Ethereum suffered a series of massive declines in August. It was one of the worst hit by the bearish sentiment that permeated the crypto market over the last thirty days.
Ethereum Loses 22% in August
The apex altcoin has been on a downtrend since July and continued into the next month. As a result, the asset experienced massive declines during the first five days, losing over 25%.
One of the biggest declines on the fifth day, when it opened, started trading at $2,688 but retraced to the level it last saw in January. Although it tried recovering, the day ended with losses of almost 10%.
The drop saw the altcoin crash below three important levels based on the pivot standard. It retraced below its pivot on the first day, the first pivot support on the fourth day, and the second pivot support on the fifth day. The asset was bleeding hard, as many claimed the bull market was off before it started. Although ETH reclaimed S2, all attempts at continuing the surge failed.
The August 8 surge was the biggest trial at recovery. Ether started trading at $2,342 but surged as market conditions improved. It flipped $2,500 and continued onward, breaking $2,700 and peaking at $2,725. A small correction saw it end the day with gains exceeding 14%.
It made another attempt at $2,800 on August 23, when it registered notable gains. It also signified a breakout from the previous trend of trading within a small channel. The asset surged from $2,623 and briefly flipped the highlighted resistance. A small downtrend saw it close with gains of over 5%.
A close look at the 1-day chart shows that the bulls held price above the second pivot support at $2,447 while trying to accumulate momentum. However, efforts at breaking out failed as the altcoin saw massive rejection while trying to reclaim the first pivot support.
Ethereum is down by over 22% this month. What caused the decline?
Key Events That Took Place in August
Ethereum underwent a significant network upgrade, known as EIP-5680, aimed at enhancing transaction throughput and reducing gas fees. This upgrade, a part of Ethereum’s transition to Ethereum 2.0, was designed to improve scalability and energy efficiency.
Additionally, the adoption and implementation of Zero-Knowledge Rollups on Ethereum experienced a significant boost, leading to improved transaction speeds and reduced costs. This, in turn, positively impacted the efficiency and user experience within the Ethereum ecosystem, spurring an increase in market capitalization and positive market sentiments.
However, the network failed to garner enough activity as traders and users ditched it for other ecosystems. The massive decrease in gas fees is a clear indication of this trend as GWEI reduced due to low transactions, making the cost of processing low.
Bitget’s most recent Proof-of-Reserves data indicated a noteworthy positive shift in the platform’s reserve status. Specifically, users’ ETH assets experienced a substantial increase of 22%, representing the most significant growth rate for ETH assets within the year.
As of August 2024, Bitget’s overall reserve ratio stands at an impressive 176%, showing a notable 9% increase from the previous month’s ratio of 167%. The platform holds 123,686.9 ETH as platform assets, and users own 81,625.78 ETH, resulting in a reserve ratio of 152%.
Market Dynamics
Institutional interest in Ethereum surged, with several major financial institutions launching Ethereum-based investment products and derivatives. This heightened institutional involvement was viewed as an endorsement of Ethereum’s long-term potential and served to drive up prices, attracting a larger retail investor base.
Economic indicators, such as inflation rates and central bank policy changes, exerted influence over investor sentiment in the cryptocurrency market, thereby impacting Ethereum. the crypto realized increased adoption through partnerships and integrations with mainstream financial and tech companies, including the utilization of Ethereum’s blockchain for supply chain management and digital identity verification.
Moreover, the non-fungible token (NFT) market, predominantly operating on the Ethereum blockchain, experienced notable activity attributable to high-profile NFT launches and auctions, as well as increased participation from artists and collectors, which positively contributed to Ethereum’s market momentum.
How Will Ethereum Perform in September?
The 1-day chart suggests that ETH is close to a breakout that will happen next month. Indicators like the moving average convergence divergence show that it is close to a breakout. Nonetheless, price movement over the last three days attests to it.
The altcoin printed dojis during this period. The relative strength index trended parallel, indicating the constant struggle between the bulls and bears. It also appears that the bulls are accumulating or gearing up for the next move.
The pivot standard points to $2,400 as a critical level the bulls defend to prevent further decline. According to this metric, ETH risks a drop to $2,100 if it loses S2. The Fibonacci retracement also points to the altcoin trading at a critical level. Losing the 78% fib level may guarantee a retest of the 100% level at $2,170.
Both metrics point to a slip below $2,200. MACD seals the predictions as the 12-day EMA is trending close to the 26-day EMA. The ongoing convergence is nearing completion, and a divergence may follow. It means that the asset will see notable declines during the first few days of September.
It remains to be seen how it will go. Nonetheless, there are speculations about several key events in the ninth month. One such is the impending interest rate cut by the federal reserves. Many analysts predict billions worth of funds trooping into other sectors, including the crypto market.
The trickling of more funds into the market will undoubtedly cause further price increases in several assets, including ETH. The chart also points to possible levels to watch.
The Fibonacci retracement level indicates a possible attempt at the 61% mark at $2,800. Ethereum will also see small increases before the major suge . The asset will look to end the month between $2,800 or a return above $3k.
It is worth noting that the monthly heatmap for September shows that it is not one of the best months for the apex altcoin. Let’s see how the asset will perform.
Elendu Benedict | September 4, 2024
