Published
5 years ago on
January 30, 2019
Ethereum (ETH) crashed hard against Bitcoin (BTC) over the past four weeks before the Chinese New Year. However, it seems to be consolidating above what seems to be a temporary bottom. The price might have room for negligible downside but it is running out of room for further declines. The daily chart for ETH/BTC shows that the price is trading in a descending wedge that it could break out of as early as next week. That being said, the 21 Day EMA which was a key support before the January correction might now be a strong level to breach. MACD for ETH/BTC shows that there is room for a rally to the upside and the price might be expected to rally against Bitcoin (BTC) short term in order to retest the 200 Day MA resistance.
The recent decline in ETH/BTC came into effect after the price faced a strong rejection at the 200 Day MA. Thus the rally that began around mid-December came to a standstill and the price was forced to correct in the weeks that followed. The daily trading volume has once again declined to levels not seen before early December, 2018. This means that a lot of investors are either holding their coins in wallets or waiting for the market to recover but exchange activity is mainly dominated by traders capitalizing on the volatility. The number of long positions in Ethereum (ETH) has also not changed much which means investors are not ready to take risk just yet and market sentiment may take time to recover. That being said, we have seen cryptocurrencies recover close to the Chinese New Year. The same could happen this time and Ethereum (ETH) might resume its rally against Bitcoin (BTC).
The daily chart for ETH/USD shows that Ethereum (ETH) has been trading in a falling wedge against the US Dollar since last year. The price has run out of room to trade further inside this wedge and will now have to break out of it. Either it will break above it to stage a bullish comeback or it will have to trade sideways for a long time until buying returns to the market. The most likely scenario is that market makers are going to let the price rally from current levels but they are going to watch closely if the price has the potential to maintain its bullish momentum. If the buyers cannot defend the price in a natural manner, the whales or market makers will accelerate its decline. The thing about corrections is that they have to happen in phases otherwise very few people would be willing to sell.
Imagine if the price of Ethereum (ETH) were to fall from $1,200 to $500 in just a few weeks, it would be close to where it fell from in the weeks ahead in that case because the sentiment at that time would still be very bullish for such a recovery. Market markets are aware of this which is why they stage the decline in a slow bleed manner where the price declines gradually but the sentiment declines faster. The same thing happens the other way round. If a few market makers were to pump Ethereum (ETH) to $700 overnight, it would be half way down the next day as investors would rush to take profit. In other words, Ethereum (ETH) already seems to have bottomed out but it would take a long time for the sentiment to turn from overly bearish to neutral and then bullish.
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