6 min read Cryptocurrency prices are under intense selling pressure on Thursday, with Bitcoin struggling around $81,000 while Ethereum has fallen below $2,400.
ETH, the second-largest cryptocurrency, trades 5.5% lower over the past 24 hours, is down almost 8% over the past seven days and has fallen 12% so far in October. Ethereum is underperforming Bitcoin, which trades 3.5% lower over the past 24 hours and is down 2.75% over the past seven days.
The move lower has come amid a broad decline in risk appetite for digital assets, as a deteriorating macro backdrop, a sell-off in ETH ETFs and weakness in tech stocks weigh on prices.
Hot inflation adds to drags on Ethereum
Unexpectedly strong U.S. CPI data yesterday and PPI inflation data today have added to expectations for further Fed rate hikes.
U.S. PPI rose 1.3%MoM, marking the largest monthly increase since March 2022, and rose 6.3% YoY. Excluding food and energy, core PPI was up 0.7% month on month and 5% compared with a year ago. All readings came in ahead of expectations.
The report suggests that underlying inflation remains firm alongside rising fuel prices. With both headline and core CPI also coming in hotter than expected, the latest data adds to concerns that inflation is sticky.
The data supports the view that the Fed may need to hike interest rates again. Markets are pricing in a 30% probability of a rate hike in October and a 90% probability of a hike before the end of the year.
Risk assets often perform better in a lower interest rate environment owing to improved liquidity. Higher rate expectations can therefore weigh on cryptocurrencies, while the U.S. dollar trading around an 18-month high adds another headwind.
The data has also forced investors to reassess their positioning, with the Crypto Fear and Greed Index falling to 53 from 62 yesterday. This puts sentiment in neutral territory, out of the greed zone, and suggests investors are becoming more cautious.
Tech weakness and forced liquidations add to selling pressure
It’s not just crypto markets being affected by deteriorating risk sentiment. Tech stocks are also under pressure, with the Kospi closing more than 7% lower and Nasdaq down 1.2% at the time of writing.
Ethereum has also experienced heavy forced selling. CoinGlass data shows that $271.79 million worth of ETH positions were liquidated over the past 24 hours, around 90% of which were long positions. This compares with $206.6 million in Bitcoin liquidations.
These figures suggest that leveraged bullish positions were caught on the wrong side of the move. As prices fell, forced closures may have added to the selling pressure, accelerating the decline.
ETH is now down roughly 15% from its high of $2,800 at the end of September, with spot ETF outflows adding to the pressure.
Ethereum ETFs recorded outflows totalling $130 million on Wednesday. With the exception of Tuesday, ETH ETFs have seen sustained outflows since September 29. Outflows in October have topped $824 million, marking the largest monthly outflow since November last year.
Persistent ETF outflows suggest that institutional demand remains weak. If this continues alongside further liquidations and a deteriorating macroeconomic backdrop, Ethereum could remain vulnerable to further downside.
Ethereum – technical analysis
After running into resistance at $2,888, Ethereum has reversed lower, breaking below the 50 EMA as selling pressure gathered pace. The price is now testing support at the 200 EMA, while the RSI is below 50, supporting further downside.
Sellers will need to break below the 200 EMA and the rising trendline support at $2,335 to bring $2,000 into focus, the psychological level. A decisive break below this area would weaken the broader technical structure and open the door to further losses.
Should the 200 EMA hold, buyers will look to recover above $2,500, around the 50 EMA, followed by $2,600 horizontal resistance. This level was important across late August and early September.
A break above $2,600 would improve the near-term outlook and bring $2,800 back into focus. A rise above $2,800 would be needed to establish a higher high and bring $3,000 into focus.
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