Ether’s outlook darkens in charts capturing hangover after Merge

MUMBAI – The fanfare over a revamp of the Ethereum blockchain is still echoing across the cryptoverse, but that is doing little to stem a slide in Ether.

The network’s native token is down 10 per cent since the most commercially important digital ledger last week implemented an upgrade to slash energy use.

The second-largest virtual coin had rallied from mid-June on hype around the software update known as the Merge, but that is fizzling now that the shift is done. It is down some 63 per cent this year, a bruising period for cryptocurrencies.

Crypto and many other assets are also quivering ahead of what is likely to be another big Federal Reserve interest rate hike on Wednesday.

The sell-off in Ether is bringing technical patterns into play that hint at more downside risk. Digital token prices were little changed on Tuesday, with Ether around US$1,350 and Bitcoin just above US$19,000 as at 1.10pm in Tokyo.

Ether has dropped below the second standard deviation of a regression channel drawn from its June lows. The study suggests that this brings a retreat to the third standard deviation – a level of about US$1,250 – into play. If that support fails, the next marker is US$1,000.

The price of Ether of late clustered around US$1,800 for a notable period of time. That, in effect, became a ceiling it struggled to break, and it has since dropped below a zone of support at around US$1,340. For technical analysts, the breach of support raises the risk of more falls.

Options data from Deribit shows a high number of outstanding Ether put and call contracts – so-called open interest – at strikes of US$1,000 and US$2,000 respectively for end-September expiry.

This suggests that those levels define a trading range for Ether. Meanwhile, bulls looking for a glimmer of hope might take solace from the so-called maximum pain point implied by the options bets.

This is part of a controversial theory that says options writers – often financial professionals – make more money than options buyers. The argument is that an asset’s price will move towards the level where options writers make the most profit – that is, where the greatest number of options expire as worthless for buyers. Deribit data puts this maximum pain point at around US$1,600. BLOOMBERG