BTC steadies after steep drop ahead of core PCE data. Can ETH recover?

The past 24 hours have been brutal for the cryptocurrency markets, as Bitcoin tumbled below 110k to a three–week low and altcoins were hit even harder, resulting in a massive wave of liquidations. 

Just a week ago, BTC was trading at a monthly high of 118k after the Federal Reserve cut interest rates for the first time this year. However, this was a ‘buy the rumour, sell the news’ event, and Bitcoin quickly tumbled lower. Monday saw Bitcoin drop from 115k to 112k. Before another leg lower yesterday, which saw the largest cryptocurrency fall to 108.6k, its lowest level this month. 

The latest leg lower resulted in $1.1 billion in liquidations, marking the second-largest liquidation event this year, following Monday’s wipeout, which saw a wave of $1.7 billion in liquidations as volatility harmed overleveraged traders.  

The BTC price remains below the 110k psychological level, a crucial level that buyers will need to retake to stage a recovery.  

The macroback drop has shifted this week following the Fed rate cut. A speech by Fed Chair Powell on Tuesday, along with stronger-than-expected GDP and jobless claims data yesterday, has raised questions about the Fed’s ability to cut rates much further.  Today, the focus will be on US core PCE, the Fed’s preferred gauge for inflation, which is expected to remain elevated at 2.9% YoY and ease to 0.2% MoM, down from 0.3% in July. Cooler-than-forecast inflation could help restore sentiment. 

Can Ethereum recover from its bleed out? 

Ethereum was at the forefront of the summer run higher. However, the second-largest cryptocurrency by market capitalization tumbled below the $ 4,000 psychological level on Thursday and trades down 20% from its 4900 August record high. 

Despite the selloff, there are still bullish factors supporting Ethereum and a recovery. Firstly, there is a diminishing supply of ETH tokens stored on crypto exchanges. According to CryptoQuant data, the ETH supply on exchanges fell to a 9-year low of 16.3 million coins.  

Furthermore, whales are buying.  Lookonchain flagged that 10 whale wallets accumulated 210k ETH for $862.85 million, at an average cost basis of 4100. This tells us that whales are backing the view that the price will reset and rise higher. 

However, institutional and smart money are not aligned. ETH ETFs have recorded four consecutive days of outflows, totaling $547 million so far this week, marking the largest exodus since early September. While whale accumulation supports a recovery, institutional demand would need to get on board to confirm the trend.  

Where next for Ethereum – technical analysis 

ETH closed below its rising trendline support and horizontal support at 4485 and proceeded to fall by over 6.5%. The price broke below the 50 SMA and 4000 round number, dropping to a low of 3825, where the selloff has stabilised at the 100 EMA support. 

While the RSI has recovered from oversold and points higher, indicating fading bearish momentum, the MACD supports a continuation of the bearish trend. 

Sellers will need to take out this to extend the selloff to 3590, the 38.2% Fib retracement of the 1384 low, and the 4955 high. 

Should the 100 EMA support hold, buyers will look to recover above 4120, the 23.6% Fib level, and 4400, the 50 EMA. 

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