Market Wrap: Ether Trades Relatively Flat Ahead of Ethereum Merge

Price Action

Bitcoin and ether traded flat for much of Wednesday amid the final countdown to the much-anticipated Ethereum Merge.

Both BTC and ETH traded in a narrow price range.

• Bitcoin (BTC) prices fell 1% on moderate volume in comparison to its 20-day moving average. The largest cryptocurrency by market capitalization declined below the psychologically important $20,000 mark. BTC is down 58% year to date and approximately 70% below its all-time high of $68,721.93
• Ether (ETH) prices rose 1.4% also on moderate volume as the Ethereum blockchain Merge approached. The Merge will shift Ethereum’s protocol from a proof-of-work consensus to proof-of-stake at some point Wednesday night. ETH prices are down 57% year to date, and 67% below its all-time high of $4,847.57.

Economic Calendar: The producer price index for August fell on both an annual and month-to-month basis. Annual PPI declined to 8.7% versus expectations of 8.9%, while monthly PPI showed a 0.1% decrease in prices versus expectations of a 0.1% increase.

PPI represents wholesale prices and can signal the direction in which retail prices (captured in CPI data) are headed. Core PPI, which excludes volatile food and energy costs, registered higher than forecast on both a manual and monthly basis however.

Overseas, annual inflation data for the United Kingdom showed a larger-than-expected decline to 9.9% versus a forecast of 10.6%

U.S. Equities: Traditional equities traded flat, with the Dow Jones Industrial Average (DJIA), tech-heavy Nasdaq composite and S&P 500 up 0.1%, 0.7%, and 0.3%, respectively.

Commodities: Crude oil prices rose 1.7%, with natural gas prices accelerating 10%. Copper futures declined 1%, while traditional safe haven asset gold fell 0.7%

The Dollar Index (DXY) rose 0.1%, showing a -0.85 correlation coefficient to BTC. The correlation coefficient ranges from 1 to -1, with 1 implying a direct relationship while the latter represents a completely inverse relationship.

The CoinDesk Market Index (CMI), a broad-based market index to measure the performance across a basket of currencies, was up 0.68%.

Latest Prices

● Bitcoin (BTC): $19,958 −1.5%

● Ether (ETH): $1,597 −0.7%

● CoinDesk Market Index (CMI): $1,007 −0.9%

● S&P 500 daily close: 3,946.01 +0.3%

● Gold: $1,705 per troy ounce +0.0%

● Ten-year Treasury yield daily close: 3.41% −0.01

Bitcoin, ether and gold prices are taken at approximately 4pm New York time. Bitcoin is the CoinDesk Bitcoin Price Index (XBX); Ether is the CoinDesk Ether Price Index (ETX); Gold is the COMEX spot price. Information about CoinDesk Indices can be found at coindesk.com/indices.

Technical Take

ETH takes center stage on a historically significant day.

After years of anticipation, multiple testnets and hours of coverage, the Ethereum Merge is finally here. The prevailing thought is that the blockchain’s conversion from a proof-of-work to a proof-of-stake consensus mechanism will occur without a hitch.

Still, all eyes will likely be monitoring the Merge and evaluating its degree of success.

On a technical basis, ETH is trading relatively neutral Wednesday. Prices are 0.77% above Tuesday’s close, ending three consecutive days of declines.

Daily volume is relatively in line with average volume over the 20 most recent trading days, which doesn’t indicate significant conviction either to the long or the short side.

ETH’s Average True Range (ATR) is down and has been trending downward all year. The ATR measures an asset’s range of price movement over time and gauges overall volatility.

Despite what often feels like a whirlwind of price movement, ETH’s volatility has narrowed leading into the Merge. Investors should note, however, that historically, diminishing volatility has not always trended in a straight line. ATR spikes in February, May and June were noticeable and could certainly be repeated.

The Volume Profile Visible Range tool, which identifies trading activity at varying price levels, shows ETH settled between two ranges of low trading activity. The significance of this trend is that prices can often move rapidly through these “low volume nodes,” resulting in the spikes in volatility mentioned above.

The next “high volume node” to the upside for ETH is near $2,700, while the next high volume node to the downside rests at approximately $1,140. Traders are likely awaiting the results of today’s Merge, and that the success (or lack thereof) will send prices ETH sharply in one direction or the other, at least in the short term.

Traders looking to derivatives data for insight will likely focus on the spike in open interest for ETH puts at the $1,550 strike price, along with the spike in call options purchased at the $1,750 strike.

Options open interest by strike gives an indication of traders’s anticipated price direction, with calls representing the right (but not the obligation) to buy and puts representing the right to sell an asset.

Altcoin Roundup

• Ethereum's Biggest Mining Pool to Stop Offering Services for the Network: Ethermine will make the move once the Merge is completed, which is expected to occur on Thursday. Ethermine users can use other affiliated servers to mine ethereum classic (ETC), an older proof-of-work (PoS) token. Users will also be able to mine ravencoin (RVN), ergo (ERGO) and beam (BEAM). Read more here.
• A Peculiar Flavor of NFTs Is Thriving in China – One Regulators Can Abide: Unlike most non-fungible tokens (NFT), China’s “digital collectibles” are built on closed networks and designed to appease regulators who frown on trading and speculation. Read more here.

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CoinDesk Market Index

Biggest Gainers

Asset Ticker Returns DACS Sector Celsius CEL +17.7% Currency Ravencoin RVN +16.31% Currency Ethereum Classic ETC +5.93% Smart Contract Platform

Biggest Losers

Asset Ticker Returns DACS Sector Terra LUNA2 -32.73% Smart Contract Platform Terra Luna Classic LUNA -24.14% Smart Contract Platform Lido DAO LDO -6.97% DeFi

Sector classifications are provided via the Digital Asset Classification Standard (DACS), developed by CoinDesk Indices to provide a reliable, comprehensive and standardized classification system for digital assets. The CoinDesk Market Index (CMI) is a broad-based index designed to measure the market capitalization weighted performance of the digital asset market subject to minimum trading and exchange eligibility requirements.