Last week in Ethereum Price Analysis we said:
ETH looks bearish on the 4H, but bullish on the Daily and Weekly in the mid-term. This suggests short-term pain followed by long-term gain, reinforced by fearful (but not extremely fearful) investor sentiment. Fundamentally, ETH has bottomed – but the Merge could be a catalyst that sends ETH off on its next bull run in the coming months.
At the time of last week’s article, ETH was trading around $2k. In the week since, ETH’s value has declined by another 10%, now trading around the $1800 mark, but sinking as low as $1700 to test that support zone. This $1.7-$1.8k zone is a range bottom that we identified, but it remains to be seen if this is the true bottom and we bounce up or if further price declines are in store.
Let’s take a look at the charts and see what we can predict for the next week.
Ethereum Price Analysis
After briefly trading above the 4H 50 SMA last week, ETH fell back to our range low support. Until the price breaks above the 50SMA and holds it as support, this will act as a resistance zone, currently priced at about $1950. The 4H 100SMA has now also fallen to $2k, making the $2k resistance a strong one.
Our momentum indicators (RSI and Stochastic) show that ETH is due for a bounce. The RSI is below the purple line, showing it is “oversold” and the Stochastic is ready for a move up. This makes it likely that ETH will retest the $1950-2000 resistance zone in the coming week. If this resistance fails to break, ETH is likely in for a lower low.
The nearest moving average on the daily chart is the 50SMA, trading at $2.6k – nearly 40% above current levels. This shows that ETH is heavily oversold (moved down very quickly). IF a bounce occurs and local resistance breaks, this could trigger cascading short liquidations that bring us up to this resistance zone before losing momentum.
The RSI looks heavily oversold, but Stochastic is heading down – suggesting that further downside is in play. If $1.7k breaks, the next local support is near $1.3-1.4k.
On the weekly chart, ETH is in the midst of printing a massive head and shoulders pattern. This pattern is generally seen as a “continuation” indicator – meaning the macro trend will continue. In this case, the “macro” trend is bullish – but it could take months for this to materialize. We could see ETH slightly decline from these levels in the short term.
The RSI is reaching a historically oversold level (akin to the 2018/19 lows), and Stochastic is nearing the bottom of its extension. It appears from the stochastic that we could have a couple more weeks of consolidation before making a strong upward reversal.
Ethereum Investor Sentiment
The Ethereum FGI is finally in “Extreme Fear” as investors begin to capitulate. However, this is still not as low as the overall crypto market FGI, which is at 12 as of today. This means that Ethereum investors are not as fearful as the rest of the market, and many have not yet capitulated.
Ethereum Fundamental Analysis
Eth’s network usage is remaining relatively stable at these levels, burning 21% of emissions over the past 7 days. This is a slight increase from last week, which burned 20.26% of emissions.
Though ETH is very established, it is still considered an altcoin – and altcoins have been taking a major beating in the crypto market as investors flee to the relative safety of BTC in these conditions. Global markets have been tanking on fears of a worldwide economic slowdown, and the world looks as if it is heading toward a recession. For now, ETH will continue to move with the rest of global markets. Sentiment seems to be improving slightly as major US indexes like the SPX have rebounded roughly 5% over the past week. It remains to be seen if this is the beginning of the relief rally we have all been waiting for. For now, trade with extreme caution and keep funds available to buy lower if the downturn continues.
Not investment advice. Do your own research.