ETHXBT continued with its selloff after breaking below a key support level last month. Price is now establishing a sharper descending channel visible on its 1-hour time frame and might be due for a test of resistance.
Applying the Fib tool on the latest swing high and low on this time frame shows that the 61.8% level coincides with the top of the channel around 0.0100 and a former support zone. This also lines up with the dynamic inflection point at the 100 SMA, adding to its strength as a ceiling.
Speaking of moving averages, the 100 SMA is below the longer-term 200 SMA so the path of least resistance is to the downside. The gap between the moving averages is slowly widening also, reflecting a pickup in bearish momentum.
RSI is heading north to show that buyers are trying to regain control of ETHXBT price action or that profit-taking is happening. However, selling pressure could return once the oscillator reaches the overbought zone and turns lower, possibly at any of the Fib levels. The line in the sand for this selloff is the 200 SMA dynamic resistance, as a break past this area could lead to a reversal or a much larger correction visible on longer-term charts.
If any of the Fib levels hold as resistance, ETHXBT could revisit its swing low at 0.00850 or head further south to make new lows. However, stochastic is also moving up to show that sellers are exhausted from the recent dive and need to take a break or draw more bears in the game.
Zooming out to the longer-term time frames shows that ETHXBT is hovering at the March lows already, which explains why sellers are hesitating to push it much lower. A break below this area could bring it all the way down to the yearly lows around 0.00200. After all, the market odds are in favor of bitcoin at the moment since this cryptocurrency is strongly supported by demand from China.
The Chinese government continues to make efforts in yuan devaluation while restricting investments abroad, thereby forcing investors to see higher returns and hedge their yuan-denominated holdings through bitcoin. Meanwhile, ethereum has been hit hard by the recent network attacks so investor confidence in this particular digital currency has weakened considerably.
With that, the path of least resistance in terms of market fundamentals for both ethereum and bitcoin is to the downside for ETHXBT, although it might need a strong catalyst for bears to ramp up their short positions. Risk-off developments and political uncertainties could reinforce bitcoin demand as traders pursue larger returns versus traditional financial assets or fiat currencies.