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Market Outlook
Chance for Ethereum Correct After Heavy Fall?

Chance for Ethereum Correct After Heavy Fall?

27-01-2022 10:34

Ethereum (ETH) Dropped 41% in Value Since the Start of 2022

Ethereum is a technology that allows its users to send cryptocurrency to anyone. Created by Vitalik Buterin, Ethereum also powers applications that anyone can use and no one can stop. Ethereum is built on Bitcoin innovations, with some big differences. Both allow us to use digital money without the services of a payment provider or bank. However, Ethereum is programmable, so you can use it for many different digital assets. It also means that Ethereum is more than just a payment. It is a marketplace that provides financial services, games, and applications.

Quick Recap on ETHUSD

Since the beginning of the year, ETH has fallen sharply. This is inseparably thanks to the decline of Bitcoin and the prohibition of cryptocurrencies in several major countries such as Russia and China. However, ETHUSD is still in a bullish structure in the long run.

Let’s dive in a little deeper to see how ETH/USD fare on multiple timeframes:

ETH/USD Monthly Technical Analysis

Chance for Ethereum Correct After Heavy Fall?
Graph taken from TradingView.

Indeed, there is not much data that can be analyzed from the monthly timeframe of ETHUSD considering that it is not even a decade old. In fact, there is still no MA 50, 100, let alone 200 data for ETH on a monthly basis. But by naked eye, we can see a wide demand area for ETHUSD on a monthly basis around 2,000, whereas in May, June and July last year, the price had rejected from that area and left a large wick. Now, Ethereum seems to have reached and rejected from that area.

ETH/USD Weekly Technical Analysis

Chance for Ethereum Correct After Heavy Fall?
Graph taken from TradingView.

On a weekly basis, ETHUSD was observed to be bearish after breaking from the support area at 3,000 and closing below the 50 MA. Meanwhile, last week’s weekly candle closed very strongly bearish and this week has surpassed the lowest limit of last week’s weekly candle. ETH will probably hit the 2,000 or 1,800 level in the next few weeks.

ETH/USD Daily Technical Analysis

Chance for Ethereum Correct After Heavy Fall?
Graph taken from TradingView.

On the daily timeframe, we can draw a downward trendline which describes a bearish bias for ETHUSD since early December 2021. Currently, ETHUSD is in a narrow ranging area with above the daily support at 2,300 and resistance at 2,800.

Trading idea for ETH/USD

Chance for Ethereum Correct After Heavy Fall?
Graph taken from TradingView.

On H4, we can see a Quasimodo or inverse head and shoulder pattern from Ethereum. ETH briefly formed a lower low when it closed below 2,300, but managed to rise and create a higher high with a break of resistance at 2.550. So, there is a possibility that ETH will retest towards 2,300 to make a higher low and move up for an upward correction in the short term.

Order: Buy Limit
Entry: 2,320
Stop Loss: 2,150
Target 1: 2,550 (50% + BE)
Target 2: 2,700 (25%)
Target 3: 2,850 (25%)
Total Risk: Max 1% Equity (High Risk Setup)
Reason: Quasimodo level and rejection from long term demand area.

ZFX Analyst’s Predictions

Ethereum, which is a cryptocurrency with additional smart contract features, does provide a promising future. The price of ETH had shot up more than 500% in 2021, so it makes sense that it needs correction before it will increase again later. In this big correction condition, long-term investors add their crypto assets when the price is still ‘discounted’. When viewed fundamentally where the acceptance of NFT is increasingly widespread and the most common NFT transaction is by payment via ETH, it is very likely that the value of Ethereum will increase in the future due to high demand.

Risk Warning: The above content is for reference only, and does not represent ZFX’s position. ZFX does not assume any form of loss caused by any trading operations carried out in accordance with this article. Please be firm in your thinking and do the corresponding risk control.

ZFX (Zeal Capital Market) is an FCA & FSA licensed online Forex & CFD broker providing more than 100 products for Forexcommoditiesstock indices, and share CFDsOpen a trading account with min. USD 50 deposit and download our MT4 trading platform now!