ETH And The First Real Bear Market Rally

VictorCobra Pro Updated   
COINBASE:ETHUSD   Ethereum / U.S. Dollar
I'm back after a couple weeks of studying for my master's exam (which I passed!). I am officially almost a licensed social worker. Now, how that qualifies me to write about financial markets, I have no idea. Though, I certainly think they are related, as much of our social and system issues stem from poor economic policy and rampant exploitation in markets.

In any case, welcome to the first significant bounce, after months of downside! I consider this the first "real" bear market rally because it is the first big bounce after a lower low (breakdown from the support held during the 2021 slump). I have been speculating about some sort of multi-month relief rally leading up to the midterm elections in the U.S., as political interests do not want markets in upheaval when their political positions are at stake. In the last several weeks, Ethereum has increased by well over 100% since the lows. Back in January, I wrote about how I thought $800 levels for ETH were possible, given the loss of the bull market uptrend and a number of other warning signs. Here is the original post:
Since then, ETH perfectly headed down towards my "value zone." Now, I call it the "Dead Zone." I was still thinking I'd scoop some back up at those sub-$1000 prices after selling above $3k, but my long term stance on crypto has changed, and I don't really have any interest in owning any. I actually think continued price appreciation for these assets would be a net-negative for society. The more energy goes into intangible assets, the less goes into improving the physical world in which we live. Unless, of course, the goal is to NOT live in the physical world. Okay, you got me. That's clearly where the money is, baby. No more real world. Only metaverse. Only APE. APE APE APE.

No, this is only an absurdity a human could design. That's the irony of the "Ape" culture, isn't it?

Now, what's going on with ETH today? We've got pretty impressive volume off the lows. Whales seem to be manufacturing a rally leading up to the ETH merge and transition to proof of stake, while Bitcoin lags behind traditional markets. As I've written before, I think much of ETH's inflated value in 2021 had to do with the NFT bubble and the ridiculous fees (premiums) people were willing to pay. The fees acted as a gatekeeping mechanism, but it also served to increase FOMO, as people had to buy even more ETH to cover the cost of all their transactions and expensive pixel purchases.

I do think this rally will fizzle out, but the question is - when? The market seems to be treating this as a "buy the rumor, sell the news" event, which plays out in crypto fairly often. Other people are skeptical and think the rally is already about to fizzle out. This is possible, given that some indicators are showing signs of slowing momentum ( bearish divergence on the oscillator, MACD looking precarious, etc.) Another camp believes that the rally will just keep going after the merge. Anything is possible! Ethereum can be particularly hard to trade. Just look at the ETH/BTC ratio:
It broke down from what looked like a huge distribution pattern, but rebounded with immense strength and is now testing the highs. This is something I honestly did not expect, since I wrote about a long term top for the ratio here:
I do still think it's possible ETH never achieves a new all-time high against Bitcoin , but it's starting to look possible that it will briefly make a new high in anticipation for the merge. There is one month left, supposedly. Since Bitcoin dominance has not really broken to the upside, and since ETH bounced with so much vigor, this reminds me a lot of the first major bear market rally in April 2018, which occurred off a big short squeeze. You can see the similarities here:
The above shows the 3-day chart, and a rejection at the 50 MA (red). If ETH fails here, I think it's very possible it'll head down to the "Dead Zone" and break the recent lows. Then, I think it would be unlikely to recover anytime soon and could simply fizzle out as the rest of the crypto market continues to implode due to lack of liquidity and too much leverage. I took a small short here from $1890, with a target between $1390-1450 (2017 ATH zone). There is room for it to first head higher towards the downtrend on my chart, but Moving Averages have proven to be a bit more reliable than trendlines during this bear market, and particularly during chop. Let's see if it gives a big pullback here.

As always, this is not meant as financial advice, but for speculative purposes only. I've been posting only periodically these days since I have other interests. I may wind down my posting even more. I am still working on my creative projects, including a sci-fi novel and my book about analyzing market behavior. That book is particularly hard to finish, because things are always evolving, and algorithms continue to become more advanced. Who knows? Maybe if I stopped posting entirely, a bot would take my place, as it would be able to perfectly imitate my writing and speech patterns. Maybe this isn't even me writing this right now.

-Victor Cobra

Comment: I think whether we get a large drop here depends on whether Bitcoin holds this wedge structure, and if it finds buyers on a breakdown.
Trade closed manually: Ended up closing my short for a slight profit. Possible ETH makes another attempt near $2k, and PA is really atrocious for day trading anyway.
Trade active: Re-entered short at 1824. Now it can bounce :) Would not be surprising as I stopped myself out of TRX near the precise top the other day. This is classic day trading for you.
Trade closed: target reached: I closed the short just below 1670 on Friday. Now in long from 1558 but might be short-lived.

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