The world’s largest altcoin, Ethereum (ETH), has been showing signs of weakness since its price dropped to $1,650 last week. Furthermore, the technical outlook confirms the weakness in ETH, signaling a potential sharp decline in the near future.
Data collected by Bloomberg since 2018 indicates that the width of the Bollinger Bands in ETH’s price chart is approaching the narrowest point seen since 2018. The Bollinger Bands Width, which represents the difference between the upper and lower bands in Bollinger Bands analysis used to evaluate price volatility, is currently at its lowest level ever.
Market observers looking at the situation from a technical analysis perspective often interpret the narrowing Bollinger Bands Width as a precursor to potential volatility increase. Additionally, if ETH’s price falls below the lower Bollinger Band, it will result in a negative increase in volatility, leading to a decline.
Since the beginning of August, ETH has lost 12% of its value. This decline was driven by expectations that risky assets would suffer from the U.S. Federal Reserve’s (Fed) additional interest rate hikes and prolonged high interest rates. Furthermore, ETH’s price has formed a technical formation called Head and Shoulders (H&S), indicating a potential downward target of $1,100 and suggesting further downside.
Caroline Mauron, co-founder of OrBit Markets, stated in an interview with Bloomberg that the slow trading activity during the summer seemed to have ended and that the prevailing sentiment in the market after significant price volatility in a low-liquidity environment last week is one of unease. While some investors believe that ETH’s price may drop due to major economic factors in the near future, there are investors who take a longer-term view. These investors are preparing to profit from a potential catalyst for growth. It is considered that the catalyst for this growth will be the approval of the first Ethereum futures exchange-traded fund (ETF) in the United States.
Analysts James Seyffart and Eric Balchunas at Bloomberg Intelligence noted that if the U.S. Securities and Exchange Commission (SEC) gives the green light, the first Ethereum futures ETF in the U.S. is expected to start trading around October 11.