Source: PaxForex Premium Analytics Portal, Fundamental Insight
Cryptocurrency traders and Ethereum enthusiasts count the day to the long-awaited Merge, which Ethereum has labeled the “biggest event in crypto history.” It switches the energy-intensive proof-of-work (PoW) protocol to a more efficient proof-of-stake (PoS) protocol, which could lower power consumption by 1,000 times. It means miners are no longer required to verify transactions on the blockchain. Ethereum has already completed the first phase of the Merge, known as the Bellatrix hard fork, on September 6th, 2022. Ethereum plans to complete the second and final phase between September 13th and September 15th.
Following the Merge, everyone with Ethereum in their cryptocurrency wallets will automatically see both tokens, the PoW, and PoS versions. Ethereum hopes that the community will reach a consensus to use the PoS token, which is likely amid the overwhelming community support for the Merge. Price action moved higher as retail traders piled into the cryptocurrency amid an expected massive airdrop of tokens following the completion of the Merge. It could be a short-term boost as traders can sell the tokens and add selling pressure to what could be volatile trading with a bearish bias.
Before Ethereum enthusiasts count their profits and hope for a massive bull run after the Merge, bearish pressures continue to increase. From a technical perspective, price action has formed a head-and-shoulders pattern, suggesting a potential sell-off, while indicators flash overbought signals. Fundamentally, the burn rate continues to decrease, which is the number of tokens burned from transactions on the blockchain. Due to the bear market, the burn rate remains depressed, failing to offer a bullish catalyst. The DeFi community began limiting Ethereum activity and raised borrowing costs, while the US administration vowed to limit or eliminate cryptocurrencies in the US.
The forecast for the ETH/USD turned bearish once again as price action reached an enforced horizontal resistance area. Volatility is expected to increase with the Kijun-sen flat and the Tenkan-sen moving higher. Adding to the bearish outlook is the Ichimoku Kinko Hyo Cloud, which began to contract, and price action is near its descending Senkou Span A, while the Senkou Span B flatlined. Traders should monitor the CCI as it has entered extreme overbought territory, from where it could record a lower high. A breakout below 100 may trigger the next sell-off in this cryptocurrency pair, and traders should exercise patience. Can bears wrestle control from bulls 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 1,640 to 1,780 zone, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Short Position
- Entry Level: Short Position @ 1,690
- Take Profit Zone: 0,955 – 1,080
- Stop Loss Level: 1,880
Should price action for the ETH/USD breakout above 1,780, PaxForex recommends the following trade set-up:
- Timeframe: D1
- Recommendation: Long Position
- Entry Level: Long Position @ 1,880
- Take Profit Zone: 2,010 – 2,080
- Stop Loss Level: 1,780
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