- Ethereum is in the midst of its sixth straight down month.
- The second largest crypto is down nearly 40% in the past month.
- Max Shannon of Bitwise reckons $1,500 could be on the cards.
Ethereum price risks crashing 22% to hit $1,500 as it’s on track to suffer through its worst streak in history, according to Max Shannon, senior research associate at Bitwise.
If the second biggest cryptocurrency’s price continues to fall in March, it would be within reach of the seven-month slump that extended between May and November 2018.
“Until a clear macro or idiosyncratic catalyst emerges to revive momentum and sentiment, downside risks extend below $1,500 for Ethereum,” Shannon told DL News.
For Shannon, there’s one clear-cut culprit behind Ethereum’s woes, and that’s Bitcoin. Ethereum moves in tandem with Bitcoin but suffers bigger swings. When Bitcoin drops 10%, Ethereum typically falls further, Shannon said.
“ETH continues to trade as a highly correlated, high-beta expression of BTC,” Shannon said, meaning Ethereum amplifies whatever Bitcoin does.
Plus, the market is ignoring good news and focusing purely on price charts, with Bitcoin leading the way down, Shannon said.
Baffling investors
On paper, though, things should be going Ethereum’s way.
It has lined up everything needed to hit another record. It, like the rest of the crypto industry, are enjoying a wave of regulatory clarity across the world.
A smattering of issuers have launched US spot Ethereum exchange-traded funds, and the $300 billion stablecoin sector relies heavily on the blockchain. It has even been name-checked by BlackRock’s CEO Larry Fink.
The stars have seemingly aligned, but Ether continues to give investors lacklustre price returns.
A glimmer of hope
There’s light at the end of the tunnel, however.
Options trades have backed off their most extreme bearish bets, said Shannon. Options give investors the right to buy or sell an asset at a certain price. The dealers who sell these options need to hedge their bets by buying or selling the actual cryptocurrency as it moves in one direction or another.
Right now, there’s a concentration of options in the range between $2,100 and $2,400. If Ethereum can climb back into that range — which means a rally of 10% to 20% — options dealers would be forced to buy Ether to protect themselves.
Still, to get Ethereum trending back upwards there need to be catalysts.
“The passage of the Clarity Act, and the resurgence of [digital asset treasuries] and ETFs purchasing more than 100% of the new supply, should boost ETH closer to new all-time highs," he said.
Pedro Solimano is a markets correspondent based in Buenos Aires. Got a tip? Email him atpsolimano@dlnews.com.