Bitcoin, Ethereum, and effectively all other digital assets have absolutely exploded after bottoming in mid-December of last year, just as they did in 2018.
Since falling as low as $120 in December, ETH has surged as high as $175, rallying as the leading cryptocurrency BTC has pressed higher on the expectations of the upcoming halving.
But, according to a prominent cryptocurrency trader, Ethereum’s bullish trend is likely at an exhaustion point, pointing to a clear divergence that shows the price may soon drop. Hard.
Ethereum Prints Bearish Divergence
According to Cold Blooded Shiller, Ethereum may soon move down “hard and fast,” despite the fact that it has effectively formed a consolidation range between $160 and $175. Backing his assertion, he looked to the fact that per one of the indicators he used, a bearish divergence has formed, with prices falling as the metric has trended higher.
This is notable as a bullish divergence — the opposite of the bearish divergence — preceded the 45% rally from $120 to $175 in a few weeks’ time.
— Cold Blooded Shiller (@ColdBloodShill) January 23, 2020
ETH’s Price Action Dependent on Bitcoin
While there are the technical analyses above, ETH’s price action will be primarily dependent on that of Bitcoin.
And unfortunately for bulls, it seems that analysts are also bearish on Bitcoin, meaning a drop in Ethereum could be sustained.
Nik Patel explained in a recent blog post that the fate of Bitcoin’s recent bull trend hinges on it holding above $8,472:
“Whether price falls off for the remainder of the week…is uncertain for now, as we have not yet closed below the resistance turned support at $8472 – this level giving way would be my primary indicator that the rally is likely over, at least short-term,” he explained.
BTC recently posted a daily candle close under this level, boding well for the bearish argument.
Also, strategists at JP Morgan, led by a managing director, noted that the cryptocurrency has some downside risk. The firm specifically looked to the fact that Bitcoin’s intrinsic value, calculated by looking at the marginal cost of production of a single coin through determining the price of computational power (via ASICs) and electricity costs, is still around $5,000:
“The market price has declined by nearly 40% from its peak while the intrinsic value has risen by around 10%… The gap has not yet fully closed, suggesting some downside risk remains.”
Photo by Henrik Hedegaard on Unsplash