(Akash Girimath – FXStreet)
– Ethereum price mostly remained unchanged after the Merge update on September 15.
– The recent run-up will likely continue until $1,450, but a reversal here is plausible, especially if Bitcoin price makes a U-turn.
I- nvestors should consider the possibility of a retest of the $1,080 support level in a dire case scenario.
Ethereum price shows a steady climb over the last twelve hours as a direct consequence of the sudden spike in Bitcoin price, which influences the whole crypto market. This run-up is likely going to continue a little higher or at least until the big crypto decides to reverse and undo recent gains. Therefore, investors should keep a close eye on BTC for indications as to where the tide is heading.
While ETH is performing relatively well, tax laws implemented seven months ago are creeping up after the Ethereum blockchain successfully shifted from proof-of-work (POW) to proof-of-stake (POS) via the Merge upgrade on September 15.
After this massive migration, investors can now stake their ETH to earn interest. Yet these tax issues may limit gains. In the UK, for example, investors will be forced to book taxes on their earnings, although a majority of the population is not required to file returns.
Apart from this, investors in the US are also going to face an issue if they have not sold their forked Ethereum PoW tokens (ETHW) tokens. These tokens were airdropped to investors holding ETH before the Merge upgrade and are eligible for tax in the US, as explained in a previous article.
Ethereum price is in a tough spot
Ethereum price, meanwhile, has rallied 14% in the last six days and is facing a decision time. Is it going to now continue its uptrend or is it ripe for a retracement? If anything, it is likely that big cousin crypto Bitcoin will have the final say because of the high correlation between Ethereum price and BTC.
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Bitcoin price has seen considerable inflation in its market value over the last 12 hours and as it approaches a key chart resistance level is likely to retrace. The same can be said of Ethereum price which is likely to experience a squeeze to the $1,423 resistance level before a retracement as well.
Investors are advised to prepare, therefore, for a potential U-turn in Ethereum price either at the $1,423 hurdle or even before then at the current price. The resulting downswing could knock it to the $1,200 to $1,300 support area, where buyers will probably step in eyeing a deal and absorb the selling pressure.
In a dire case, Ethereum price might even slide lower and retest the $1,080 support floor.
Regardless of the high correlation, Ethereum price could also continue to head higher even if Bitcoin price simply stalls and consolidates for a while. In such a case, a flip of the $1,730 resistance level into a support floor will invalidate the bearish thesis.
This development could potentially trigger Ethereum price to revisit the $2,000 psychological level.
Read Fed’s Powell calls for proper crypto regulations as Bitcoin price shoots beyond $20,000
