Fridays China crackdown on cryptocurrency, which deemed their transactions “illegal”, led to the price of Ethereums native currency Ether (ETH), falling.
“Financial institutions, non-bank payment institutions, cannot offer services to operations and activities related to virtual currency,” the Peoples Bank of China stated in a statement posted on Friday. It also said that offshore crypto services offered to Chinese residents are “illegal financial activity.”
In response, the USD/ETH pair saw a drop in bids of up to 13.30% to $2735 After a turmoil in Chinas property sector, crypto markets saw traders pay as high as $3,346 for one Ether token. However, this price dropped to $2,651 from its WTD high.
Daily chart of the ETH/USD exchange rate. Source: TradingView.com
Bitcoin, the most popular cryptocurrency in the world, fell from its WTD high at $47,358 down to $2,651. Its prices dropped by 9.38% on Friday, a dramatic intraday drop but less than Ethers decline in the same period.
It appears that traders decided to dump digital assets that offered better long-term returns than Bitcoin. Even after the recent declines, ETH/USDs year to date (YTD) gains were over 280%. Bitcoins YTD profits, however, were slightly higher at just over 40%.
ETH/BTC drops to multi-week lows
Ethers performance against Bitcoin was also disappointing, with the ETH/BTC exchange rate falling to 0.066 BTC in the first three weeks. The pair traded at 0.079 BTC, its annual high.
Daily price chart for ETH/BTC. Source: TradingView.com
However, Ethereum charts indicate that Ether will grow stronger against Bitcoin over the next sessions. This is primarily due to a Bull Flag formation at ETH/BTC, a bullish continuation trend that appears when prices consolidate lower/sideways after a strong uptrend. (FLAGPOLE).
If the price moves above the channels upper trendline, a Bull Flag sets its profit targets at length equal the Flagpoles. ETH/BTC could experience a bullish breakout in order to retrace its local high of 0.0824 BTC.
Bullish fundamentals persist
The Ethereum token is expected to continue its upward trend due to its participation in the Decentralized Finance (DeFi) industry. Cointelegraph previously reported that the total value locked (TVL), across decentralized applications (dapps) reached $142 billion as of August 2021. 68% of this figure was concentrated on Ethereum.
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This increases demand for Ether tokens to be able to power smart contracts which back dapps. However, the active supply of Ether tokens across the board is expected to decrease as holders lock their ETH holdings in Ethereums proof–of-stake smart contracts.
In just nine months, the total value of all stakes in the Ethereum PoS smart contracts has increased from 11,616 Ethereum to 7.76 Million ETH. Source: CryptoQuant
As the Ethereum network continues to use a portion of its 13,000 ETH daily issuance after its August 5 London Hard Fork upgrade, more supply is expected to be out of circulation. WatchTheBurn reports that the network has burned 358 616 ETH, worth more than $1 billion.
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