Ethereum Plunges 29% as Quantum Computing Fears Collide With Technical Breakdown
Market Structure Shifts Lower
- Ethereum price dropped over $1,000 in monthly selloff, losing 28.78%
- Buyers face extreme negativity amid Vitalik Buterin’s quantum computing FUD
- Critical technical levels now act as resistance; recovery hinges on reclaiming $3,000+
Ethereum has been hit by a significant monthly selloff that pushed its price down by over $1,000. Vitalik Buterin’s quantum computing FUD added to the downward pressure. Buyers now face extreme negativity.
Ethereum’s monthly losses hit 28.78% and dragged the coin through several critical technical levels that will now take on the role of resistance. ETH retraced all of November’s gains but interestingly it has returned to the exact same price it was at the end of October 2021. Because of these factors, traders must determine whether ETH has reached an interim low and is poised to stage a recovery or if the subsequent technical damage will initiate a new wave lower. A lower close to the week below $3,000 would be ominous.
| Metric | Value |
|---|---|
| Asset | ETHEREUM (ETH) |
| Current Price | $2741.22 |
| Weekly Performance | -2.17% |
| Monthly Performance | -28.78% |
| RSI (Relative Strength Index) | 31.5 |
| ADX (Average Directional Index) | 42.9 |
| MACD (MACD Level) | -166.45 |
| CCI (Commodity Channel Index, 20-period) | -101.05 |
RSI at 44.29 Signals Exhaustion After Month-Long Selling Spree
The oscillator is forming a bullish divergence vs. price, but the slope of lower lows would remain in place until a print above the prior high of 86.39. The 200-DMA has proven as resistance for the last two weeks, and its convergence with the 50-DMA this week sets up a death cross, which has only been the start of a downtrend if looking back to 2018 as a guide. Mentioned last week, the on-balance-volume (OBV) confirms the selling in the shares but is starting to tick back up.
Therefore, the higher timeframe location and structure should determine one’s bias and time spent fighting intraday volatility is likely wasted effort. ETH cemented a form of HL on the monthly, potentially installing a higher low HL above $170, which is bullish if confirmed. HLs have also formed on the weekly suggesting more bullish bias. Buyers are responding at the first weekly OB retest.
ADX at 42.94 Confirms Mature Downtrend Nearing Exhaustion Point
Trend strength indicators clearly show capitulation behavior. With an ADX entry of 42.94, we are officially trending very hard – in a very strong downtrend that has been the primary factor driving December’s price action. This kind of extreme reads usually appears on the edges of qualitative moves, when the final bag-holders finally let go and the momentum peaks out, blowing itself out.
What is interesting to note is how quickly ADX went up from the mid-20s to where it is now, and it kept on increasing since the quantum computing story started to circulate. In less than two weeks, we went from rather choppy consolidation to panic sell-off, with many traders (myself included) caught on the wrong foot expecting year-end strength. So day traders, we are in the exhaustion stage and these violent counter-trend bounces should become more and more likely, even if the longer-term trend has not technically turned.
50-Day EMA at $3,389 Transforms From Support to Massive Overhead Resistance
The breakdown below the daily Cloud highlights the rapidly eroding bullish market structure. Before the clouds disappeared, the twist was a clear bear trend shift; Right now any attempted rally is being met with a strong defense by the bears which are showing no signs of retreat. That said, bears should not take out the ATH. The 76% retrace from the long-standing trend into the ATH is a common retrace level for bear-trend relief rallies.
Taking a big-picture view of the moving averages, the 100-day EMA at $3,586 and the 200-day EMA at $3,487 currently present far-off resistance areas almost $750-$850 higher. Blockchain is a system of recording information in a way that makes it difficult or impossible to change, hack, or cheat the system. An insightful analysis of this correction was written by Ben Lilly, co-founder and analyst-role trader at Jarvis Labs. The compression of those long-term averages also implied ETH was still exposed before the quantum research catalyst entered the scene – the information just fueled an overdue correction.
Support Stacks Between $2,435 Monthly Pivot and $2,475 Weekly S1
There are several clear horizontal levels just below this zone, too, so there should be healthy demand in the $2,435-$2,475 area. DG’s UOA database highlights another couple of pockets of significant demand below there, with nearly 70,000 ETH contracts uncovered between $2,000 and $2,100, and a further 37.5k coins between $1,825 and $1,950.
With this month’s action clearly weakening the technical structure, and potential profit taking from late shorts and scaling longs hitting the 10-day EMA, rallies should be viewed as opportunities to re-short or take derivative-based hedges if structurally long.
The bulls are still combating a surge in supplies from marginal producers and the aggressive balance sheet expansion currently underway. Initial support areas include $2,488, $2,477, and more importantly $2,435 with a close below the latter opening up the chance for a slingshot down to the $2,000 psychological level. On the positive side, trading a move over $2,551, 2.0 % Fibo of $3,117/$2,336 down leg, will likely trigger an extension to $2,612 then the $2,671 band.
Recovery Requires Decisive Reclaim Above $3,000 to Shift Sentiment
To show the bleeding has stopped, the bulls need a daily close above $3,176 (weekly pivot), with follow-through strength through the 10-day EMA, which is present at $2,947. This would give the market time to build a base and consolidate before any further upside tests could be seen. The first resistance would be the 20-day EMA ($3,055), and above that, a test of the old support of the buildup phase around $3,200. Positive news such as the development that Eclipse is bringing Solana’s parallel runtime to Ethereum could lead to a stronger rebound, even though the technical damage is enormous and likely won’t be repaired right away.
If the scenario in which the quantum news scare remained contained with a quick recovery to the $2,435 floor, the outlook for Q4 remains positive toward our $5,700 Q4 target. If such news emerges again on bigger volume and more vulnerable market conditions, it could negatively impact the exchange settlement efforts inflating future physical crypto liquidity values and splash trading desks again to $2,000 monthly and psychological support.
The very oversold bounce alert crosses wires with the extreme interpretation of monthly ADX and a rising wedge breakdown targeting the $2,200 area. In other words, bulls will need to proceed with extreme caution until the dust settles. There’s often a tendency to “sell the news” of a major support retest as weak-handed longs finally capitulate. BOOLETHFORCE’s likelihood of an eventual retest of this crucial support isn’t in question, only the timing of such a key event and the ensuing reaction of fair-weather speculators.
