Ethereum is starting a new downtrend as it trades below a descending trend line on its 1-hour chart. Price is bouncing off support around $126.25 and could be due for a correction to the Fib levels marked below.
The 50% level is closest to the trend line at the $155 mark and is also in line with the 100 SMA dynamic inflection point that adds to its strength as a ceiling. The 100 SMA is below the longer-term 200 SMA to indicate that the path of least resistance is to the downside. In other words, the downtrend is more likely to resume than to reverse.
A larger pullback could last until the 61.8% Fib just slightly past the short-term falling trend line. Stochastic is still moving up to show that buyers have the upper hand and could continue to push for more gains. RSI is also heading north to show that buyers still have the upper hand and could keep the correction going for a bit longer.
Ethereum has had a rocky run but appears to be finding a bottom, despite the pickup in volatility. Traders might be cashing out on their earlier positions leading up to the Thanksgiving holidays when liquidity is expected to be thinner.
The recent SEC crackdown on potentially illegal ICOs is spooking ethereum investors as cashing out on these holdings as precautionary measures also mean a selloff in the ERC20 token. According to The Block, ICO treasuries hold around 3.5 million ETH, which amounts to roughly 3.5% of the total Ethereum supply.
This compares to around 4.5% back in April, which shows that investors have already started liquidating their ethereum-related ICO holdings back then. The SEC is also looking closely into exchanges that are carrying such tokens, likely leading investors to move their funds elsewhere.