Source: PaxForex Premium Analytics Portal, Fundamental Insight
From the beginning of 2021 to the all-time high reached in November 2021, Ethereum has risen by a mind-boggling 500%.
Since that all-time high, Ethereum has fallen about 75%. It is currently trading at around $1,200, and there seems to be no hope of a quick rebound.
While we can rule out the possibility of a V-shaped recovery, there are interesting technical indicators that give some insight into how Ethereum has behaved in similar territory. These indicators help put things in perspective for long-term investors who may be concerned about Ethereum's current position in the market.
As always, past trends do not guarantee future results. Investors should not rely entirely on these indicators.
The 200-week Moving Average (WMA) serves as an indicator to determine the overall health of an asset. If an asset trades above the 200-week moving average, conditions are considered favorable. If the asset falls below the 200 WMA trendline, then times are tough.
Ethereum has only fallen below 200 WMA twice in its history. This does not mean that Ethereum has bounced back quickly from these levels. The first time Ethereum crossed 200 WMA, it stayed there for almost six months. It ended up rising above the trendline for just a month and then retreated below 200 WMA for another four months before returning above it in July 2020.
Today, Ethereum met that trend line again. For the first time in nearly two years, Ethereum is within falling distance below 200 WMA. As history shows, Ethereum can certainly trade below this indicator for more than a long time, but, likely, Ethereum won't fall too much from here.
More than likely, it will be a long process. But it gives investors a great buying opportunity. Ethereum is likely to have short rallies during which it will flirt with the 200 WMA, which looks like it could turn this streak from resistance to support.
At this point, we can assume a repeat of the situation seen from July 2019 to July 2020, when Ethereum dangled around 200 WMA for quite some time without any significant gains. This could be a great opportunity for investors to build a larger position in Ethereum.
Another indicator that can be used to provide context is the Relative Strength Index (RSI). The RSI serves as a momentum indicator to determine if an asset is overbought or oversold. Values above 70 indicate overbought and values below 30 signal oversold.
Currently, Ethereum's weekly RSI just hit a historic low of 27.27. The last time Ethereum approached these levels was in late 2018. From that 2018 low, Ethereum ended up rising more than 300%, from around $85 to nearly $315 in June 2019.
Current prices are more than modest, but Ethereum is still the second-largest cryptocurrency by a wide margin. And for good reason. Without Ethereum, the cryptocurrency sector would likely not be in the shape it is in today. Decentralized finance (DeFi) technologies would never have been as successful without Ethereum and its programmable smart contracts. These smart contracts have allowed developers to create things like borrowing and lending platforms, DEX, tokens, NFT, and more.
And yet Ethereum's dominance of the DeFi market hasn't changed. As of mid-June, Ethereum still supports nearly 65% of all DeFi.
These times can be tough for investors. But maintaining perspective is crucial. Ethereum has a proven track record of delivering true value. Its smart contracts have helped strengthen the burgeoning DeFi economy. Without Ethereum, likely, DeFi would not exist.
Despite the current downtrend, these claims are still valid. While Ethereum could fall even lower and will likely be trading in a sideways trend for quite some time, there is already a buying opportunity. Ethereum isn't going anywhere anytime soon. Use this as a chance to gain additional value from prices that will look like a bargain in a few years.
As long as price is below the 1700.00 level, follow the recommendations below:
- Time frame: D1
- Recommendation: short position
- Entry point: 1122.56
- Take Profit 1: 900.00
- Take Profit 2: 500.00
Alternative scenario:
If the level of 1700.00 is broken-out, follow the recommendations below:
- Time frame: D1
- Recommendation: long position
- Entry point: 1700.00
- Take Profit 1: 2150.00
- Take Profit 2: 2550.00
