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How Low Can We Go? Bearish Bitcoin and Ethereum Targets

Steve Miley trader
Updated 17 Jun 2022

Trade Ethereum Here Your Capital Is At Risk

Key points:

  • Crypto Exchange Co-Founder Warns of Bearish Risks
  • Bitcoin Threat to $17383 on a Break Below $20,000
  • Ethereum Downside Risks on Surrender of $1000

Crypto Exchange Co-Founder Warns of Bearish Risks

In a Twitter thread this week, Arthur Hayes, the prominent co-founder of the BitMEX cryptocurrency exchange, cautioned that should the $20,000 level for Bitcoin and the $1000 for Ethereum be surrendered, more intense selling pressures could lead to another capitulation-type breakdown. This is not just because these levels are psychological, round numbers, but because they are option strikes.
In the Twitter thread, he focuses on the Deribit futures and options exchange, which has a large percentage of the open interest in the cryptocurrency options market. He notes that much of this open interest is on the strike prices at $20,000 for Bitcoin and $1000 for Ethereum. When important options strike levels are breached, even by only the smallest of margins, this creates either forced buying, or in this case, forces selling pressures as hedges are triggered. This will impact the cash markets, the futures and options markets and Over The Counter (OTC) exchanges.

As of now, these levels are holding, but should they break, what are the downside risks for Bitcoin and Ethereum, from a technical analysis perspective?

Also Read: Best Bitcoin Wallet in the UK

Bitcoin Threat to $17383 Next on a Break Below $20,000

As stated above, the $20K level is a significant Bitcoin support from a psychological and option-related perspective. Should this levels break, a next key target is the previous cycle high as previously highlighted in our note here, at $19511. This is the old cycle high from 217, as is noteworthy because on previous bear market corrections, Bitcoin has never ventured back below the previous major cycle high. Below here, the threat would then be to a technical analysis support level from chart retracements. The 78.6% Fibonacci retracement of the entire 2019-2021 bull rally is at 17380. This would be the next obvious target. Below here sees little natural support until the $10K area.

Ethereum Downside Risks on Surrender of $1000

The outlook for Ethereum is even more negative! As can be seen in the chart, Ethereum has already breached its 78.6% Fibonacci retracement of the entire 2019-2021 bull rally. There is little notable support for Ethereum until 725, with a threat of a deeper target down to 311!
Buyers beware!

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.