeks, the price of Ethereum has dropped by 9% and is currently trading at $2467. Additionally, future traders are anticipating a prolonged correction for Ethereum based on the increased implied volatility and option writing for the coming months.
Expanding Channel Pattern Indicates Uncertainty
- The formation of an expanding channel pattern reflects increased uncertainty among market participants.
- A healthy retracement in ETH price keeps the overall trend bullish.
- The intraday trading volume in Ether is $4.63 Billion, indicating a 39% loss.
Ethereum’s price recovery over the past two months can be observed through an expanding channel pattern. The coin price has experienced rebounds from the trendlines within this pattern, indicating that traders have closely followed its structure. On January 12th, there was a reversal from the upper trendline, initiating a new bear cycle within the channel. Currently, Ethereum is trading at $2469 and attempting to hold above the local support level of $2400.
Implied Volatility and Option Writing Signal Correction
According to Deribit Insight data, Ethereum’s implied volatility (IV) has significantly declined over the past week. This decline is largely driven by structured call selling in both markets.
This change in strategy suggests that some investors may be exiting long positions or engaging in overwriting strategies against their Ethereum holdings. Notable transactions include the selling of calls with various strike prices. The heavy call selling at the psychological level indicates that option traders believe Ethereum is less likely to surge higher in the coming months and may remain in a sideways or correction trend.
Will ETH Price Correction Continue?
If the broader market continues to exert selling pressure, Ethereum’s price is likely to break the immediate support level of $2400. This could lead to a further fall of 6.5% to retest the lower trendline of the expanding channel pattern at $2300. A breakdown of this trendline would intensify supply pressure and potentially cause the price to drop to support levels at $2140 and $1920.
- Moving Average Convergence Divergence: A bearish crossover between MACD and the signal line reflects an active correction sentiment in the market.
- Bollinger Band: The upper boundary of the Bollinger band going flat reflects a weakening in bullish momentum.
Hot Take: Ethereum Faces Correction Amidst Market Uncertainty
The cryptocurrency market, including Ethereum, is experiencing a correction phase due to concerns about Grayscale’s potential Bitcoin sell-off. Ethereum’s price has dropped by 9% within two weeks, and future traders anticipate a prolonged correction based on increased implied volatility and option writing. The formation of an expanding channel pattern reflects uncertainty among market participants. If selling pressure continues, Ethereum’s price may break immediate support levels and experience further downward movement. However, indicators such as Moving Average Convergence Divergence and Bollinger Bands suggest an active correction sentiment in the market. Overall, Ethereum’s price correction highlights the current market uncertainty.
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