After briefly falling below $1,400 for the first time in almost two months earlier in the session, Ether (ETH) has been able to find some stability after the US jobs report for February was released.
The last time I checked, ETH, the cryptocurrency that runs the smart-contract-enabled Ethereum blockchain, was being traded for close to $1,425. This was after US wage growth was slower than predicted, and the unemployment rate in the US jumped to 3.6% by a surprising amount.
This means that Ether is still down about 1% for the day and about 7% in the last 24 hours.
The price of ETH dropped from over $1,500 on Thursday due to worries about the failure of crypto-friendly bank Silvergate Bank and a worsening liquidity situation at another crypto-friendly bank, SVB Financial.
The urge to sell got worse after the New York Attorney General called Ether security in a case against KuCoin that is still going on.
In the past few weeks, crypto markets have been worried about a crackdown by US regulators. Some people are afraid that the US Securities and Exchange Commission will soon try to crack down on Ether, saying that it is unregistered security.
Some people have also said that the latest budget from the Biden administration, which would try to stop tax loss harvesting, is a headwind for prices.
ETH Liquidations Spike as Price Collapses
Not surprisingly, the sudden drop in the price of ETH has led to a rise in the number of leveraged long positions being sold. According to data from coinglass.com, approximately $63 million worth of long futures positions were wiped out on Thursday. This was the most since January 23.
Long liquidations for Friday are already at almost $30 million, which is a lot more than the Average for the past several weeks.
Options Markets Turn Bearish
The Block’s options market data shows that investors are taking more steps to prepare for the possibility that the ongoing drop in the price of ETH may continue.
The 25% delta skew of Ether options that expire in 7, 30, and 60 days has dropped to new two-month lows in the -7 region.
Those with a 25% delta. Skew is often used as a proxy for how much trading desks are overcharging or undercharging investors for protection against the market going up or down through the put-and-call options they offer.
With a put option, an investor has the right but not the responsibility to sell an asset at a certain price. With a call option, an investor has the right but not the obligation to acquire an asset at a certain price.
A 25% delta options skew above 0 means that desks are charging more for call options than for puts that are the same.
This means that there is more demand for calls than puts, which can be seen as a hint that investors are more ready to protect themselves against a rise in prices or wager on one.
Where Next for Ether (ETH) as Bulls Hold $1,400 Level?
Since ETH has been able to stay above $1,400 for now, there hasn’t been a long-lasting, compelling breach below the important 200-Day Moving Average level at $1,423. The 200DMA was a significant level of resistance in 2022, and it has been said that it will be a crucial level of support in 2023.
A break below it would be a huge blow to the long-term bullish case for ETH since a sustained break above the 200DMA (like what happened earlier this year) is considered a vital sign that the market’s long-term momentum is changing for the better. If ETH goes back down below $1,400, this momentum might have been lost.
The important US CPI inflation figures will come out next week. ETH bulls will be hoping that the data surprises to the downside. If this happens, the chance of a 50bps rate hike from the Fed later this month will be priced out of the market even further. Bulls will also hope that the problems that US banks that like cryptocurrencies are having will quiet down.
If ETH does rally, the February lows around $1,460 are a key point of resistance to keep an eye on. Bears will be looking for a retest of support at $1,350 if the price goes south.
If this level breaks, it might lead to a retest of the lows below $1,100 that happened in November.
DeFi Llama, using on-chain statistics, says that this is an important region of support since a break below it would cause long positions on decentralized exchanges to be sold for $68 million. (DEX).
DeFi Llama says that another milestone to keep an eye on is at $1,240, where $30 million in DEX long might be lost.
08 Mar 2023
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