Ether (ETH) Dips Post-Upgrade: Analyzing Key Levels Amid Bullish Momentum
Ether (ETH), the native cryptocurrency of the Ethereum blockchain and the second largest digital asset by market capitalization, experienced a more than 5% decline in early Friday trading following the completion of Ethereum’s highly anticipated Dencun upgrade. This downturn suggests that investors may have already priced in the news of the successful network enhancement.
The Dencun upgrade, aimed at improving the cost-effectiveness of the Ethereum ecosystem, had initially boosted bullish sentiment surrounding Ether, driving the cryptocurrency above the $4,000 mark earlier in the week. According to Richard Meissner, co-founder of Safe, the upgrade is expected to revolutionize smart contract development on Ethereum, leading to more secure and user-friendly applications.
In addition to the Dencun upgrade, Ether has been riding on the coattails of record flows into spot Bitcoin exchange-traded funds (ETFs) and growing anticipation of its own spot ETF. Investors are eagerly awaiting potential approval of an Ether ETF application filed by asset manager BlackRock on May 23, although Bloomberg ETF analysts estimate the likelihood of approval by that date at just 30%.
Despite these bullish factors, signs of caution have emerged. Ether put options, which protect holdings from potential price declines, have traded at a premium to call options expiring over the next 30 and 60 days. This shift in sentiment, coupled with high leverage levels in the market, could trigger a correction, although Singapore-based digital assets trading firm QCP Capital anticipates any dips to be short-lived.
Ether’s current bull run, which began in late October last year, gained momentum when the 50-day moving average crossed above the 200-day moving average, forming a bullish golden cross chart pattern. However, the cryptocurrency encountered resistance earlier this week just above the $4,000 level.
As selling pressure persists, it is crucial to monitor key Fibonacci retracement levels as potential areas of support. Presently, the 38.2% Fibonacci retracement level stands at around $3,365, while the 50% Fib level aligns with the $3,135 region. These levels may provide insights into potential price movements amid ongoing market dynamics.
