Market Wrap: Bitcoin Takes Late Dive Below $19K, Ether Falls as Merge Countdown Begins

The largest cryptocurrency by market capitalization was down more than 4% over the past 24 hours.

AccessTimeIconSep 6, 2022 at 8:41 p.m. UTC
Updated Sep 6, 2022 at 9:05 p.m. UTC

Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX

Price Action

Bitcoin (BTC) and Ether (ETH) took divergent paths on Tuesday, as BTC traded down while ETH rose early in the day ahead of the much-anticipated transition of the Ethereum blockchain to a proof-of-stake protocol from proof-of-work. ETH prices traded down as the day progressed

  • Bitcoin started off the post-Labor Day week by trading down 4.5% on moderate trading volume. The largest cryptocurrency sank below $19,000, falling more sharply late in the afternoon New York time.
  • Ether, by comparison, was 2% lower on greater-than-average volume, as Ethereum moves closer to its conversion to a faster, more energy efficient proof-of-stake protocol. Monday’s successful activation of the Bellatrix upgrade is one of the final steps before completion of the Merge, a software update that is expected to be completed between Sept 13-15.

Bitcoin: The largest cryptocurrency by market capitalization recently declined by more than 4% as investors remained wary of riskier assets, including cryptocurrencies.

Ethereum will likely hold center stage for weeks, as crypto investors await the results of the Merge, which was first announced in December 2020. With the move, minting new ether tokens will consume a lot less energy than before.

The potential also exists for ETH to become a deflationary currency post-Merge, which would result in lower overall ETH supply. A lower supply of ETH is likely to cause higher valuations for current holders of ETH, something that is driving ether higher now.

Economic Calendar: Growth in the U.S. services sector was stronger than expected in August, as a reading from the Institute of Supply Management came in at 56.9, compared with expectations of 55.. Figures above 50 represent an expansion, while figures below 50 imply contraction.

U.S. Equities: Traditional financial markets were down, as the Dow Jones Industrial Average (DJIA), S&P 500 and tech-heavy Nasdaq Composite fell 0.6%, 0.4% and 0.7%, respectively. Investors appear to be taking a wait-and-see approach with stocks.

Commodities: Crude oil prices fell 0.1%, while natural gas prices fell 8.5%. Copper futures rose 1.3%, and the price of gold, a safe-haven asset, declined 0.7%

Altcoins were down, with polkadot (DOT) and solana (SOL) decreasing 6% and 4%, while uniswap declined 9%

Latest Prices

Bitcoin (BTC): $18,843 −4.6%

Ether (ETH): $1,576 −0.7%

S&P 500 daily close: 3,906.28 −0.5%

Gold: $1,712 per troy ounce +NaN%

Ten-year Treasury yield daily close: 3.34% +0.1

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Technical Take

ETH continues to outpace bitcoin.

ETH prices warranted attention Tuesday and will continue to do so in coming days, given the Ethereum Merge. The price for the second-largest cryptocurrency by market cap is roughly flat since Aug. 29.

Derivatives markets imply bullish sentiment for ETH, however, as the call/put ratio for the open interest in ETH options is 3.81. A call option represents the right but not the obligation to purchase an asset at a specific price. A put option represents the right but not the obligation to sell an asset at a specific price.

Open interest indicates the number of call and put options contracts held by investors, and the ratio between the two highlights which is held more. A call put ratio above one can signal that participants are bullish.

ETH’s 3.81 call/put ratio shows that investors now hold more than three times the number of options to buy as they do options to sell, suggesting a high degree of optimism. The highest level of call open interest for ETH exists at the $3,000 strike price, representing a nearly 100% premium to the current price.

Plotting ETH prices relative to BTC shows that the ETH/BTC currency pair has risen 52% since July 22 to 8 cents from 5 cents. The relative strength index (RSI) indicator is 69, which in traditional circumstances implies an overbought condition. ETH’s RSI for the ETH/USD pair is 47.92, which is slightly below the traditionally neutral mark of 50.

The RSI is a technical indicator that measures price momentum. Values above 70 imply overbought/overvalued conditions, while values under 30 imply oversold/undervalued conditions.

Because the ETH/USD pair trades at significantly higher volume than the ETH/BTC pair, its neutral RSI implies additional upside for ETH prices, particularly when viewed in conjunction with derivatives data.

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Ethereum/bitcoin's daily chart along with the RSI metric (TradingView)

Altcoin Roundup

  • Ethereum Classic's Hashrate, Prices Surge as Miners Prepare for Post-Merge Reality: Futures tracking Ethereum Classic's native tokens ETC logged $27 million in liquidations in the past 24 hours – second only to ether and ahead of bitcoin futures. Ethereum Classic was formed after the DAO hack in 2016 caused a hard network fork that split the blockchain into two. The original chain continued as Ethereum Classic, and the new one was called Ethereum. Read more here.
  • Traders Bet on GMX Tokens as Proxy for Ethereum Layer 2 Tool Arbitrum: Tokens of decentralized exchange (DEX) have almost doubled in price during the past two weeks during a mostly flat market. Read more here.

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Biggest Gainers

There are no gainers in CoinDesk 20 today.

Biggest Losers

Asset Ticker Returns DACS Sector
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Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk 20 is a ranking of the largest digital assets by volume on trusted exchanges.

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Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX

CoinDesk - Unknown

Glenn C Williams Jr, CMT is a Crypto Markets Analyst with an initial background in traditional finance. His experience includes research and analysis of individual cryptocurrencies, defi protocols, and crypto-based funds. He owns BTC, ETH, UNI, DOT, MATIC, and AVAX

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