Ethereum eyes fresh yearly lows vs. Bitcoin as bulls snub successful ‘Merge’ rehearsal

Ethereum’s native token Ether (ETH) resumed its decline against Bitcoin (BTC) two days after a successful rehearsal of its proof-of-stake (PoS) algorithm on its longest-running testnet “Ropsten.”

The ETH/BTC fell by 2.5% to 0.0586 on June 10. The pair’s downside move came as a part of a correction that had started a day before when it reached a local peak of 0.0598, hinting at weaker bullish sentiment despite the optimistic “Merge” update.

ETH/BTC four-hour price chart. Source: TradingView

Interestingly, the selloff occurred near ETH/BTC’s 50-4H exponential moving average (50-4H EMA; the red wave) around 0.06. This technical resistance has been capping the pair’s bullish attempts since May 12, as shown in the chart above.

Staked Ether behind ETH/BTC’s weakness?

Ethereum’s strong bearish technicals appeared to have overpowered its PoS testnet breakthrough. And the ongoing imbalance between Ether and its supposedly-pegged token Staked Ether (stETH) could be the reason behind it, according to Delphi Digital.

“Testnet Merge was a success, yet the ETH market did not react,” the crypto research firm wrote, adding:

“Concerns over the ETH-stETH link are swirling as the health of financial institutions post-Terra is questioned.”

Several DeFi platforms that have staked Ether in Ethereum’s PoS smart contract will not be able to access their funds if the Merge gets delayed. Thus, they risk running into ETH liquidation troubles as they attempt to pay back their stakeholders.

That could prompt these DeFi platforms to sell their existing stETH holdings for ETH. Meanwhile, if they run out of stETH, the selloff pressure risks shifting to their other holdings, including ETH.

If Swissborg tried to exit their entire stETH position, they would bump the peg down another cent.

More importantly, this would consume 25% of the remaining ETH liquidity in the pool. Swissborg also contributes a few thousand Eth to this pool… 6/ pic.twitter.com/sWIdzMWNvU

— Dirty Bubble Media: ⏰ (@MikeBurgersburg) June 8, 2022

More downside for Ether price?

From a technical standpoint, Ether’s latest decline against Bitcoin pushed ETH/BTC below a multi-month support level around 0.0589, thus exposing the pair to further correction in June, followed by Q3/2022.

The now-broken support level coincides with the 0.382 Fib line of the Fibonacci retracement graph, as shown in the chart below. If ETH/BTC’s correction extends, the pair’s next downside target comes to be around the 0.5 Fib line of the same graph — around 0.0509, a new 2022 low.

ETH/BTC weekly price chart. Source: TradingView

Interestingly, the 0.0509-level is near ETH/BTC’s 200-week exponential moving average (200-week EMA; the blue wave) and its multi-year ascending trendline support. Together, this support confluence could be where ETH/BTC exhausts its bearish cycle, allowing the pair to eye 0.0589 as its interim rebound target.

Conversely, a further break below the confluence could prompt Ether to watch 0.043 BTC (near the 0.618 Fib line) as its next downside target, down almost 25% from June 10’s price.

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