Trading Ranges for Bitcoin, Ether Reflect Diverging Views About the Assets

Trading ranges for bitcoin (BTC) and ether (ETH) moved in opposite directions on Wednesday, signaling differing investor perceptions of the two largest cryptocurrencies by market capitalization.

Bitcoin spent much of the day trading flat, with a narrower trading range than the prior day. BTC eventually moved downward, and was recently off 4.3%, although the decline did not offset the robust gains of the previous four days.

Moreover, BTC trading volume was lower than in the previous day, while the low price on the day exceeded the low price from Tuesday, generally referred to as a “higher low.” An asset reaching a higher low signals the continuation of an uptrend, even if the price is lower on the day.

By contrast, ether’s trading range expanded relative to the day prior, with its decline in price eliminating Tuesday gains.

Monitoring the trading range of an asset can provide clues about investor sentiment, particularly when coupled with volume. Ether’s “lower low” compared to the prior day suggests that ETH holders are entertaining concerns about the market turning bearish.

Whether ETH's price finds support near $1,640 will be key to watch. A look at ETH’s Volume Profile Visible Range (VPVR) shows significant levels of activity near its current trading level. Traditionally, price action can be “sticky” at these high volume nodes, as liquidity is easy to secure.

ETH investors could be wary that the upcoming Shanghai upgrade will cause selling pressure, because previously locked staked ether will be eligible for sale.

According to Ethereum.org, the current amount of staked ETH is 17,577,231, representing approximately $29 billion, and receiving a current annual percentage rate (APR) of 5.2%.

A counter-thesis to ETH being sold off following the upgrade is the extent to which it makes economic sense to do so. The current ETH price ($1,650) exceeds the price of ETH in December 2020, when staking began ($600). However, the current APR relative to other opportunities may prove compelling enough for investors to continue staking.

Additionally, removing the requirement to lock up ETH indefinitely during the staking process could incentivize more staking, not less. As a result, stakers who are removing ETH to take profits will likely be offset by new stakers who want to participate.