Ethereum (ETH) is at a risk of retesting its previous yearly lows as the price action looks extremely weak. The bears are too confident whereas the bulls are completely demoralized when they should be pushing for a trend reversal after an extended correction. The RSI for ETH/USD seems to have formed a rudimentary version of a bullish gartley pattern which could be taken as a sign of temporary relief. However, the RSI could keep being oversold and the price may still fall. This is nothing new and as we have seen the past few weeks, the price can fall straight for hours despite the technical conditions being against it. Markets seldom act rationally and therefore it is better to be prepared for all outcomes instead of just catching a falling knife.
The recent correction seems to have done more damage to Ethereum (ETH) than most large and medium cap coins. This is why Ripple (XRP) ended up replacing Ethereum (ETH) as the second largest coin by market. Currently, that gap has grown past $3 billion and is unlikely to be bridged anytime soon. Nobody wants to hold an ICO during a bleeding market but a lot of ICOs that have raised money through Ethereum (ETH) in the past keep selling their stash regularly to pay for expenses. It is likely that most of these ICOs have large bags of Ethereum (ETH) that they are holding to sell just when the market recovers because they have learnt that “hodling” might just put them out of business if it hasn’t already.
Of course in circumstances like these, one man’s misery is another’s opportunity. Falling Ethereum (ETH) prices have also reduced mining difficulty. So, while a lot of miners did sell their equipment the past few months because they could not turn in a profit, new players are now getting into the game mining more coins for the same hash power. The best part is that they get to buy all the mining hardware dirt cheap from people who just gave up thinking this is it and things will never be the same again. This could not be further from the truth. In fact, we have seen throughout history that financial markets repeat similar patterns over and over again. This is why it becomes so important to learn from mistakes of the past.
Ethereum (ETH) is currently facing the same dilemma as Bitcoin (BTC). Will the RSI for ETH/USD on the daily time frame break past the support turned resistance or not? This should deter the bulls from entering long positions but this should in no way be taken as a hint for a sell setup because it might very well be a trap! Remember, this is the most opportune spot for a reversal. It is unadvisable to enter a short position at this point no matter how tempting it may seem. The price of Ethereum (ETH) may drop to the previous support and retest yearly lows but it is not worth taking a sell position over, not when the technicals point to a recovery sooner or later.