Why did Ethereum (ETH) break below another significant support line?

2 min read

Introduction

Ethereum (ETH) is down more than 34% this month, and there are no signs of recovery.

The altcoin was trading around $2,500 on Jan 25th before it dropped. 

Will Ethereum recover as FUD turn to FOMO?

Key Ethereum Takeaways:

  • Ethereum, the second-largest cryptocurrency by market cap, faced bearish technicals on the daily and the weekly charts.
  • On-chain metrics indicated the largest buy-call spike in a month, which could result in a bullish reversal.

YEREVAN (CoinChapter.com) – Ethereum’s price today stood at $2,425 in the European session. The price action gave Ethereum (ETH) bulls some consolation, as it moved sideways rather than crashing below the significant support line (marked orange on the chart below). However, the second-largest cryptocurrency mainly mimicked Bitcoin (BTC) chart and flashed bearish technicals on different time frame graphs.

ETHUSD Daily Chart

The alpha altcoin broke below another significant support line on Jan 21, bringing the month-to-date loss to 37% on Jan 25. Since early November, the said support has been instrumental, and getting back over it might pose a challenge. However, Ether held the support at $2,413 and boosted its tanked relative strength index (RSI).

In short, the RSI is a momentum indicator that tells traders whether the value of a particular asset is ‘fair’ in the current market conditions. When RSI falls below 30, the asset is considered “oversold,” and many traders who watch the indicator might decide to enter the market and buy the dip. As a result, the price climbs.

ETHUSD Daily Chart
ETHUSD Price daily chart. Source: ETHUSDT on TradingView.com

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However, the weekly chart paints a bearish picture, as several technical indicators show a looming decline.

Bearish Ethereum Weekly Price Chart

Ether’s weekly chart hinted at a bearish continuation, as the token broke several supports and formed a bearish setup. In detail, ETH/USD price action formed a Rising Wedge. The formation consists of two converging trendlines with a positive slope and lowers the price swing as the pattern progresses.

Ethereum (ETH) price weekly chart featuring a Rising Wedge.
Ethereum (ETH) weekly price chart featuring a Rising Wedge. Source: ETHUSD on TradingView.com

The Rising Wedge is a reversal pattern, and it played out the bearish scenario in the previous week, breaking the setup’s lower trendline. Additionally, Ether registered a bearish RSI divergence. The latter occurs when the price action prints higher highs, while the RSI indicator registers lower highs.

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The divergence could result in a further downtrend for the digital asset unless ETH bulls pick up the pace. But according to analytical platform Santiment, the market could be ready for recovery.

Will Ethereum Recover?

Santiment claims that the FUD turned to FOMO, as Monday saw a buy call boost that turned out to be the biggest over January. According to the platform, Bitcoin, Ethereum, and alt-buys picked up after the bloody Sunday’s negative trading returns.

Moreover, as CoinChapter pointed out in the previous Ethereum review, the off-exchange whales are also on the move and stacking up on Ether. Additionally, another analytical platform, Glassnode, reported growing ETH 2.0 deposits. The upgrade has over 9.19 million ETH coins locked.

Even though technicals are not favoring the Ethereum bulls in the short term, the positive developments and whale investments could pick up the price in the upcoming sessions, following Bitcoin’s example.

 

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