Ethereum shows some signs of exhaustion

Since the summer of 2022, we have maintained a bearish stance on Ethereum, with price targets at $1000 and $900. Furthermore, throughout several months, we have repeatedly stated that the attractive area for short (re)entry is between $1500 and $1600, while the area near $1200 is associated with higher risk. Today, we continue to hold that notion. Despite bullish developments on multiple time frames, we disagree with calls for the primary trend reversal. That is because market sentiment and the rally's nature do not reflect a healthy recovery. Contrarily, the rally seems to be driven by emotions. In addition to that, the reality is that the FED is set to continue tightening, which will cause more problems in the stock market. Because of the high correlation between the stock and cryptocurrency markets, we expect this to weigh on the price of ETHUSD. Furthermore, we anticipate more problems on the institutional side of the market, threatening the overall market’s health. As a result, we have no reason to change our bias.

Illustration 1.01

Illustration 1.01 displays the daily chart of ETHUSD and sloping support. To support a bearish thesis, we want to see the price fail to break above Resistance 1. Otherwise, a breakout will suggest a short-term continuation of the rally.

Illustration 1.02

Illustration 1.02 shows a bullish build-up in volume that led ETHUSD to recent highs. However, near elevated price tags, volume can be seen dropping significantly. Therefore, we are very cautious.

Technical analysis
Daily time frame = Bullish
Weekly time frame = Slightly bullish

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DISCLAIMER: This analysis is not intended to encourage any buying or selling of any particular securities. Furthermore, it should not be a basis for taking any trade action by an individual investor. Therefore, your own due diligence is highly advised before entering a trade.

Trade active:

As we think it is important to keep track of ideas that did not work out as initially expected, we decided to update this article. Ethereum overshoot levels we deemed attractive for short (re)entry, making a new high and significantly diminishing odds of crashing toward new lows. We still expect a significant decline in Ethereum from the current levels, however, we are growing unconvinced that ETHUSD will revisit its 2022 lows. With that said, we still do not think the market's behavior is healthy and that it represents a genuine primary trend reversal. Altcoins behave much like penny stocks in the 2000s, and bullish hype is bigger than during any other rise since the start of the bear market in late 2021, making a perfect cocktail for things to turn south. Therefore, we remain a very cautious stance on the cryptocurrency market.