The ether-US dollar exchange rate fell to a six-week low below $250 today as the mood in the markets soured and fears of a broader exchange crackdown in China were seemingly confirmed.
However, while today's price decline appears to be a response to the news, ether's particular drop should not be a surprise for traders – the move was in line with the bearish technicals discussed earlier this week. As we've covered previously, China's decision to ban ICOs hurt ether the most as the vast majority of ICOs are launching tokens issued on top of the ethereum blockchain.
When the news hit the wires last Friday, it lead to a bout of panic selling in cryptocurrencies. However, as the rumors went unconfirmed, ether prices moved higher to $316 levels on the back of short covering.
The lack of fresh buying interest then made way for a deeper correction to $256 levels.
All in all, however, it's perhaps best to view this as nothing more than a healthy technical correction following a rally of epic proportions. In one year, the value of all blockchain-based cryptocurrencies has increased by a whopping 1,450 percent.
Ether clocked record highs above $400 this summer, and at press time, it's still trading at $266 levels, which means only 50 percent of the rally from the July low of $136 has been undone. Week-on-week, ether is down 20.6%. On a monthly basis, the cryptocurrency is down 11%.
Last but not the least, the technical factors are responsible for the sell-off as well.
The ongoing technical correction would add credence to the stellar rally in ether and other cryptocurrencies. In a way, the correction is a litmus test as traders who missed the bus earlier can enter the market now.
Increased dip demand would signal that heightened interest in cryptocurrencies is for real.
Is the technical correction over?