Ethereum's native token, Ether (ETH), is down today, dropping by over 1.66% to reach $3,700 on May 30. Its move downside is part of a broader crypto market correction, with net capitalization dipping by up to 2.50% on the same day.
Key factors driving the Ether price lower today include rising bond yields on weaker demand for short-term Treasury notes and an ongoing drop in whales' ETH holdings.
Ether declines after a tepid U.S. debt auction
This week's auction of $183 billion in 2-, 5-, and 7-year U.S. Treasuries encountered weak demand, resulting in a sharp increase in yields over the past two days. Interestingly, the period of rising bond yields coincided with declines in the Ether market, as shown below.
As dealers and investors sought higher returns, these elevated Treasury yields, combined with growing expectations that the Federal Reserve may only reduce interest rates once this year, put pressure on the crypto market.
Generally, when the U.S. dollar strengthens and yields on safer investments like Treasuries rise, investors shift their funds away from riskier assets, including cryptocurrencies, in search of more stable returns. This leads to a decrease in demand for Ether, causing its price to fall.
Ether whales are dumping their holdings
Ether's price decline today follows a sharp decline in the ETH supply held by one of its richest cohorts.
Notably, the supply of Ethereum held by entities with balances between 1 million and 10 million ETH (brown) has decreased by 1% in the past 24 hours. Meanwhile, the supply held by entities with balances between 100,000 and 1 million ETH has increased, indicating absorption from the larger cohort.
The redistribution from larger to smaller Ether wallet cohorts indicates that whales are selling their holdings, which is leading to a decrease in the ETH price.
An overbought correction
Ether's decline today is part of a correction that started on May 29, when its four-hour relative strength index (RSI) reading almost ventured into the overbought area above 70. An overbought RSI typically precedes a consolidation or correction period.
Furthermore, the cryptocurrency's correction has preceded a bearish divergence between its price and RSI, with the price forming higher highs and the RSI forming lower highs. This indicator suggests a waning buying sentiment in the market.
Meanwhile, ETH has formed a double top pattern, marked by the creation of two consecutive peaks with a minor correction between them, indicating more downsides for the cryptocurrency in June.
Double top patterns are typically seen as bearish reversal indicators. They are confirmed when the price breaks below the neckline support, potentially leading to a decline equal to the pattern's maximum height.
Applying this technical rule on the ETH market presents $3,684 as the neckline support target, which, if broken to the downside, could have the price fall toward $3,400 in June. This level, down 8.80% from the current price levels, is coinciding with another ETH's support — the 200-4H exponential moving average (200-4H EMA; the blue wave).
Conversely, a decisive bounce from the neckline support — accompanying a rise in trading volumes — could invalidate the double top pattern, with ETH's price eyeing its early May resistance at around $3,850 as the next upside target.