Ethereum falls further after 'The Merge', targets $1,200 and drags Bitcoin down

The cryptocurrency market extended the sell-off that began after Ethereum´s merge during the weekend and the total capitalization of all tokens is now closer to $900 billion than $1 trillion. The global value of these assets gave up this mark last week, as soon as the blockchain technology migration of smart contracts was completed, leading to a 'sell the news' event. After an initial lull, when the shift from consensus to proof-of-stake model was successfully completed, investors began to unload their positions in Ether - the Ethereum network unit - Bitcoin and other 'altcoins'.

The market is facing further weakness, if possible, since Ether lost 25% of its value starting last Monday, and also ceded the $1,400 level, where an important resistance formed on August 28, resided. As for the rest of the 'altocoins', they have not had better luck and the losses are more than 10% for many of the tokens. Bitcoin, meanwhile, threatens the $18,000 level and opens the doors towards $17,000.

Experts, in general, attribute the surge in selling to a 'buy the rumor sell the news' move, and "in terms of the price action, there is no doubt that many have been excited about this event and the recent rally, which took the price away from its lows of $860 was mainly due to this hype," commented Naeem Aslam, analyst at Avatrade. "Traders have continued to think that when the real event happens, they will see a higher price. However, the disappointment on this end led them to start the profit-taking process, and that triggered a sell-off in the price of ETH that started on Thursday and continued over the weekend," he added.

"Had 'The Merge' not gone well, the market could have registered a much stronger sell-off. Net FX flows were positive in the days leading up to Ethereum´s upgrade," noted Simon Peters, analyst at eToro. "Generally, increased deposits in the spot and derivatives market can be interpreted as increased selling pressure and the arrival of volatility," he added.

In fact, analysts do not believe that the downward pressure has bottomed out yet. Currently, the price is consolidating losses above the $1,280 level and below the 100-hour simple moving average. On the upside, the price is facing resistance near the $1,335 level. It is near the 23.6% retracement level of the recent decline from the high of $1,474 to the low of $1,288.

The next important resistance is near the $1,360 and $1,380 levels. The hourly chart of Ethereum/dollar shows a bearish trend line with resistance near the 1,360 level. It is near the 50% retracement level of the recent decline from the high of 1,474 to the low of 1,288.

If Ethereum fails to break above the 1,360 resistance, it could continue to move lower. A first downside support is near the $1,300 area.

The next important support is near $1,260. A downward break below the $1,260 support could mean another sharp decline. In this case, Ether´s price could decline towards the $1,200 level.