Ether's outlook darkens in charts capturing hangover after the Merge

THE fanfare over a revamp of the Ethereum blockchain is still echoing across the cryptoverse but that's doing little to stem a slide in Ether.

The network's native token is down 10 per cent since the most commercially important digital ledger last week implemented an upgrade to slash energy use.

The second-largest virtual coin had rallied from mid-June on hype around the software update known as the Merge, but that's fizzling now the shift is done. It's down some 63 per cent this year, a bruising period for cryptocurrencies.

Crypto and many other assets are also quivering ahead of what's likely to be another big Federal Reserve interest-rate hike on Wednesday (Sep 21).

The sell-off in Ether is bringing technical patterns into play that hint at more downside risk. Digital-token prices were little changed on Tuesday, with Ether around US$1,350 and Bitcoin just above US$19,000 as of 1.10 pm in Tokyo.

Regressing

Ether has dropped below the second standard deviation of a regression channel drawn from its June lows. The study suggests that this brings a retreat to the third standard deviation - a level of about US$1,250 - into play. If that support fails, the next marker is US$1,000.

Creaking

The price of Ether of late clustered around US$1,800 for a notable period of time, indicated by the horizontal bars below, which capture how much time the token spent at particular levels. That, in effect, became a ceiling it struggled to break, and it has since dropped below a zone of support around US$1,340. For technical analysts, the breach of support raises the risk of more falls.

Betting

Options data from Deribit show a high number of outstanding Ether put and call contracts - so-called open interest - at strikes of US$1,000 and US$2,000 respectively for end-September expiry. That suggests those levels define a trading range for Ether.

Meanwhile, bulls looking for a glimmer of hope might take solace from the so-called maximum pain point implied by the options bets.

This is part of a controversial theory that says options writers - often financial professionals - make more money than options buyers. The argument is that an asset's price will move towards the level where options writers make the most profit - that is, where the greatest number of options expire as worthless for buyers. Deribit data puts this maximum pain point around US$1,600. BLOOMBERG