- Ethereum has been down since Nov.
- The second most important cryptocurrency hits a low
- Excitement around Ethereum 2.0 caused buys and abandons
- Ethereum remains a bullish beast for early buyers.
- Technical levels to watch: Sentiment is the only critical factor
remains the second most important cryptocurrency among the more than 19,850 cryptocurrencies currently available. At near the $1,173 level on June 16, Ethereum has a market capitalization of $140.57 billion.
While the market capitalization of Ethereum is less than half that of , it is well over twice that of . As of mid-June 2022, the cryptocurrency asset class had a total value of $950.7 billion, and Ethereum’s value represents over 15.5% of the entire cryptocurrency market.
Although Ethereum remains a dominant crypto, its price action has been bearish since the end of 2021. ETH tokens became a falling knife on November 10, when both BTC and ETH set up bearish key reversal patterns on their daily charts.
This week, Ethereum fell to its lowest level since January 2021. Ethereum may be a leader, but its price action is lagging behind Bitcoin.
Fall of ethereum since November 10
November 10, 2021 was a bad day in the cryptocurrency arena, with Bitcoin and Ethereum hitting record highs before crashing. The bearish trend reversal that day led to more than six months of bearish price action for this volatile asset class.
As the chart illustrates, Ethereum hit a high of $4,865.426 last year on Nov. 10 and settled below the $4,555 level. The low on November 9 was $4,715.74. The reversal had a powerful impact on the price of Ethereum, and Bitcoin performed the same technical pattern that day. Ethereum hit a low of $1,077.694 on June 14.
The second most important cryptocurrency hits a low
Bitcoin, the main cryptocurrency, hit a low of $20,885.96 on June 14.
Charts show Ethereum doing worse than Bitcoin. At the June 14 low, Ethereum was 77.85% below the November 10 high. Over the same period, bitcoin is down 69.7% from its November 10 high of $68,906.48.
Ethereum has been the weak link of the two cryptos which hold over 60% of the overall market capitalization of the asset class.
The Ethereum 2.0 craze caused buys and abandons
Ethereum’s underlying technology is changing, and version 2.0 will use a proof-of-stake consensus mechanism to verify transactions by staking instead of the current proof-of-work protocol.
Proof of work is a competition between miners to solve cryptographic puzzles and validate transactions to earn block rewards. The proof-of-work protocol is very energy-intensive. Proof of Stake uses randomly selected validators to ensure the reliability of the transaction, with compensation in cryptocurrency. Proof of stake is asset dependent and requires much less energy.
Ethereum’s plan, announced in August, to roll out version 2.0 prompted a wave of buying at the end of 2021. But the downtrend caused many of the second crypto’s laggards to shed their long-risk positions, the Ethereum having hit lower highs and lows.
Ethereum remains a bullish beast for early buyers
Meanwhile, Ethereum has come a long way over the past few years and remains a bullish beast for those who bought the tokens before 2018.
The long-term chart of Ethereum highlights the rise from $11.13 per token in May 2016. It remained below the $100 threshold until April 2017.
While the price rose above $1,400 in January 2018, it corrected to lows of $82.408 in December 2018 and $89.505 in March 2020. As a result, long-term holders remain deep in the money on risk positions near $1,200 per token on June 16.
Indeed, over the past few years, buying Ethereum on corrections has been the optimal approach to the second most prominent cryptocurrency. Also, for those paying attention to the fundamentals, additional phases of Ethereum 2.0 are expected to go live in August 2022, with the full release not expected until 2023.
Technical levels to watch: Sentiment is the only critical factor
Time will tell if the move to Ethereum 2.0 will create a relief rally for Ethereum or if the different phases will help boost the token in the meantime.
The chart shows that critical technical support is now at the psychological level of $1,000 per token, a price not seen since January 2021. Technical resistance is at the April 2022 high at 3,579, $86. The range is wide, but cryptocurrencies are highly volatile assets.
With Ethereum being much closer to support than resistance, it is in the buy zone for investors and traders brave enough to buy the crypto which has been a falling knife for the past six months. Ethereum will find a bottom when sentiment changes and the asset class moves back into an uptrend. The value of cryptocurrencies is solely a function of buy and sell offers in the market.
Only invest capital that you are willing to lose in Ethereum or other cryptocurrencies, as the potential for incredible rewards comes with commensurate risk. Although Ethereum has been a leader in the cryptocurrency asset class for the past few years, it has been lagging since November as the wave of buying turned into a rush of selling.
The herd could change direction over the next few months and the move to 2.0 could be the spark needed to book the trend. Expect a lot of volatility on Ethereum, and you won’t be disappointed.
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The Buzz Around Ethreum 2.0 Could Take Volatility To The Next Level | Investing.com
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