It’s been a few weeks since our last Ethereum analysis, and markets have been taking a beating as inflation fears and a hawkish federal reserve have lowered investor sentiment. ETH and BTC have been trending together, and are currently around $3k and $40k, respectively.
In this article, we will look at recent price action, investor sentiment, and fundamentals to identify short and long term trends for Ethereum.
Ethereum Price Analysis
On our short term 4H chart, we can see the moving averages forming a bearish “death cross” pattern, which was validated by ETH failing to break above the 200 SMA yesterday, currently at about $3.2k. Retracing back to recent lows, it is likely that the 50 and 100 SMA will both act as resistance between $3k – 3.1k.
The RSI is neutral but has a slightly oversold bias. The Stochastic is at the bottom of the range, suggesting a potential bounce upward in the near-term to test our identified resistance levels.
On the mid-term daily chart, the moving averages are currently neutral. ETH is trading just below the 50 SMA, and the 200 SMA may act as support at $2.9k. The 200 SMA acted as a near perfect resistance level, and is currently sitting at $3.4k.
Both the daily RSI and Stochastic are in neutral territory right now. It will be important to watch the stochastic in the coming days to determine if it will continue upward (toward resistance zones) or drag the price down to test support at $2.9k.
On our long-term weekly chart, it appears that ETH failed to break above our 50 SMA which will now act as resistance. This resistance level is at about $3.2k. The RSI is neutral but stochastic looks overextended, suggesting a price retrace to support is likely. Local support is at our previous low around $2.5 – 2.6k..
Ethereum Investor Sentiment
Investor sentiment is down across all markets, and Ethereum is no exception. Note that the sentiment is not yet in the “extreme” category, suggesting we have some room to fall before sentiment bottoms out. It is likely at this time that big buyers are on the sidelines waiting for the market to fall further before making a big entry.
Ethereum Fundamental Analysis
Ethereum transaction fees have been falling with declining network usage as L2’s, side-chains, and alternative L1’s have gained popularity. Over the past month, the average base fee was 76 gwei, producing a net reduction of 34.64% of emissions.
This number is down significantly from prior months, which burned nearly 100% of all ETH emissions.
The Ethereum merge is still coming, but was delayed until Fall ‘22. It is likely that we are still about six months away from the merge occurring, which will transition Ethereum to a Proof of Stake model. This transition will also reduce ETH emissions by 90%, making it deflationary even with such low network usage. While this is a long term bullish outcome, six months is an eternity in the crypto market.
Price indicators do not look good on any time frame. The 4H looks bearish, the daily looks neutral at best, and the weekly looks bearish. Investor sentiment shows room to decline, and fundamentals are in decline (at least in the short term). Macro economic environment does not look good for ETH either, as the Federal Reserve has taken an increasingly “hawkish” stance, signaling rising interest rates and further turbulence for speculative markets such as stocks and cryptos. It is likely we will see a big capitulation event at some point in the mid term, which will present a great buying opportunity for long term holders. In the long term (3+ years) ETH still looks very bullish, but the market will get worse before it gets better.
Not investment advice. Do your own research.