Ethereum Consolidates Near $1,950 Ahead of Options Expiry, Market Volatility Looms

Highlights:

• Ethereum is consolidating between $1952.2 and $1907.7
• Upside momentum post options expiry could trigger a rally to $1993.5
• Weakness in equity markets could push Ethereum lower

Ethereum (ETH), like the rest of the market, is experiencing an intraday price slide. In the last 24 hours, Ethereum has dropped by 1.29% to trade at $1943.13. Ethereum’s trading volumes have also crashed intraday. They currently stand at $19.67 billion, down by 13.54% in the day. 

The drop in Ethereum trading volumes, at a time when the price is going down, reflects weakening demand for Ethereum and other cryptocurrencies. It shows that, even at currently discounted prices, few investors are willing to buy Ethereum. There are a couple of factors that are likely to sustain this price weakness in the short to medium term. 

Bitcoin Selloff Piling Downside Pressure On Ethereum

One factor is that Bitcoin is under significant selling pressure. Ethereum, like other altcoins, tends to trade in the direction of Bitcoin. At the moment, Bitcoin is being sold by large players, making it hard to predict the market’s overall direction.

In the last 24 hours, a whale has deposited more than 500 million worth of Bitcoin on Binance. This has triggered a selloff, as such large deposits are usually sold, putting pressure on prices. This, coming at a time when market sentiment is weak, is pushing Bitcoin lower. By extension, the same is putting a lot of pressure on Ethereum and other altcoins.

Options Expiry Could Trigger Ethereum Volatility

Ethereum is also under pressure due to options set to expire today. A total of $3 billion in Bitcoin and Ethereum options are set to expire today at 08:00 UTC. Of this total, $406 million is for Ethereum, with a maximum pain price of $ 2,150. The expectation of volatility around this option’s expiration is pushing many investors out of the market. This thin liquidity means that a slight increase in sellers could drive the price significantly lower in the short to medium term.

Negative Social Media Buzz Around L1s Driving Ethereum Lower

Ethereum is also being pushed lower by negative social media buzz around cryptocurrencies. Social media tends to drive both cryptocurrency buys and selloffs through FOMO and FUD. At the moment, there is a lot of FUD around altcoins, particularly around layer-1 blockchains such as Ethereum.

The narrative is that exchanges are dumping L1 cryptocurrencies. The result is that retail holders are also exiting their positions amid fears of further selloffs. For Ethereum, this could trigger another wave of price drops in the short to medium term. 

Selloff In Equities is Negatively Affecting Ethereum

Ethereum has also been hit by the selloff in the equity markets. Data shows that cryptocurrencies now have a 93% correlation to the S&P 500. For the better part of this week, the S&P 500 has been in a selloff. Since yesterday, February 12, this selloff has been quite strong. The same has been reflected in the price of Ethereum and other cryptocurrencies. If weakness in equity markets persists, Ethereum could be headed much lower in the short- to medium-term. 

Technical Analysis – Ethereum Consolidating But with Upside Bias

Ethereum is currently consolidating between the $1952.2 resistance and $1907.7 support. However, bulls appear to be taking control in the hourly trades. If bulls are strong enough to push Ethereum through the $1952.2 resistance, a rally to $1993.5 could follow.

On the other hand, if Ethereum bears push the price below the $1907.7 support, a short-term correction to $1800 could follow. How Ethereum plays out could depend on how it trades after the options expire and on how the stock markets open today. If there is a selloff ahead of the options expiry and the stock markets open lower, Ethereum could drop.