Ethereum has been met with strong resistance at its current levels and might potentially re-test support. The cryptocurrency still preserves some of its profit from the past weeks but has been losing momentum over today’s trading session.
At the time of writing, Ethereum trades at $1,860 with a 2% loss and 5% profit over the last 24 hours and 7 days, respectively. ETH’s price was pushing the sector’s bullish momentum on the back of the narrative around the upcoming “Merge” event, as it will complete Ethereum migration to a Proof-of-Stake consensus.
However, the second crypto by market cap has been lagging meme coins, such as Dogecoin and Shiba Inu. These cryptocurrencies record a 20% and 30% rally, respectively, and seem poised for further gains before returning to previous support levels.
Ethereum has seen losses at technical resistance levels, and other assets contribute to the downside price action in the crypto industry. According to analyst Justin Bennett, the S&P 500 is approaching the top of a major channel that might operate as critical resistance.
Ethereum and digital assets have been moving in tandem with equities. Therefore, the price action of major indexes in the legacy financial system has been exercising an influence on cryptocurrencies’ price action.
As seen below, the S&P 500 recorded some gains after bouncing off support at the bottom of the channel and now seems on track to re-test those levels as it has done over the past few months. Bennett told his followers: “This is not where you want to get bullish”.
In addition, Bennett pointed out that the U.S. dollar (as measured by the DXY Index) has been reclaiming major support and could potentially reclaim previously lost territory. The latter might translate into further losses for risk-on assets, like Ethereum.
As cryptocurrencies move in tandem with stocks, they have negatively reacted to upside momentum in the U.S. dollar. The analyst added:
I was “cautiously” bullish in the “short term” last week. Bearish patterns have since developed, and the $DXY reclaimed significant support on Monday.
Ethereum At Critical Levels, Will History Repeat?
Furthermore, a new report from research firm Arcane Research acknowledges the importance of “The Merge”. This has pushed ETH to its 2022 highs when compared to Bitcoin (BTC) for the ETHBTC trading pair.
“The Merge” hype and narrative pushed ETH to peaked at 0.0881 BTC, last week. These levels represent another major line of resistance for the cryptocurrency as it approaches the 2021 high at 0.0886. Arcane Research noted the following on the importance of these levels:
Ethereum has only traded at higher levels compared to BTC for 196 days since May 2016, or 8.62% of all days since May 2016. Since Jan 1st 2021, ETH has only closed at higher levels than today’s 39 times, or 6.59% of all days (…).
In that sense, ETH’s price bullish momentum might not be “sustainable”, as Arcane Research noted. However, the research firm didn’t rule out “The Merge” potential to drive ETH into price discovery on the ETHBTC pair.