In the case of ETH, this selloff has sent it down to a key near-term support level, and if this breaks, analysts are noting that the cryptocurrency could see a massive decline that erases much of its recent parabolic gains.
It is also important to note that there were signs that this type of drop was bound to occur, as the crypto’s RSI was significantly overextended yesterday.
Ethereum Plummets Below $270 as Analysts Eye Further Downside
At the time of writing, Ethereum is trading down just under 5% at its current price of $268, which marks a notable decline from daily highs of $290 that were set yesterday when the cryptocurrency’s bulls attempted to spark a movement to $300.
It is important to keep in mind that today’s drop only erased one day of gains, and the cryptocurrency still remains in an incredibly firm uptrend due to its climb from weekly lows of $215.
There were signs that yesterday’s rally up towards $290 was unsuitable, however, as the cryptocurrency’s RSI ran to all-time highs.
Alex Krüger, an economist who focuses primarily on cryptocurrencies, spoke about this in a recent tweet from his alt account, saying:
“ETH RSI has never before been this high (using Bitfinex data from 2016).”
He further went on to note that an asset’s RSI being overextended isn’t what causes its price to retrace, but it is a sign of unsustainability amongst buyers.
Another key factor that should be watched in the near-term is the fact that it is currently sitting on a key support level, with a break below the support at roughly $260 potentially catalyzing a downside movement towards $230.
Cold Blooded Shiller, a popular crypto trader on Twitter, spoke about this in a recent tweet, noting that he is currently looking for an ideal short entry.
“Despite yesterday where ETH looked to be preparing for higher, we very quickly snapped back down. Break red and I’m looking for green. Momentum back at a crucial point and only requires a little push for a bearish flip. LTF shows bullish divs, playout and I’ll look to short,” he said.
The coming few hours will be critical for Ethereum to determine its near-term market structure, as any further downside could mean that a deep retrace is imminent.