Source: PaxForex Premium Analytics Portal, Fundamental Insight
The trading week will start with low volumes and closed equity markets due to various holidays in the UK, the US, and Switzerland, three major financial hubs. It makes cryptocurrencies a more attractive space to explore for trading opportunities. South Korea, a leading cryptocurrency trading hub, especially across Asia, was also closed, which does not impact cryptocurrencies the same manner it does other assets. Ethereum rallied sharply until mid-April but has lost its upside momentum with bearish chart patterns forming. Bullish traders should approach the ETH/USD cautiously as bears gather forces to push price action lower.
Fundamental developments adopted a bearish bias, slowly joining with technical aspects and forming a bearish cloud. On the bright side, the Ethereum Shanghai upgrade, which introduced fix-income opportunities via staking rewards, has made it easier to detect criminals. Professional crypto forensic teams with the staking reward as the risk-free rate, which can help detect illicit activities on the blockchain, as criminals do not engage with the blockchain to earn money but to obscure and launder money. It may take some time to yield positive results, as the $7.5 million Arbitrum-based Jimbos Protocol hack revealed just three weeks after going live. The thief stole 4,090 Ethereum 20 days after its launch.
Another issue on Ethereum is its burn rate, which destroyed $6.1 billion worth of Ethereum over the past 21 months, at an average rate of 3.51 Ethers per minute. While it suggests economic activity driven by decentralized finance activities and increases the value of the Ethereum network, it could add to scalability problems and bottlenecks, making the blockchain less efficient and more expensive. Adding to fundamental issues is the Biden administration, which vowed to crack down on Bitcoin and the cryptocurrency sector, but traders should prepare for a potential bearish whale move. A dormant Ethereum wallet, which bought Ethereum in 2015 for an estimated $0.31 per Ether, showed activity for the first time. The holder has 8,000 Ether, joining numerous dormant wallets that became active.
The forecast for the ETH/USD turned cautiously bearish after this cryptocurrency pair spiked into the Senkou Span A of its sideways trending Ichimoku Kinko Hyo Cloud, which shows signs of a potential narrowing. Volatility could rise with the ascending Kijun-sen trading below the flat Tenkan-sen, setting the stage for bulls and bears to fight for directional control. Traders should also monitor the CCI after it surged into extreme overbought territory to a multi-month peak. This technical indicator is vulnerable to a reversal, and a breakdown below 100 could tip the favor to bears, plunging Ethereum into a sell-off. Can bears regain control over price action in the ETH/USD and pressure this cryptocurrency pair into its horizontal support area? Subscribe to the PaxForex Daily Fundamental Analysis and earn over 5,000 pips per month.
Should price action for the ETH/USD remain inside the or breakdown below the 1,865 to 1,935 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,900
- Take Profit Zone: 1.595 – 1,675
- Stop Loss Level: 1,995
Should price action for the ETH/USD breakout above 1,935, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,995
- Take Profit Zone: 2,085 – 2,125
- Stop Loss Level: 1,935
Open your PaxForex Trading Account now and add this currency pair to your forex portfolio.
