Ethereum’s ‘Falling Knife’ Plunge: Analysts Warn of Another 30% Drop vs. Bitcoin

Ethereum’s native token, Ether (ETH), has hit its lowest value against Bitcoin (BTC) since May 2020, sparking concerns among analysts about further declines in the coming weeks. On March 13, the ETH/BTC trading pair dropped over 1.50% to reach 0.022 BTC, underscoring Ether’s prolonged weakness against Bitcoin.

Falling Knife Scenario Raises Alarm

Ethereum’s ongoing decline is part of a broader multi-year downtrend since peaking at 0.156 BTC in June 2017. The latest drop represents an 85% depreciation, with technical indicators suggesting that the downtrend could persist.

The two-week ETH/BTC Relative Strength Index (RSI), a key momentum indicator, has plummeted to a record low of 23.32. Typically, an RSI below 30 signals oversold conditions, hinting at a potential rebound. However, Ethereum’s RSI has remained below this threshold for two months, indicating accelerating bearish momentum.

Crypto analyst Alessandro Ottaviani has described Ethereum’s trajectory as a “falling knife,” a term used for assets experiencing steep declines that discourage buyers from stepping in too early. Historically, such scenarios have led to further losses before stabilization.

Key Resistance and Potential Rebound Levels

For Ethereum to signal a potential reversal, traders are eyeing a rebound from the 0.022 BTC support level. This level previously acted as a strong floor in December 2020, triggering a 300% rally. If history repeats, ETH/BTC could target its 0.382 Fibonacci retracement level at 0.038 BTC, aligning with its 50-week exponential moving average (EMA).

However, if ETH fails to hold its current support, analysts predict further declines toward historical support levels in the 0.020-0.016 BTC range, representing an additional 30% downside.

Fundamentals Point to Continued Weakness

Ethereum’s struggles extend beyond technical indicators. The rise of competing blockchains like Solana (SOL) has intensified, with Solana’s decentralized exchange (DEX) volumes now surpassing Ethereum’s. Additionally, the emergence of Bitcoin ETFs has shifted market liquidity away from altcoins, disrupting the traditional cycle where ETH previously outperformed BTC post-halving.

Also Read: Ethereum Whale Liquidates $306M: Can ETH Hold Above Key Support?

Further, recent events like the Bybit hack have contributed to ETH selling pressure, exacerbating its relative weakness. Until market conditions change, Ethereum’s downward trajectory against Bitcoin may persist, leaving investors cautious about a near-term recovery.

Disclaimer: The information in this article is for general purposes only and does not constitute financial advice. The author’s views are personal and may not reflect the views of Chain Affairs. Before making any investment decisions, you should always conduct your own research. Chain Affairs is not responsible for any financial losses.

Andrew Chen

I’m a crypto enthusiast with a background in finance. I’m fascinated by the potential of crypto to disrupt traditional financial systems. I’m always on the lookout for new and innovative projects in the space. I believe that crypto has the potential to create a more equitable and inclusive financial system.