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The Ethereum (ETH) price is on the decline once again after recovering to as high as $137 across major exchanges. The pullback comes after technical indicators pointed towards an upsurge to $170.
Declining momentum of the bitcoin price in anticipation of a gloomy U.S. stock market opening on Monday is likely to be causing the cryptocurrency market to slump.
Ethereum had an optimistic short-term outlook
According to cryptocurrency trader Josh Olszewicz, a technical structure called E2E and an abstruse inverse head and shoulders (IHS) formation on lower time frames initially pointed towards an optimistic short-term price trend for ETH.
During weekends, however, the volume of the cryptocurrency market tends to decline. As such when the price of major cryptocurrencies like Ethereum and bitcoin start to rise while volume declines, it often indicates a fakeout before a large drop.
In times of uncertainty, alternative cryptocurrencies tend to follow the price trend of bitcoin. When the price of bitcoin drops, Ethereum and other major crypto assets are likely to see intensified movements to the downside.
In the short-term, technical analysts expect the bitcoin price to retest the low $5,000 region again at the least, following the rejection of $6,200 on March 22.
Cryptocurrency trader Michael van de Poppe said:
“[Bitcon] having it's problems with the $6,400 level already. There's still two scenarios that I'm watching. Either we've got a fake rally and make a LH here, through which we test the $5,280-5,400 level for support. Or we break up and take the highs and do the same.”
At a technical level, the rejection of $6,200 is expected to lead to the retest of $5,800 for bitcoin. Once that breaks down, traders foresee a further drop to the low $5,000s, possibly to the mid-$4,000 area.
Ethereum, XRP, and Bitcoin Cash, which have already underperformed against bitcoin since early March are likely to struggle in sustaining their momentum in the near-future.
The U.S. stock market is still bearish
After a near 5 percent correction on March 20, the U.S. stock market is showing no signs of recovery based on pre-market data. The Dow Jones Industrial Average (DJIA) is set to open with a 165-point drop, pushing it lower to the 18,000-point support level.
A bearish sentiment in the U.S. stock market could add significant selling pressure on the cryptocurrency market once again in the following week. That could cause further capitulation with alternative cryptocurrencies, especially with exchange deposits of Ethereum rising to record highs in the past week.
On-chain data suggests large holders of Ethereum are selling off ETH and other high-risk assets, making it difficult for the market to recover in the short-term.