Source: PaxForex Premium Analytics Portal, Fundamental Insight
The long-awaited Merge in Ethereum, the move from proof-of-work to a proof-of-stake, passed and the price of the Ethereum token extended its slide. Enthusiasts hoped the Merge would deliver a powerful rally, especially from depressed levels. The absence of a price action reversal, despite a game-changing event, provided the latest reminder that cryptocurrencies are neither an inflation-hedge nor an inverse-related asset. It also highlighted that cryptocurrencies, led by Bitcoin and Ethereum, have no intrinsic value and rely 100% on extrinsic value.
The Merge accomplished one thing, it lowered the excessive power consumption of the Ethereum network. While it presents a necessary improvement, the price of Ethereum had its “to the moon” moment and presently faces numerous bearish catalysts. The faltering global economy means portfolio managers dump non-essential assets, and cryptocurrencies usually rank among the first to go as cash requirements surge. The US Federal Reserve continues to hike interest rates into a recessionary environment, attempting to correct their historic policy errors over the past 13 years, which boosted the US Dollar at the expense of everything else. Inflation manifested itself in the economic pipeline. It could linger for years as debt levels, and financing costs dampen economic activity.
While many economic, fiscal, and fundamental factors will pressure Ethereum and Company lower, the most significant threat stems from within. The cryptocurrency sector was born on the promise of decentralization and inclusion. Yet most have caved and are moving towards a heavily centralized system and ignoring privacy, depriving the core appeal of cryptocurrency projects. Some attempt a pivot, and blockchain technology can and should disrupt many economic sectors, but if they become centralized ledgers, they are unlikely to succeed, as the only difference they offer is a buzzword, which is not a sustainable economic model. Traders should expect the cryptocurrency sector and Ethereum to shrink over the next quarters.
The forecast for the ETH/USD remains bearish, with the descending Ichimoku Kinko Hyo Cloud supplying downside pressure, enhanced by the Tenkan-sen, which began to drift lower. Volatility could increase as bulls and bears square off to regain control, while short-term bearishness is absent, as confirmed by the Kijun-sen. Traders should monitor the CCI after it has recorded a lower high in extreme overbought territory before completing a breakdown. It also moved below the zero level and has plenty of downside potential. Can bears continue their dominance over price action and force the ETH/USD 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 1,285 to 1,370 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,315
- Take Profit Zone: 955 – 1,080
- Stop Loss Level: 1,435
Should price action for the ETH/USD breakout above 1,370, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,435
- Take Profit Zone: 1,565 – 1,610
- Stop Loss Level: 1,370
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