Ethereum Is Down, But Not For Long

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Ethereum Is Down, But Not For Long

This Is Why Ethereum Will Lead The Rebound

The entire cryptocurrency market fell hard last week as a double shot of negative news hit the market. The first, a paper published by students at the University of Texas, says that Bitcoin’s price run up in 2020 was due to Tether Dollar manipulation. Tether Dollar, a cryptocurrency tied to dollar deposits, is supposed to mimic the US dollar but has long been though to be flawed because there is no way to know that the number of Tether Dollars equals the number of dollars on deposit with the Tether network. The second, word that Bitcoin futures, coming from mega bull Tom Lee, had a negative impact on BTC prices as expiration approached.

The good news is that neither of these events has any relation to the underlying value of BTC, and both provided opportunity for new purchases at long-term lows. In the first case, if Tether Dollars were manipulated in order to run up the price of BTC it is Tether that is worthless, not BTC. In the case of the second, futures trading and the impact of options expiration is a phenomenon most commodities face and that, ultimately, has little affect to BTC price value long term.

Ethereum, The One Crypto To Rule Them All

Meanwhile, Ethereum has made several announcements over the past two week’s that bodes well for the world’s most advanced blockchain. The first is progress on the Plasma network. Plasma is a blockchain application that will launched on top of the Ethereum network in an effort to speed up transactions. It is part of a larger scaling plan that will eventually allow the launch of private blockchains across the Ether network and ultimately pave the path for debit transactions comparable to the current banking/CC system on the block chain.

The second is updates to the sharding protocol. Sharding will divide across the network so that only those servers attached to a specific Shard will have to process transactions within the shard. This is expected to enhance security as well as reduce transaction times. The third is an update to the Casper protocol, a protocol that will switch Ethereum from proof-of-work to a hybrid proof-of-work/proof-of-stake blockchain, and also increase network speeds.

The most important announcements comes from US regulators. The CFTC commissioner says that blockchains are a tool for changing our daily lives, a very optimistic statement from someone at the center of the regulatory debate. The SEC followed that up with an announcement they’ve decided (no surprise to us) that Ethereum is not a security and that buying/selling ETH is not a securities transaction. This is good for two reasons as it means less SEC meddling with Ethereum exchanges and paves the way for an Ethereum futures contract.

At the time of this writing ETH is down nearly 5% on the day but off the weekly low, and well off the long term low. The coin appears to be at an extreme low, confirmed by the indicators, and ripe for reversal. The indicators are both divergent from the low and showing bearish crossovers, consistent with upward movement in prices. A move up may find resistance at the short term moving average, a break above that would be bullish.

Ethereum Bears Are Not Done Yet, Here’s Why ETH Could Test $68

Ethereum is down more than 50% in a day against the US Dollar. ETH price broke many crucial supports and it is now approaching the $78 and $68 support levels.

  • Ethereum collapsed below $150 and $100 in a harsh market crash against the US Dollar.
  • The price is forming a huge bearish candle on the daily and weekly chart.
  • There was a break below a major bullish trend line with support at $183 on the weekly chart of ETH/USD (data feed via Kraken).
  • Bitcoin price is down more than 45% and it broke the key $5,000 support area.

Ethereum Price Could Dive Further

In the past three sessions, we saw a massive decline in Ethereum from well above the $195 level against the US Dollar. ETH price tumbled more than $100 and broke many important supports to start a strong downtrend.

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The decline was such that there was a substantial close below the $150 level and the 100-week simple moving average. Moreover, there was a break below a major bullish trend line with support at $183 on the weekly chart of ETH/USD.

Ethereum also failed to stay above the 76.4% Fib retracement level of the last major upward move from the $111 swing low to $292 high. It is now trading below the $100 support and it might continue to move down.

An initial support is near the $78 level (the 2020 swing low). If the price fails to stay above the $78 support, it could continue to move down towards the $68 support level.

The mentioned $68 support holds a lot of importance since it is the 1.236 Fib extension level of the last major upward move from the $111 swing low to $292 high. Any further losses could decrease hopes of any crucial bounce in the coming months.

Long Lasting Bearish Trend?

The recent collapse in Ethereum and bitcoin destroyed the market sentiment and the current bearish sentiment might last for a few months.

The market changed its course and in order to recover the bulls need to put up a strong fight. If they are able to protect the $78 and $68 support levels, there are chances of a recovery. The last line of defense in the long term could be the $50 zone.

Weekly MACD The MACD for ETH/USD is now gaining momentum in the bearish zone.

Weekly RSI The RSI for ETH/USD is currently diving below the 40 level, with a bearish angle.

Major Support Level – $68

Major Resistance Level – $125

Aayush Jindal

Aayush is a Senior Forex, Cryptocurrencies and Financial Market Strategist with a background in IT and financial markets. He specialises in market strategies and technical analysis, and has spent over a DECADE as a financial.

Why I Won’t Buy Ethereum

Ethereum has lost 40% of its value year to date and could have big upside. But that doesn’t mean I’m ready to buy.

The massive run-up in cryptocurrency valuations has been one of the most exciting financial developments of the last decade. Crypto-mania seems to be in a cool-down phase at the moment, but those who bought leading coins early have seen tremendous returns.

Ethereum (ETH-USD) has been a huge winner for investors who got in on the ground floor, increasing in value a whopping 3,800% over the last two years, even after big sell-offs in 2020. That’s an absolutely incredible return, and the potential to be a part of ongoing momentum on that scale certainly has its appeal. That said, I still have no plans to purchase Ethereum.

Image source: Getty Images.

What is Ethereum?

Ethereum is a distributed blockchain network. This basically means that it’s a platform for recording and executing data transmissions that’s more secure than most other current solutions. Whereas bitcoin (BTC-USD) is strictly an asset that’s stored on the blockchain, Ethereum is a network that can run applications. The computing power to carry out these decentralized applications has a cost, which is measured in units — or tokens called Ether.

Blockchain is still very young

With cryptocurrencies at large still in a relatively nascent state, I think there’s a high probability that new coins will emerge that have better value propositions than any of today’s top coins, even if blockchain proves to be a revolutionary step forward in information tech. The amount of new cryptos that can enter into circulation is essentially unlimited, and I expect that future ventures on the blockchain will surpass most of the current batch of comparable projects.

There’s also the possibility that emerging technology, like quantum computing, will render blockchain networks obsolete. Much of the current case for blockchain-backed currencies revolves around the premise that the blockchain allows for secure contracts that can’t be altered because the encryption is too complicated to hack, but breakthroughs in quantum computing could change all of that.

Ethereum also has security issues, and it’s not clear how the technology will function as it scales. As the size of the network and number of coins in circulation increases, transaction fees and transaction times are likely to rise. As the currency becomes more popular, its usability as a currency will likely decrease — which has already happened with bitcoin. Ethereum founder Vitalik Buterin estimates that the network’s scalability issues will be solved in the next two-to-five years, but with little visibility on how these fixes are progressing, it’s a risky bet.

Separating hype from value

I’m of the mind that a lot of investors in the crypto market don’t have a sound understanding of what they’re investing in, and this has resulted in a dangerous rise in valuations. If you survey cryptocurrency discussion forums, you might notice that a significant portion of crypto enthusiasts frame their investments in terms of a philosophical or moral rejection of fiat currency systems. I think that type of ideological investing lays the foundation for overvaluation, and the significance of this risk factor increased when cryptocurrencies became a hot topic in mainstream news outlets.

Many crypto investors seem to have purchased coins with the expectation that their holdings will increase in value — without a well-founded reason for why that should happen. That’s not to say that everyone who purchases stocks necessarily has a deep understanding of the underlying businesses or financials of the companies that they invest in. However, in general, there’s fundamental value behind publicly traded companies — so there’s a greater degree of risk in not understanding an investment in crypto than there is in an investment in, say, Alphabet or Johnson & Johnson.

There’s also the issue of Ethereum’s value being closely tied to the value of bitcoin in recent months. At the moment, some coin exchanges require users to first buy bitcoin and then use that cryptocurrency to purchase other cryptos. This, among other factors, has caused much of the movement in the crypto market to be tightly correlated across coins.

Bitcoin’s significance to the broader crypto market is evident even in popular terminology, with all other cryptos sometimes lumped together under the banner of “altcoins.” That doesn’t mean that Ethereum or other cryptocurrencies will always trade in relation to bitcoin, but for the moment, that appears to be the case. If bitcoin crashes, there’s a very good chance that it will drag down the value of other major coins — Ethereum among them.

So I’m staying out of crypto. for now.

Blockchain is a promising technology, but I see too much hype and not enough long-term soundness of product in Ethereum and most other cryptocurrencies. It’s certainly possible that the coin will continue on its incredible run and deliver great returns for investors, but it’s undoubtedly a high-risk play that could just as easily (or even more easily) go up in smoke.

At present, I don’t understand the value case for Ethereum. Perhaps I’m missing it, but for now, that’s enough reason for me not to buy it.

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