Ethereum price to awaits for directional bias after another fraud surfaces

Ethereum price lacks directional bias as it trades in a tight range after a sudden collapse on March 2. The likelihood of a continuation of this bearish trend is high, considering the weakness in the market and investor sentiment, which is largely bearish-to-neutral. With Silvergate and Eco drama taking the spotlight last week, this week is key due to the testimony of Fed Chair Jerome Powell and the announcement of Non-farm Payrolls (NFP). So, investors need to be extra cautious and perceptive of the incoming volatility as things are likely going to get dicey for crypto markets, including Ether, the second-largest cryptocurrency by market capitalization.

Another day, another crypto fraud misappropriating customer funds

According to Fintech Business Weekly report, a whistleblower revealed that Eco, a crypto wallet company backed by a16z and other heavy hitters, lent 100% of customer funds to firms like Goldman Sachs, Bank of America, Wells Fargo etc., to earn interest, which was then paid out to customers.

In addition to lending money to these too-big-to-fail companies, Eco, which was not FDIC-insure (Federal Deposit Insurance Corporation), also was reportedly ready to transfer customer funds to BlockFi. This move would push Eco’s interest rate earnings from 3%-5% to 8.6%, according to the whistleblower.

In response, Eco CEO, Andy Bromberg, refuted most of the allegations and also noted that customer funds were not transferred to BlockFi, Genesis or other DeFi protocols. 

This development comes after Coinbase dropped Silvergate as its banking partner on March 2, which coincides with a sudden selloff in crypto markets that resulted in $234 million worth of positions getting liquidated. In terms of the amount liquidated, the March 2 event is the third largest since January 14.

Ethereum price to crumble again

Ethereum price failed to overcome the $1,677 monthly hurdle after weeks of trying. This lack of momentum or participation, combined with the Silvergate FUD, caused ETH to sink by 7% on March 2. Since then, ETH has been consolidating inside a $42 range.

As this range tightening occurs, one of two things could happen to Ethereum price. A recovery bounce that pushes ETH up to $1,600 before continuing its descent to $1,400 or a breakdown of the ongoing consolidation, resulting in a direct crash to $1,400. 

The $1,429 level is the midpoint of the range created by Ethereum price as it rallied 42% in early January. Hence, this level is key in defending ETH, but a failure to hold onto this barrier could result in a steepening of the correction to $1,331. Such a move would constitute a 15% drop.

ETH/USDT 1-day chart

While predicting a directional bias at uncertain times reduces the probability of the move, investors need to be patient. If Ethereum price bounces hard to a sudden spike in buying pressure, causing it to flip the $1,677 level into a support floor, it would invalidate the bearish thesis.

In such a case, Ethereum price could attempt a rally to $1,800 or higher.

Taking another look at on-chain metrics

The netflow of stablecoins to exchanges spiked to 1.37 billion on March 4, two days after the Silvergate-induced sell-off. Therefore, the chances that the short-term bearish outlook could be coming to an end are high. This recent uptick in stablecoins present on exchange denotes the gunpowder for investors should markets take another dip.

Stablecoin exchange netflow