Ethereum - What's next?
Updated
Since the June 18 low of $879 on the 1W 300SMA, Ethereum has rallied over 89% to $1,664 on July 24, to be rejected by the 1W 200EMA. Since then it has dropped by 18% and is now consolidating at $1,438. This appears to all be on the expectation that the conversion to Ethereum 2.0 and its new PoS protocol is going according to plan. Clearly the performance and efficiency gains to be experience by the move to PoS is good news for Ethereum investors resulting in some excess of demand over the past month.
Will this rally resume and continue, however, now that the market has digested the “good news”?
I think not … and for a few reasons:
Conversely, a continuation of the rally to break above $2,000 would pretty well invalidate the bearish view, while price above $2,164.
So, allowing for the possibility of a brief rally to test/confirm resistance at the 1W 200EMA and the $1,700 level, it looks like ETH is set to follow the broader market to new lows in the coming month or so. Possibly to as low as $566.
Looking at the weekly log chart and we can see the 81% decline of the current bear market in context to the 94% decline of 2018 bear market, with price being rejected at the 0.236 line of the Fibonacci channel and a reasonable expectation that the bottom of the channel may be a target for price, with the potential for a spike below it. In fact, to replicate the 94% decline of 2018, price would have to fall to around the $400 handle.
Will this rally resume and continue, however, now that the market has digested the “good news”?
I think not … and for a few reasons:
- Volume – Is reducing, even as the new high was reached, showing a divergence in sentiment from the price action.
- RSI – Support at the critical 55.65 level has not held and the RSI has broken to the downside. Similarly to volume, as price reached its recent high, the RSI was diverging from the price action.
- MACD – momentum is rolling over into bearish territory.
- Elliott Wave Count – Trying to make sense of the impulses and corrections, it looks like a minor Wave 4 is or has completed, marking out the need for a final impulse lower to complete the wave 5 down-leg.
Conversely, a continuation of the rally to break above $2,000 would pretty well invalidate the bearish view, while price above $2,164.
So, allowing for the possibility of a brief rally to test/confirm resistance at the 1W 200EMA and the $1,700 level, it looks like ETH is set to follow the broader market to new lows in the coming month or so. Possibly to as low as $566.
Looking at the weekly log chart and we can see the 81% decline of the current bear market in context to the 94% decline of 2018 bear market, with price being rejected at the 0.236 line of the Fibonacci channel and a reasonable expectation that the bottom of the channel may be a target for price, with the potential for a spike below it. In fact, to replicate the 94% decline of 2018, price would have to fall to around the $400 handle.
Note
There is a potential fractal in this chart with the rally before the Covid low in March 2020 where price rallied to a false break above the 0.236 line before dropping to the bottom of the channel. Is that what we a witnessing at the moment?
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