The Ethereum price is currently trading within a narrow range with no clear trend after experiencing a sudden drop on March 2. There is a high probability that the market will continue to be bearish based on the prevailing negative-to-neutral investor sentiment and overall market weakness.
Last week, the focus was on the Eco and Silvergate controversies, but this week is crucial as it includes the testimony of Fed Chair Jerome Powell and the release of Non-farm Payrolls (NFP) data. Investors should exercise additional caution and awareness as there may be increased volatility in the crypto markets, including Ether, which is the second-largest cryptocurrency by market capitalization.
Here are some recent highlights on Ethereum:
- Following a 5% drop, the Ethereum price currently exhibits a close consolidation pattern of around $1,550.
- ETH has been trading within a narrow $42 range, and if there is a breakout, it could result in another significant drop to $1,400.
- While a bearish outlook is possible, it is not definite. Therefore, a rebound could prompt a recovery rally of up to $1,617 in specific scenarios.
The impact of Silvergate on crypto so far
The value of cryptocurrencies declined following troubling reports about Silvergate Capital, the bank supporting many prominent players in the industry. The reports included news of the bank losing significant clients and being on the verge of financial collapse.
And the impact? Even the largest crypto, Bitcoin, took a massive hit in terms of market value. The crypto fell by around 5.2%, thus, losing approximately $1,200 from its previous close. Following suit was Ethereum (ETH), the second largest crypto in the market, which also experienced a decline of around 5% and was being traded at a price of about $1,500.
Even other altcoins such as Polkadot (DOT), Polygon (MATIC), Cardano (ADA), Avalanche (AVAX), and Solana (SOL) experienced comparable declines of 4% to 5%, similar to Ethereum (ETH). On the other hand, Litecoin (LTC) and Dogecoin (DOGE) saw even larger losses, declining around the range of 6 to 8.5%, respectively.
The collapse quickly arrived after Silvergate Capital Corp announced on Friday that it had decided to terminate its crypto payments network, the Silvergate Exchange Network, citing a "risk-based decision." This announcement came just two days after the digital asset-focused bank cast doubts about the network's sustainability.
Silvergate recently disclosed that it had sold more debt securities this year at a loss and is assessing its ability to continue operations as a "going concern." The bank warned that it may become "less than well capitalized if it continues to suffer losses."
Following Silvergate's warning, several significant players in the cryptocurrency industry, including Coinbase Global Inc, Galaxy Digital, Paxos, Circle, Cboe's digital asset exchange, Bitstamp, and Gemini, ended their partnerships with the bank.
Another day crypto fraud mishandling customer funds
As per a report by Fintech Business Weekly, a whistleblower disclosed that Eco, a crypto wallet company supported by prominent investors like a16z, lent all of its customers' funds to entities such as Goldman Sachs, Bank of America, and Wells Fargo, among others, to earn interest, which was subsequently distributed to customers.
Aside from extending loans to these large corporations, Eco, which lacked FDIC insurance, allegedly planned to transfer customer funds to BlockFi. The whistleblower stated that this action would boost Eco's interest earnings from 3%-5% to 8.6%.
The CEO of Eco, Andy Bromberg, responded by denying most of the accusations and clarified that customer funds were not moved to DeFi protocols like BlockFi or Genesis.
@mikulaja — despite the primary sourcing, this piece is filled with inaccuracies. You clearly had no interest in pursuing the truth and did not give us any opportunity to address many of the (untrue) allegations here. To start:— Andy Bromberg (@andy_bromberg) March 5, 2023
- Eco did not put user funds with Blockfi,… https://t.co/hCFnX6Eyhf
This news follows Coinbase's decision to sever ties with Silvergate as its banking partner on March 2, which aligned with a sudden drop in the cryptocurrency markets that caused $234 million in positions to be liquidated. This liquidation amount is the third largest since January 14.
Ethereum price to collapse again
Despite weeks of effort, the Ethereum price could not surpass the monthly obstacle of around $1,600. The lack of momentum or engagement, as well as the Silvergate FUD, resulted in approximately a 7% drop in ETH on March 2. ETH has since been consolidating within a $42 range.
As the range of Ethereum prices narrows, there are two possible outcomes. It could either experience a recovery bounce that propels it to $1,600 before declining again to $1,400, or it could experience a breakdown of the current consolidation, resulting in a direct drop to $1,400.
The midpoint of the range formed by the Ethereum price, which rose by 42% in early January, is at the $1,400 level. Therefore, this level is crucial in safeguarding ETH. Still, if it fails to maintain this barrier, it could result in a correction to $1,331, resulting in approximately a 15% decline.
During times of uncertainty, making predictions about the directional bias can decrease the likelihood of accuracy. Thus, investors should remain patient. If the Ethereum price experiences a sudden increase in buying pressure and bounces back strongly, causing it to convert the $1,600 level into a support floor, this would invalidate the bearish outlook. In this situation, Ethereum's price might aim for a rally to around $1,800 or beyond.
Taking another look at on-chain metrics
On March 4, two days after the sell-off triggered by Silvergate, the net flow of stablecoins to exchanges rose to around 1.37 billion. As a result, the short-term bearish trend is likely coming to a close. The recent increase in stablecoins on exchanges indicates that investors have the resources to buy in case the markets experience another dip.