Ethereum sold off on Monday, dipping as low as $1,500 before finding support near the 200 Day EMA, immediately bouncing higher and closing above the 50 Day EMA just under $1,800. This is a bearish candle but ETH managed to bounce at a critical support level and recover much of the losses before the daily candle closed, indicating strong buying support. Now the question is whether or not ETH has completed a ~25% correction or will have a double-dip first.
(February 22, 2021 11:30 PM EST)
Outlook:
Ethereum followed through on my alternative view, finding resistance at the $2,000 level and getting rejected to fall nearly 25% on the day before shaving the losses down to about 10% by the daily close. It is possible that, like Bitcoin, ETH completed its local Wave 2 correction today in a single day, much like Bitcoin's 24-48hr correction in January in which it fell from $42K to under $29K, and promptly recovered to ~$35K shortly before rallying to new highs in a matter of days. This could very well play out similarly as the crypto bull market is even more underway now. If that's the case, then right now is an excellent opportunity to add to longs during this pullback which is currently offering a 15% discount off this weekend's ETH price.
However, if ETH still has a bit more downside left or is set to put in a double-bottom as it lags behind Bitcoin's recovery, then we could see ETH return to $1,500 and retest support at the 200 Day EMA before bouncing higher again. I would not rule this out quite yet, however I favor the former view as demand for ETH and crypto is disproportionately higher than the supply as well as any FUDers. And frankly, these 25% - 30% corrections are run-of-the-mill for crypto-assets; we expect them during bull markets, and they're a fraction of the sort of volatility we see in the start of bear markets.
ETH/BTC:
As you can see in the ETH/BTC chart below, ETH fell sharply again on Monday, dropping below the 50 Day EMA and reaching down toward the 200 Day EMA where it appears to have found some degree of support. This is a nasty candle with moderately long wicks on both ends, indicating volatility against the satoshi. This is really a major inflection point for ETH as it needs to hold the 200 Day EMA around 0.0311 to maintain the uptrend. If it does, then ETH is fantastic value here against BTC as ETH could be set for a 3-4x against BTC alone, let alone in fiat terms.
Historically, this ETH/BTC level is very low for ETH and typically offers excellent value for ETH and a favorable risk-reward ratio as an investment opportunity, as we are in a clear crypto bull market. With ETH closely lagging behind BTC, following this recent breakout, ETH should follow in tow.
Current Strategy:
HODL, buy the dips and earn ETH while we enjoy the ride.
Support:
Local support at the 50 Day EMA around ~$1,770. Major support and probably a floor at the 200 Day EMA below around $1,500.
Resistance:
Immediate-term $2,000, then $2,500, then $3,000.
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