Ethereum (ETH) Bear Flag Points To Devastating Downtrend Ahead

Ethereum (ETH) is on the verge of a major downtrend. Many analysts are busy talking about the next bull run or a golden cross on the 3D chart but they so conveniently choose to ignore this major bear flag on the weekly chart that has a history of ending very badly. If we take a look at the weekly chart for ETH/USD, we can see that the price is already trading below the 21 Week EMA and is now likely to close its ongoing week before the 21 Week EMA as well. The RSI has broken a key uptrend and the Wave Trend indicator signals further downside in the weeks ahead. In other words, this is one of the worst times in history to be buying Ethereum (ETH) or any other altcoins. 

Historically, bear flags have a very high probability of breaking to the downside and kicking off another downtrend. We have been constantly discussing in our analyses that this recent rally in the market is not the beginning of a bull market. In fact, it is something similar to what we saw in 2014 just before the beginning of a bear market. Most traders and analysts just look at the charts but there is a lot more to technical analysis than just lines and patterns on a chart. For instance, when liquidity is abundant, the market will find an excuse to rally as we saw after December, 2018. Similarly, when liquidity is scare, markets find an excuse to crash as we are going to see very soon. There is no denying that Ethereum (ETH) and other altcoins are going to crash hard in the weeks and months ahead. We have a target of $60 for ETH/USD but considering the outlook of the stock market, we would not be surprised if ETH/USD ends up falling to a single digit price.

Bitcoin (BTC) “going to zero” becomes a serious concern at a particular stage of the market cycle. Those who have been in this market would be able to relate how even the most resilient of traders start to doubt whether Bitcoin (BTC) is really going to zero. For those that have been around 2014, this was the Mt. Gox debacle. A lot of analysts and traders were very fearful that BTC/USD may not survive after Mt. Gox lost 850,000 BTC to an exchange hack and then filed for bankruptcy. At that time, 7 out of every 10 transactions were handled by Mt. Gox so you can imagine how we all felt when that happened. A lot of us seriously thought that it was game over for Bitcoin (BTC). 

Now, as mentioned before, when the market runs out of liquidity, it finds a reason to crash. That reason could be anything and if we take a look around the market is not short of such reasons. We have Bitfinex and Tether at the top of the list but a black swan event like Mt. Gox could easily trigger the next brutal crash. One thing that is very important to realize is that whenever the market is supposed to crash, we see some sort of negative event take place. This is not just about Bitcoin (BTC); it happens in every market. You will find some interesting correlations between 9/11 and the stocks of companies like Boeing. Coming back to ETH/USD, soon as we see the price decline and close below the 50 EMA on the 4H time frame, we are likely to see it begin its decline below the bearish pennant and that will be the beginning of the long awaited downtrend.