Ethereum, the cryptocurrency giant created by Vitalik Buterin, has started the month of June on a strong footing, as it is currently trading around the $600 mark. But can the bulls garner enough momentum to push prices above the highs seen in May?
The cryptocurrency giant is currently ranked 2nd in terms of overall market cap, according to data from www.coinmarketcap.com, with a market cap value of $60 billion.
ETH has been trading in a range-bound market condition over the past week as the market has only increased by a total of 1.6% over the past seven trading days.
Although Ethereum might be up against the US Dollar by a total of 68% from the recent low set in April at a price of $358, over the long-term, ETH is down a total of 57% from the all time high set in January at a price of $1,424.
Ethereum was created in July 2015 by Vitalik with the intent to create a blockchain which allowed for developers to build decentralised apps (DAPPS) on top of it. Over the course of the last twelve months Ethereum has experienced some issues with scalability.
More specifically, the decentralised app known as CryptoKitties, caused the Ethereum blockchain to slow down by delaying transactions and causing a heap of unprocessed transactions for a few days. CryptoKitties at one time managed to increase the number of unprocessed transactions by a factor of six, indicating the technical problems surrounding Ethereum driven by the CryptoKitties craze. The Ethereum blockchain currently can process a small number of 25 transactions per second whilst Bitcoin can currently process 7 transactions per second. This is a far cry from the required number of transactions required per second for the increasing demand on Ethereum’s blockchain.
However, more recently Vitalik has hinted that the scalability problem surrounding Ethereum are coming to a solid resolution. Speaking at a OmiseGo event recently, Vitalik made a statement about a new development known as Sharding, which would theoretically allow the Ethereum to process up to ten thousands transactions per second.
If this protocol upgrade shows any signs that it could improve transaction speed and throughput for the Ethereum blockchain then the market may experience a significant bull run.
Let us examine how the price action has been behaving from a long term perspective.
ETH/USD PRICE ANALYSIS
ETH-USD – LONG TERM – DAILY CHART
Looking at the market from a long term perspective, we can see that Ethereum is trading within a consolidating market. Price action has been following the confines of a very loose symmetrical triangle as price action has made neither higher highs nor lower lows.
Ethereum is trading, marginally, below the 100-day simple moving average just shy of $600. This price level has been a major pivotal point throughout the previous few months as price action finds significant support or resistance in this area.
If the market can show some movement above the $600 handle and eventually break above the upper boundary of the triangle we should see this as a potential alert that the market is in the process of a long term reversal. For the bullish market to be confirmed, we would need to see price action test and break above the highs seen in April at $838.
Alternatively, if price action fails to hold above $600 we may see an extension of the bearish trend in May as prices approach the $542 and eventually, the $461 handle.
Let us analyse price action over the past few months a little closer.
ETH-USD – SHORT TERM – DAILY CHART
Looking at price action more recently, we can see that April was an extremely bullish month for Ethereum as price rose from a low of $363 and continued all the way through to early May where price experienced a high of $838.
Form this high, we can see that price action had re-traced all the way up to the .618 Fibonacci Retracement at a price of $542 where a small rebound was experienced. Price action is currently trading at the .50 Fibonacci Retracement level at a price of $599/$600. The retracement and the psychological round number of $600 should provide significant support in this region.
If price actin can garner some momentum and push price a above the .382 Fibonacci Retracement at $656 then we may see price action make an attempt at the upper boundary of the symmetrical triangle at some point, possibly, during June. A break of the triangle would allow price action to retest the highs set in April, $838, once again.
Alternatively, if the bears manage to overpower the bulls at the $600 handle, we could see prices falling back to the $542 region before finding any further support. If $542 fails, we could potentially see price action to continue further toward the lower boundary of the triangle at the $450 region.
The technical indicators are at a period of indecision in this moment in time. The RSI indicator has been in a consistent battle with the 50 line over the past few trading sessions as it fails to break above or fall below the line. If we were to see some bullish momentum entering the market then we would see the RSI line begin to pull away from 50 which would confirm the bullish sentiment that prices may head toward the triangle’s upper boundary.
In addition to this indecision, the moving averages have all been trading sideways for the past few sessions. If we are to see a bullish move within the market then we would need the 7-day EMA cross up above the 21-day EMA. For a long term bullish move to occur we would then need both the 7-day EMA and the 21-day EMA to cross up above the 100-day SMA.
Trading within range bound markets is a difficult task for beginner traders. Instead, it is best to wait for the market to show which way it would like to trade in by breaking out above or falling below the range.
Ethereum has been in a period of consolidation for a strong few months now. However, if price action can show some bullish strength we may see the market make its movement toward the upper boundary of the triangle and attempt to break above it, within the the next month.
It will be important to keep up to date with Ethereum’s upcoming development especially with regards to Sharding as a significant upgrade in transactions per second will have a serious bullish impact on price.
– Yasin Sheikh