Ethereum has sure been basking in the warm light of attention this week; not surprising given its move over the 200 day moving average and momentum since. Will it last though? Let's take a look at that and the wider market.
You may be wondering why I'm starting with BTC if ETH is all in the news. Well because the BTC picture isn't as rosy, it is still in charge of sentiment until otherwise proven, and ETH was 87% correlated with BTC over the last 90 days.
What we've seen this week has been a failed second attempt at the 200 day moving average from BTC. The second attempt has volume and RSI divergence (showing weakness) and the MACD (the lowest oscillator here) looks ready to print a sell signal.
This is not a bullish chart. Let's rewind the clock and see how this action compares to 2014.
Back in 2014 we saw a similar multi-day test of the 200 day from underneath at this point.This concluded downwards with a similar MACD bear cross, a descent which was stopped within a few days by a cross of the 50 over the 100 day moving averages (blue through yellow here).
Price then traced sideways until there was a bull cross which potentially could have marked the resumption of the uptrend.
However the market was still too battered and no buyers stepped in (look at the volume) - so the price continued to track sideways until eventually a 2nd death cross was triggered (warning symbol on the right), foreshadowing much lower prices.
So, are we back in a bull trend? Absolutely not yet, and Ethereum knows it too.
While on the surface this looks like a bullish breakout over the 200 day moving average, I'm not buying it - yet. Why?
Firstly because ETH is still correlated strongly with BTC, which looks ready to start a new downleg and is clearly still in a bear market.
Secondly because of the volume. Point 1 on the left is what the volume has historically looked like during a strong breakout on ETH. If you compare with now (Point 3) you'll see the current action is actually pretty anaemic. There isn't even as much volume on this move as at point 2 in December, which is when the bull run was weakening.
No this looks very much like a bull trap to me, or at best the cue for another retest of the 200 day from above.
What would change this view?
If BTC managed to make it over its 200 day moving average, the whole picture would be up for reassessment. Equally ETH could decorrelate from BTC - but we've not seen strong evidence for that yet. A move up past yesterday's highs on extreme volume would be another sign that the sunny outlook was here to stay.
Ripple, while over its 200 day, is looking weak. The recent high was on lower volume and momentum (RSI), making a clear double top, plus MACD is turning over. The 200 day (red) will be strong support, but if BTC moves lower I doubt it'll hold.
Once again Litecoin is outperforming. This is the only chart not threatening an MACD bear cross currently. But the break above the 200 day was on tiny volume, so once again I doubt this will hold if BTC commences another downleg.
BCB Group has no position or opinion on the price of Bitcoin or any other cryptocurrency and this article should not be construed as analysis of or advice regarding the current or future market price of Bitcoin or any other cryptocurrency. No analysis of the price movements of BTC or any other cryptocurrency or any other asset provided by BCB Group should be construed as an invitation or inducement to buy, sell or otherwise to trade BTC or any other cryptocurrency.
Strategy and Execution Partner
Jon is MD of British music production company Poseidon. He began studying technical analysis in 2000 for use in managing his own investments and due to its overlap with behavioural economics – much used in Poseidon's international marketing work. This has seen the company achieve three iTunes US number one albums in as many years among other notable successes.
A Bitcoin investor since 2013, Jon and has been providing Technical Analysis (TA) commentary for a private community of Cryptocurrency investors since mid 2017.