Ethereum, like most other cryptocurrencies, remains in a deep correction from it's ATH in January. I see no signs of a reversal yet, but anticipate one soon.
ETH remains a favorite of crypto investors. In my experience it is perhaps the most universally-liked crypto; with nearly unanimous bullish long-term sentiment. From a fundamentals standpoint, the developers continue to progress on their roadmap, and the much-anticipated transition to Proof-of-Stake is set to roll out this year. Thus, purchasing at such a markdown is appealing.
Levels
I'm charting on the USD pairing, as CoinMarketCap reports that the majority of trading volume is against the dollar.
Price action should tell you everything you nearly everything that trend-based indicators would, which is why I have omitted all of them from my chart. It's not hard to spot the very bearish trend.
4 levels catch my eye in this chart. The first is the pivot around $400. This has acted as major support and resistance twice each, and is the most "obvious" spot for a reversal. From an Elliot wave perspective, if we are within a corrective wave 4, price cannot drop much below this line without incurring a wave failure.
The second is the Point of Control at $300. This is the area with the greatest volume in the VPVR--the largest High Volume Node (the long purple bar on the right). The Volume Profile is one of my most essential tools and what I depend on while scalping low timeframes. More volume in an area=more liquidity, which acts to slow momentum. (Thus, HVNs can be thought of as "magnets" for price). All of Bitcoin's bottoms have wicked to or just past a HVN. The $400 support is attractive, but sits in an LVN. Thus, if price does not tap this line and move away quickly, I expect further downside.
The other points are at $356 and $275, which are minor key structure points near the PoC. If price were to break $275, I'd again anticipate downtrend continuation to the next pivot around $200. However, I strongly doubt a price drop below $300.
I've also overlayed a box denoting a 78.6% drop from the high. This is primarily a visual indicator to demonstrate the depth of this correction, as my chart is in log scale. Additionally, the .786 retrace is a key entry point for many traders. I'm not sure if algorithms are pulling fibs from the $6 swing low, but it is interesting to see confluence near the PoC.
Indicators
The daily RSI sits well below the oversold region, at 22. This has only happened once before for ETH. This indicates the downwards momentum is likely to reduce in intensity soon, but is not a buy indicator until divergence appears.
My other indicator is the VIX-FIX, an instrument designed to detect volatility in any asset class. Bottoms in crypto are usually rapid and intense; the 6k BTC bottom had the highest daily VIX-FIX of all time. I'd expect similar significant capitulation for an ETH bottom given the steepness of the downtrend.
Plan
The volume profile is my secret sauce. I'll be placing bids near the PoC in hopes of catching a capitulation wick of a sharp bottom. Alternatively, ETH & BTC may bottom slowly (like many altcoins have) before the next bull run. ETH may never even reach $400. In these cases I'll look for classic signs of reversal: RSI divergence on a higher timeframe, breaking structure to the upside, and ideally a bounce off some support level.
Overall, longterm investors need to pay less attention to entry and more to overall trend. ETH is bullish--most are confident it will well surpass its high of $1400. An entry around $400 would not be a foolish one.
ETH remains a favorite of crypto investors. In my experience it is perhaps the most universally-liked crypto; with nearly unanimous bullish long-term sentiment. From a fundamentals standpoint, the developers continue to progress on their roadmap, and the much-anticipated transition to Proof-of-Stake is set to roll out this year. Thus, purchasing at such a markdown is appealing.
Levels
I'm charting on the USD pairing, as CoinMarketCap reports that the majority of trading volume is against the dollar.
Price action should tell you everything you nearly everything that trend-based indicators would, which is why I have omitted all of them from my chart. It's not hard to spot the very bearish trend.
4 levels catch my eye in this chart. The first is the pivot around $400. This has acted as major support and resistance twice each, and is the most "obvious" spot for a reversal. From an Elliot wave perspective, if we are within a corrective wave 4, price cannot drop much below this line without incurring a wave failure.
The second is the Point of Control at $300. This is the area with the greatest volume in the VPVR--the largest High Volume Node (the long purple bar on the right). The Volume Profile is one of my most essential tools and what I depend on while scalping low timeframes. More volume in an area=more liquidity, which acts to slow momentum. (Thus, HVNs can be thought of as "magnets" for price). All of Bitcoin's bottoms have wicked to or just past a HVN. The $400 support is attractive, but sits in an LVN. Thus, if price does not tap this line and move away quickly, I expect further downside.
The other points are at $356 and $275, which are minor key structure points near the PoC. If price were to break $275, I'd again anticipate downtrend continuation to the next pivot around $200. However, I strongly doubt a price drop below $300.
I've also overlayed a box denoting a 78.6% drop from the high. This is primarily a visual indicator to demonstrate the depth of this correction, as my chart is in log scale. Additionally, the .786 retrace is a key entry point for many traders. I'm not sure if algorithms are pulling fibs from the $6 swing low, but it is interesting to see confluence near the PoC.
Indicators
The daily RSI sits well below the oversold region, at 22. This has only happened once before for ETH. This indicates the downwards momentum is likely to reduce in intensity soon, but is not a buy indicator until divergence appears.
My other indicator is the VIX-FIX, an instrument designed to detect volatility in any asset class. Bottoms in crypto are usually rapid and intense; the 6k BTC bottom had the highest daily VIX-FIX of all time. I'd expect similar significant capitulation for an ETH bottom given the steepness of the downtrend.
Plan
The volume profile is my secret sauce. I'll be placing bids near the PoC in hopes of catching a capitulation wick of a sharp bottom. Alternatively, ETH & BTC may bottom slowly (like many altcoins have) before the next bull run. ETH may never even reach $400. In these cases I'll look for classic signs of reversal: RSI divergence on a higher timeframe, breaking structure to the upside, and ideally a bounce off some support level.
Overall, longterm investors need to pay less attention to entry and more to overall trend. ETH is bullish--most are confident it will well surpass its high of $1400. An entry around $400 would not be a foolish one.
Unfortunately, I don't think this is the absolute bottom. The nodes we bounced from have only slightly higher volume, indicating buy pressure could be weak. Already, price has not rallied sharply upwards like we've seen with previous capitulation bottoms. This is what makes me extremely wary. Thus I interpret these bounces as temporary seller exhaustion and not true reversals.
I'm still eyeing 300-340 as an even nicer ETH entry. I have thoughts regarding % drops between BTC & ETH and VPVR nodes; along with tips for reading VPVR and ideas about market cycles. I'll make a new post soon about all this and where we might be going, hopefully refining targets for both.
Until then just remember that the trend is bearish and further downside is more probable than not. Additionally, it is not impossible that we have just entered a prolonged bear market and that prices will bleed for months--bottoming not with a bang, but with a whimper.