Crypto collapses over the weekend: Will we retest the summer lows?

There’s a downside to having a market that never closes, as crypto bulls who were hoping to enjoy their weekend just found out.

Friday’s selloff in Bitcoin, Ethereum and other cryptoassets turned into a rout heading into the weekend, and prices aren’t yet seeing much reason for optimism yet in the new week. There was little in the way of fundamental or macroeconomic news to drive the selloff; rather traders’ appetite for risk assets has simply collapsed across the board.

From a technical perspective, the big drop has done durable damage to the charts. Looking at Bitcoin, prices bounced off their June lows, forming a rising channel to retrace back to their 50-day EMA last week. Following this weekend’s precipitous drop, the largest cryptocurrency has definitively broken below its rising channel, leaving a bearish near-term bias for a potential retest of the summer lows near $18,700:

Source: StoneX, TradingView

Turning our attention to Ethereum, the world’s second largest cryptoasset saw a far more impressive rally through the summer, effectively doubling off its June lows compared to “just” a 35% rally in Bitcoin. Ethereum continues to benefit from speculation around next month’s “Merge,” when the network will transition to the more environmentally friendly proof-of-stake security and supply growth is projected to flip negative.

Nonetheless, Ethereum is falling sharply in-line with its larger rival to start this week’s trade. The ETH/USD price is now trading below its 50-day EMA, with bears now eyeing support at the late July swing low near $1375, the midsummer range high at $1275, and the multi-year low around $1000:

Source: StoneX, TradingView

After the dramatic blowups and deleveraging we saw in May and June, an long-term V-shaped bottom this summer was always unlikely. As we flip the calendar into September, the key question for crypto traders may well be whether we go on to break this summer’s lows or merely retest them to set the stage for the next bull cycle.

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