In our last Ethereum Price Analysis we said:
Though ETH was net deflationary over the past week, fundamentals remain poor as network usage is on a downtrend. The price does not look promising on any time frame, however there is potential for bullish divergence to solidify on the daily chart if a bounce occurs soon. This could be invalidated by a flash dump, however. The most likely scenario for ETH is to retrace to the $2700 level over the next week (local support).
Our prediction that ETH would trace back to local support has proven to be accurate, as ETH is now trading around the $2700 range. At time of writing, ETH is just below this at $2680, where it has begun consolidating after yesterday’s crash.
Let’s take a look at the charts for this week.
Ethereum Price Analysis
On our 4H Chart, ETH’s moving averages are all bearish. An attempt to break above the 50 and 100 SMA earlier this week was invalidated, cementing these levels as resistance zones. $2.9k is the resistance level.
We can see historical support levels around $2.5k, which acted as a bottom in March.
On this low timeframe, the RSI is oversold and stochastic is at the bottom of its range, indicating a short term bounce is likely. At the very least, it means we will consolidate in this range before dumping again.
Moving averages on the daily chart are still neutral with the same bearish divergence we saw earlier this week. After rejecting off the 200 SMA, the price has fallen beneath all moving averages – setting up a death cross in the coming weeks. We can see historic price support in the $2.4-2.5k range, and wick support at $2.2k. Resistance will be at $2.9k and $3.4k.
The RSI is nearing oversold levels, but does not look bottomed out yet as the stochastic has actually risen despite the dump. On the daily, another dump to lower support levels looks likely.
On our long-term weekly chart view, the RSI is only slightly oversold and stochastic is just beginning a move down. The chart appears to be forming a massive head and shoulders pattern – indicating more room for a downtrend in the medium term. Long term, head and shoulder patterns are a continuation indicator, and it is clear that the macro-trend is up, but things will likely get worse before they get better. The weekly 200 SMA is a strong support, currently at $1.1k.
Ethereum Investor Sentiment
Despite yesterday’s dump, ETH investors have not yet capitulated into “extreme fear” suggesting more pain is on the way for sentiment to bottom.
Ethereum Fundamental Analysis
ETH is still net deflationary over the past 7 days thanks to the NFT land sale that took place last weekend. One of the beautiful features of ETH is that when it dumps, ETH burns in the process. In the long term this will help ETH to achieve new highs. Lately, ETH has been (on average) burning 30-50% of its emissions, making it still net inflationary. Despite the cool off in network usage, ETH’s burn rate has been stable at this level. The merge is still on schedule for Q3 2022, likely to happen this summer.
ETH looks bearish on all time frames, with a slight bounce or consolidation likely on the 4H chart. Daily and weekly look very bearish, and a retrace to lower support levels is likely in the coming weeks. This is in line with BTC and other traditional markets, which have all been suffering as the world attempts to rein in spiraling inflation. These next few months will likely be painful, but will present good buying opportunities along the way.
Not investment advice. Do your own research.