Bitcoin and Ethereum activity shows major risk of crypto crash in coming days

Volatility has hit the cryptocurrency market, resulting in over $160 million in liquidations in the past 24 hours. Bitcoin and Ethereum are now sitting on weak support, posing the risk of further losses.

Bitcoin and Ethereum retracements

Bitcoin and Ethereum on-chain activity looks precarious, and without significant improvement, the two major cryptocurrencies could suffer major corrections.

Bitcoin appears to have developed a Bart pattern after a pullback on Tuesday. Bitcoin rose from a low of $18,700 and briefly broke to $20,390 on Tuesday. However, it has since fallen, erasing its gains to hit a low of $18,480.

From an onchain perspective, investors are showing little interest in accumulating bitcoins at current prices. Addresses holding between 1,000 and 10,000 bitcoins have sold or redistributed around 50,000 coins worth around $950 million over the past week. The growing selling pressure could soon have an impact on the price of bitcoin.

Distribution of bitcoin supply
Distribution of bitcoin supply (Source: Santiment)

Transaction history shows that bitcoin is sitting under a sizable supply wall with some sizable demand walls below it. Around 1.26 million addresses bought 685,000 bitcoins at an average price of $19,000. A further drop could prompt these investors to exit their positions to avoid further losses. Given the lack of support levels, bitcoin could see a drop towards $16,240.

Bitcoin needs to recover the $19,000 level as support as soon as possible to have a chance of invalidating the pessimistic outlook. If successful, it could head towards the recent high of $20,390, marking a crucial break above the psychological level of $20,000.

Bitcoin transaction historyBitcoin transaction history
Bitcoin transaction history (Source: IntoTheBlock)

Ethereum has also seen high volatility over the past 24 hours, losing almost 150 points in market value. The erratic price behavior coincides with a significant drop in activity on the chain. The number of new ETH addresses created per day has fallen by more than 50% after hovering above 60,000 addresses over the past week.

In general, a steady decline in the number of new addresses created on a given blockchain causes prices to correct sharply over time.

Growth of the Ethereum networkGrowth of the Ethereum network
Growth of the Ethereum network (Source: Glassnode)

IntoTheBlock’s IOMAP model shows that further downward pressure could take Ethereum to $1,180, where 500,000 addresses hold approximately 1.19 million ETH. But if that level of support doesn’t hold, the correction could extend towards $1,000.

Ethereum Transaction HistoryEthereum transaction history
Ethereum transaction history (Source: IntoTheBlock)

Ethereum needs to climb and print a daily close above $1,300 to invalidate the bearish thesis. If it succeeds, it could recover and rise towards $1,450.

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