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Ethereum Sells Off Post-Merge as SEC Head Comments

Steve Miley trader
Updated 20 Sep 2022

Buy Cryptocurrency Your Capital Is At Risk

Key points:

  • Ether Has Underperformed Bitcoin Since the Ethereum Merge
  • SEC Comments Not Helping Ether
  • Ether And Bitcoin Charts, Analysis and Price Forecasts

The wider cryptocurrency world has been under negative price pressures in the past week since the Ethereum Merge, but primarily due to the sell-off in risky assets since the mid-September release of higher than expected US Consumer Price Index (CPI) we covered here. However, Ether (ETH) has been underperforming its main crypto rive, Bitcoin (BTC), which has been assisted by recent comments from the US Securities and Exchange Commission (SEC) that warned the upgrade could see ETH become regulated as a security have exacerbated the cryptocurrencies recent plunge. We take a look at these factors and do some quick analysis on the Ether and Bitcoin charts.

Ether Has Underperformed Bitcoin Since the Ethereum Merge

Ether is down 21% since last Tuesday (ahead of the US CPI release), while Bitcoin is down 13% in the same time frame. On Thursday, we saw the completion of the long-awaited Ethereum Merge, which many had anticipated would have seen an outperformance by Ether and herald the start of a new bullish phase. The broader sell off in cryptocurrencies has primarily been driven by the wider price erosion for risky assets since the hotter than anticipated US inflation data. But the underperformance by Ether has more recently been intensified by comments from the SEC.

SEC Comments Not Helping Ether

The Ethereum Merge to proof-of-stake will allow Ether holders to “stake” coins to receive a return. Gary Gensler the SEC chair stated to reporters that:

“From the coin’s perspective…that’s another indicia that under the Howey test, the investing public is anticipating profits based on the efforts of others”.

Although not directly naming Ether, this could see the SEC look at regulating Ethereum as a security.

In addition, in a possibly exceptional move in a lawsuit the SEC filed against crypto influencer Ian Balina on Monday, the SEC seemed to state it had the right to sue Balina because the entire Ethereum network falls under the US government’s jurisdiction. The SEC is possibly proposing that, as most of Ethereum’s validating nodes operate in the US, therefore, all Ethereum transactions globally could be considered of origin in the US. We continue to watch this regulatory space with interest!

Ether And Bitcoin Charts, Analysis and Price Forecasts

Source: IG

ETH has surrendered swing supports from earlier September and July at 1422 and 1357 over the past week, down to 1281 on Monday, to then rebound from here and from just above the basing trend line from the June and July lows. Whilst holding above 1281 we hang onto a short-term rebound bias, to retest September and August peaks at 1789 and potentially 2031.

But a break below 1281 would open the door for a more bearish tone to target 1006/997 supports and even the bear market low at 880, possibly a bearish extension below here.

Source: IG

Bitcoin spiked down below the early September low at 18546 on Monday to 18273, but then posted a solid rebound from here for a bullish Hammer candlestick. And whilst holding above this support factor, we see recovery risks to again target the confluence of 50- and 100-day Moving Averages (MAs), at which the market stalled back from last week, currently in the 21380/21470 area. Above here aims for 22778, then 25204, September and August swing highs.

But back below 18273 would quickly target the June bear market low at 17604 and possibly a deeper bearish extension through here.

Steve has 29 years of financial market experience including 3 years at Credit Suisse and 15 years at Merril Lynch. Steve is the Academic Dean for The London School of Wealth Management and has won many awards from Technical Analyst Magazine.