- Bitcoin is holding above a key support level, but if this level fails it may lead to a downswing towards $9,000.
- Ethereum whales have been “buying the dip” despite the strong possibility of prices declining below $300.
- Currently, the odds seem to favor the bears even with the big losses already incurred.
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The crypto markets lost $30 billion in value over the past day. Capital outflows from Bitcoin and Ethereum could cause prices to break below crucial support levels, indicating further losses on the horizon.
Bitcoin Drops to Critical Support Level
Following the 19% correction that Bitcoin experienced at the beginning of September, its price action began to form an ascending triangle on the 4-hour chart. A rising trendline developed along with the swing lows while a horizontal resistance was created along with the swing highs. This technical formation suggested that BTC was poised to rise towards $11,300.
The flagship cryptocurrency was indeed able to break out of the ascending triangle on Sept. 14 and surpass the $11,000 mark. However, Crypto Briefing noticed several bearish signs that did not support continued upward price action a few days later. Now, it seems like those sell signals were validated as Bitcoin took a 7% nosedive after failing to turn the 50-day moving average into support.
The recent downturn pushed BTC to the 100-day moving average, which is currently the only barrier preventing a steeper decline. If this support level were to break, prices could fall towards the 200-day moving average around $9,200.
Such a pessimistic scenario holds when looking at Santiment’s holder distribution chart. The behavior analytics firm shows that the number of addresses with millions of dollars in Bitcoin, colloquially known as “whales,” continues declining.
Since Sept. 11, the number of addresses holding 1,000 to 10,000 BTC has dropped substantially. Roughly 13 whales left the network or redistributed their tokens since then, representing a 0.62% decrease in only ten days.
The continuous decline in the number of large investors behind Bitcoin may seem insignificant at first glance. Still, when considering they hold between $11 million and $110 million in BTC, the spike in selling pressure can translate into millions of dollars. Therefore, losing the 100-day moving average as support could be catastrophic for the bellwether cryptocurrency.
Ethereum Aims for $250 After Recent Downswing
Ethereum investors could see the value of their holdings evaporate. The smart contracts giant appears to have developed a bear flag pattern on its daily chart, foreshadowing further losses. The 37% downswing that took place at the beginning of the month created a flagpole while the following consolidation period formed the flag.
The technical formation suggests that the asset’s trend will continue in the same direction as the initial movement—in this case, down. Based on the flagpole’s height, Ether could fall as much as 37%, translating to a drop to $235.
On its way down, Ethereum may find support around $300 based on IntoTheBlock’s “In/Out of the Money Around Price” (IOMAP) model. This on-chain metric reveals that roughly 940,000 addresses had previously purchased over 2.2 million ETH around this price level. Such a critical supply barrier should absorb some of the selling pressure as holders within this range will buy as Ether goes on sale relative to their cost basis.
It is worth mentioning that despite the probability of a steeper decline, there has been a significant spike in the number of Ethereum whales on the network. Santiment’s holder distribution index recorded a 2.54% jump over the past two weeks in the number of addresses holding 100,000 to 1 million ETH.
This increase in buying pressure while prices have been declining may indicate that large investors are “buying the dip.” Therefore, the bullish outlook cannot be taken out of the question. If Ether can regain the $380 level as support, it might aim for new yearly highs since the IOMAP cohorts show no significant resistance ahead.
Crypto Market Volatility Inbound
Once again, September has proven to be one of the worst months for Bitcoin and the rest of the financial markets. The so-called “September Effect” continues to haunt investors within different market sectors, and particularly those invested in the cryptocurrency industry. As losses spill over the board, some are losing faith in Bitcoin’s safe-haven status.
Regardless, multiple on-chain metrics continue to support the idea that BTC is poised for further gains from a macro perspective. When looking at the stablecoin supply ratio on different cryptocurrency exchanges, it seems that the buying power is sufficient to propel Bitcoin above $20,000 by the end of the year, as forecasted by the stock-to-flow model.
It is reasonable to assume that the current price drop may be the last chance that sidelined investors have been waiting for to get back into the market. And Ethereum whales seem to be well aware of that possibility.
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