EthereumShort
ETH 6 Month Outlook: Price Due for a Correction
Updated
This is my 6 month outlook on ETH. I try to chart as unbiased and emotionlessly as possible. I learned to trade using Wyckoff's method and place heavy importance on supply and demand as represented by volume to back up any price movements. Plus I saw the new and very well designed Volume Indicator by BobRivera990 and had to try it out.
All price action is dictated by supply and demand. Especially now that large institutional investors have taken an interest in Ethereum and cryptocurrency in general, it is going to behave like a predictable market. Also, EIP-1599 had the opposite effect than what many in the community loudly said it would have. With transactions being sped by by a "tipping" system, the network is essentially a whale's playground, with gas prices routinely being prohibitively expensive for all but the wealthiest investors. Everyone else can play during their off hours. The burning of ETH likely helped speed up this recent bull trend, but it's the market makers who dictate this, executing trend reversals after testing the demand (more on this below).
If you like this, show some love. Those thumbs up and comments let me know what kind of analysis people are looking to see.
Technical Analysis
This chart is using Fibonacci retracement levels starting at the 1 year volume low which kicked off the bull run. Most of our support is at 0.236 fib, roughly $1300. This is likely to be the bottom of the correction.
The upward and downward Gann fan is useful in helping to time market movements as well as predict future price-trend channels. In determining a channel for the downtrend, follow the Gann lines to the volume profile on the right. Support and Resistance can be determined by where the bulk of the volume lies.
The run that took the price from $238-$4380 started with a daily volume of 7k ETH and peaked at 320 ETH. The most recent run that brought us from $1800 to current levels (~$3300) kicked off mid October with a daily trading volume of 8k ETH and the price climbed 85% to it's ATH. Meanwhile, the highest volume we've seen in the last month was 69k ETH.
Volume is a direct representation of demand. Supply and demand dictates the price of a token. When demand is high and/or supply is low this creates bullish conditions. When demand is low and/or supply is high this creates bearish conditions. Current volume indicates that demand is low, even with ETH burning in place due to EIP-1559 reducing the supply slightly, we're not seeing an increase in demand to match the price movement upward, this divergence is bullish as it indicates that the price is being moved by the market makers. Additionally we have divergence in the LSMA.
> Note the volume spikes that routinely pop up to roughly 125k ETH. This is market makers testing the demand. Sometimes people bite, in which case they buy/sell ETH in order to move the price in a direction that is favorable to them.
While the price went up 85%, demand fell by 75%. Basically the price is currently inflated by about 75% of what it should realistically be based on volume and demand, we're due for a huge correction. The only reason I think it won't correct a full 75% is due to the strong support at the $1300 price level which corresponds to the 0.236 fib retracement level.
It's not a coincidence that the yearly volume peak and the volume peak at the sell off are identical either. That's the market makers taking profit, or as Wyckoff would say, "the composite trader" setting the price. Psychologically, you can think of trading as a game between you and one single entity who's goal is to take your money, which isn't far from the truth. The market makers all have the same goal: profit. They do this by shaking out retail investors with false breakouts and bringing the price to inflated levels like where we are now.
So what do we look for to determine when to sell?
1. Volume jumping to ~125k ETH (resistance test) followed by a change in price action.
2. A daily close (not just a wick) below the 0.618 fib level
So yes, we have shorter-term EMAs that bounced off long-term and a golden cross, but the real question is: does the current demand back this up?
Right now, no it does not. I expect the price in a downtrend to follow the outlined channel until around February, at which point the direction will be determined by the demand and the crypto landscape at that time, a landscape that's constantly evolving.
Keep those stop losses prom-night tight ladies and gents, things could get real fun real fast.
All price action is dictated by supply and demand. Especially now that large institutional investors have taken an interest in Ethereum and cryptocurrency in general, it is going to behave like a predictable market. Also, EIP-1599 had the opposite effect than what many in the community loudly said it would have. With transactions being sped by by a "tipping" system, the network is essentially a whale's playground, with gas prices routinely being prohibitively expensive for all but the wealthiest investors. Everyone else can play during their off hours. The burning of ETH likely helped speed up this recent bull trend, but it's the market makers who dictate this, executing trend reversals after testing the demand (more on this below).
If you like this, show some love. Those thumbs up and comments let me know what kind of analysis people are looking to see.
Technical Analysis
This chart is using Fibonacci retracement levels starting at the 1 year volume low which kicked off the bull run. Most of our support is at 0.236 fib, roughly $1300. This is likely to be the bottom of the correction.
The upward and downward Gann fan is useful in helping to time market movements as well as predict future price-trend channels. In determining a channel for the downtrend, follow the Gann lines to the volume profile on the right. Support and Resistance can be determined by where the bulk of the volume lies.
The run that took the price from $238-$4380 started with a daily volume of 7k ETH and peaked at 320 ETH. The most recent run that brought us from $1800 to current levels (~$3300) kicked off mid October with a daily trading volume of 8k ETH and the price climbed 85% to it's ATH. Meanwhile, the highest volume we've seen in the last month was 69k ETH.
Volume is a direct representation of demand. Supply and demand dictates the price of a token. When demand is high and/or supply is low this creates bullish conditions. When demand is low and/or supply is high this creates bearish conditions. Current volume indicates that demand is low, even with ETH burning in place due to EIP-1559 reducing the supply slightly, we're not seeing an increase in demand to match the price movement upward, this divergence is bullish as it indicates that the price is being moved by the market makers. Additionally we have divergence in the LSMA.
> Note the volume spikes that routinely pop up to roughly 125k ETH. This is market makers testing the demand. Sometimes people bite, in which case they buy/sell ETH in order to move the price in a direction that is favorable to them.
While the price went up 85%, demand fell by 75%. Basically the price is currently inflated by about 75% of what it should realistically be based on volume and demand, we're due for a huge correction. The only reason I think it won't correct a full 75% is due to the strong support at the $1300 price level which corresponds to the 0.236 fib retracement level.
It's not a coincidence that the yearly volume peak and the volume peak at the sell off are identical either. That's the market makers taking profit, or as Wyckoff would say, "the composite trader" setting the price. Psychologically, you can think of trading as a game between you and one single entity who's goal is to take your money, which isn't far from the truth. The market makers all have the same goal: profit. They do this by shaking out retail investors with false breakouts and bringing the price to inflated levels like where we are now.
So what do we look for to determine when to sell?
1. Volume jumping to ~125k ETH (resistance test) followed by a change in price action.
2. A daily close (not just a wick) below the 0.618 fib level
So yes, we have shorter-term EMAs that bounced off long-term and a golden cross, but the real question is: does the current demand back this up?
Right now, no it does not. I expect the price in a downtrend to follow the outlined channel until around February, at which point the direction will be determined by the demand and the crypto landscape at that time, a landscape that's constantly evolving.
Keep those stop losses prom-night tight ladies and gents, things could get real fun real fast.
Note
ETH has been moving nicely between the upward blue (resistance) and purple (support) Gann lines, with any quick parabolic breakout from this channel turning out to be a false breakout.Currently hugging resistance, a break above the trend line would be bearish, likely seeing a retrace to the 0.786 fib ($3500). Rising gas prices, an enormous and convoluted NFT bubble, and faster, better, and cheaper competing chains (along with bridges now adding the option to "peg in" to a native currency on any token transfer will reduce ETH demand.
Gann structure indicates a correction to take place around December 10th, with the purple and red downward Gann lines providing our channel downward as we move into distribution mode.
Note on long term viability of ETH. Eventually blockchains will be an order of magnitude better in every way, don't forget this is part of a very new technological paradigm that is providing improvements literally daily. It's not fast, efficient, or even very safe (it doesn't natively stop integer overflow errors... that's not the system we want global finance on). Manage expectations when consolidation occurs; with such direct competition it's possible we never see prices for ETH so high ever again after this cycle.
Nobody uses AOL anymore in 2021, I expect in the next 5-6 years you'll be the oddball if you are active on Ethereum.
Disclaimer
The information and publications are not meant to be, and do not constitute, financial, investment, trading, or other types of advice or recommendations supplied or endorsed by TradingView. Read more in the Terms of Use.