Ethereum recovered a bit on Wednesday, rallying earlier in the day to over $1,700 before pulling back, closing the daily candle just north of $1,600. This is an inverted hammer and indicates the sellers are selling into rallies, short-term bearish for ETH. I'm not so sure that tells the entire story, although it's possible ETH's bottom isn't in just yet.
(February 23, 2021 10:30 PM EST)
Outlook:
Ethereum recovered a bit on Wednesday, rallying before giving back much of the gains, but ultimately forming a positive candle. Though not significant, it shows the buyers are still here (of course they are!) ETH suffered from what appears to be a standard bull market 30% correction as is typical in crypto, so if the bottom is not in yet for ETH, then it should not be much longer or lower from here. Accordingly, I have been adding on dips, as this is a perfect opportunity to BTFD during a clear bull market when ETH is not far from new ATHs and is -- frankly -- only now just getting started.
Going forward, I think ETH will probably put in a major bottom here between $1,400 - $1,500 if it hasn't already, equating to a roughly 61.8% retracement of this most recent W1 up from ~$1,050 to $2,050. It's possible the low is already in but we'll have to wait and see how the rest of the week plays out. If the buyers step in and ETH appears to stabilize in price, then it's possible the bottom is in. If we continue to see rallies get sold into like today, then we may have a bit lower left to go. I'm looking for a W2 termination sometime in the next couple of weeks or so which will set up a W3 (possible W3 of W3) higher to new highs and toward a long road toward a five-figure ETH. If we get a break above $1,800, then we have a higher low and a good chance of the bottom is in.
Fundamentals:
Nothing has changed. ETH's demand continues to increase by the day with institutional investors and funds adding allocations to ETH, as well as the retail herd which is, of course, very bullish on ETH, more than ever before. With EIP-1559 in the near-term horizon which will burn ETH collected by transaction fees and effectively make ETH near-deflationary and ETH 2.0's Phase 1 set to roll out in late-2021, ETH's fundamentals are as strong as ever, and based on this recent price action I would argue that ETH is strongly undervalued.
ETH/BTC:
As you can see in the ETH/BTC chart below, ETH found a bit of support on Wednesday, bouncing again at the 61.8% fib level -- which is a common length for a corrective W2 -- recovering a hair to about 0.033 before pulling back and finishing the day up around 0.032. This is a good sign even if it's a bit of a relief rally, though I think there's not a ton of downside from here. If this is the start of an ETH/BTC bottoming pattern, then ETH should trade sideways around here for a while before starting to grind back higher again. However, if this was a bottom, then this would be a higher low and a medium-longer-term bullish development.
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. ETH's historical low against BTC is in the mid-0.02s, so it's a 4-6x higher from here or a 25% drop from here - which offers a better Risk:Reward?
Current Strategy:
Buy the dips (I did today!) and earn ETH, especially at these bargain prices.
Support:
Local support around the $1,500 - $1,400 level, which was the previous ATH and an area of major resistance for some time before ETH eventually broke out. This is further supported by the rising 50 Day EMA just below around ~$1,340.
Resistance:
Immediate-term $2,000, then $2,500, then $3,000.
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