Welcome to my first post here. I come from a business background and I’m aiming for presenting my view on the financial markets, cryptocurrency and politics in an easy and digestible way where I always explain technical terms.
As this social media site has its offspring from the blockchain technology I find it suitable that my first analysis will be one of the hot topics in the blockchain space at the moment which is Ethereum. We have witnessed an impressive surge this year in the value of almost all crypto assets but especially Ethereum has been skyrocketing this year so far, but might be about to enter a bear market (a continued longer period of decline from current prices).
What is it that has happened in the last few months that makes me come up with this prediction? It’s the double top formation seen when Ethereum first reached a price of 400 $ per Ether in mid June and again in the beginning of September. It’s a perfect example of a double top since both tops reach the same price, its separated by a few month in this case 2 and a half month and heavy volume (amount of Ether traded in dollar) has increased during the decline from the second top of 400 $ which is true as well.
By looking at the chart we can see the downtrend hasn’t been confirmed yet, in order of confirming we are indeed in bear market territory we would need to break out of the lower channel of support at a price of 200 $ per Ether. We have been moving sideways for some months now, and can’t seem to break the 400 $ resistance level and neither the 200 $ support level.
The market knows we are in a dangerous trading area, we saw it when we dipped under the 200 $ support level in mid July for the first time after reaching 400 $ and a flash crash occurred (a flash crash is triggered by automated sales orders being fulfilled when prices reach a certain level and if there’s not enough demand in the market at a certain time and sales orders exceed buying orders an asset can drop like a stone for a short time) bringing down Ether’s price to 10 cents which was the lowest price being traded! This story in itself was crazy enough to deserve a separate article which I might write if people wish me to do so.
What we saw after the flash crash was for the market price to stabilize and big investors to return and buy up Ether’s in order to bring Ether’s price back above the 200 $ support level and in thus remain in an uptrend as far as nothing else was confirmed. The next big test would then be to break the previous top of 400 $ in order to continue the uptrend which as we have just seen didn’t happen. This indicates a turnaround in the price movement could be just around the corner.
There hasn’t been enough demand for Ether to break the 400 $ price and supply have been overwhelming when reaching 400 $. This signals a reversal in trend, and therefore I predict the momentum and the demand supply situation will bring us under 200 $ in the near future which would technically bring us into a bear market.
Should and can cryptocurrencies after all be treated like fiat money (money issued by central banks such as $ and €), stocks and precious metals in order to do technical analysis on them? Indeed they can is my answer, after all the price is determined by supply and demand like all other assets, and maybe even more so in cryptocurrencies since there’s no underlying cash generating asset like in stocks! Therefore doing technical analysis on cryptocurrencies makes more sense in my mind than doing them on stocks where so many other factors play a role.
I’m happy to join this community, I’m not bragging about being a financial wizard all I like to do is share my knowledge combined with my thoughts and views and engage in hopefully many fruitful discussions. I hope people enjoy and can use my analysis of the cryptomarkets ahead and will follow me for further updates on the markets.