ETH price collapsed on Friday after China stepped up its crackdown on cryptocurrencies by classifying related transactions as “illegal”.

“Financial institutions and non-bank payment institutions cannot provide services for virtual currency-related activities,” the People’s Bank of China said in a statement on its website today, further claiming that online cryptocurrency services are provided to Chinese citizens from overseas exchanges, too “Illegal financial activity”.

The ETH price fell as much as 13.3% to USD 2,735 after this news. At the current weekly high (WTD), traders paid up to $ 3,346 for 1 ETH, but the price plummeted as low as $ 2,651 on speculation in the property market.

Price table ETH/ USD daily | The source: TradingView.com

As a result, Bitcoin, the world’s leading cryptocurrency, also fell from a WTD high of $ 47,358 to a low of $ 42,651. Meanwhile, the price fell as much as 9.38% at one point today – a massive intraday drop, but still well below the drop in ETH over the same period.

So it seems that traders have chosen to sell digital assets that offer better returns than Bitcoin over the long term. For example, even after the recent declines (YTD), ETH’s profit is still over 280%. In contrast, Bitcoin’s return since the start of the year is just over 40%.

ETH / BTC falls to a low of several weeks

ETH also underperformed Bitcoin, as the ETH / BTC pair fell to 0.066 BTC for the first time in over 3 weeks. At its high for the year, the pair is trading at 0.079 BTC.

diagram ETH / BTC Daily | The source: TradingView.com

However, the charts show that ETH will get stronger against Bitcoin in the coming sessions. This is primarily due to the formation of a bullish flag on the ETH / BTC market, an uptrend continuation pattern that occurs when prices consolidate lower / flat after a strong uptrend (FLAGPOLE) – flagpole lower / flat (FLAG – flag) .

Bull flags usually set a profit target with a length equal to the size of the flagpole when the price breaks above the upper trendline of the channel. As such, ETH / BTC could break bullishly on the previous local high of 0.0824 BTC.

Basics remain optimistic

Meanwhile, ETH will continue to gain in value overall thanks to developments in the emerging decentralized financial sector. Total Value Locked (TVL) in the decentralized applications (dapp) industry reached $ 142 billion in August 2021, of which 68% is focused on the Ethereum network.

This creates a higher demand for ETH, as it has the option of operating Dapp-enabled smart contracts. On the other hand, the active supply is expected to decrease as the owners continue to tie their ETH to a smart contract proof-of-stake on Ethereum.

The total value of PoS smart contracts on Ethereum rose from 11,616 ETH to 7.76 million ETH | in 9 months Source: CryptoQuant

More supply is expected to be withdrawn from circulation as the Ethereum network continues to burn part of the 13,000 ETH daily that was published after the London hard fork upgrade on August 5th. According to WatchTheBurn, the network burned 358,616 ETH worth over $ 1 billion.

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Minh Anh

According to Cointelegraph

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