Ethereum is fragile - Is the return to $1,350 inevitable?

Ethereum is fragile – Is the return to $1,350 inevitable?

Lthe market is shaking – The year 2022 continues to be complicated for the financial markets and cryptocurrencies are no exception! While The Merge was successfully deployed on Ropsten, Ethereum continues to struggle to defend the $1,750 zone. In a bull market, this kind of news would have brought buying flow, but this is not the case. Ethereum is now in bearish momentum and altcoins are followingent. There is still some hope of not experiencing a bear market like we saw in 2018, but buyers will have to show up quickly!

This analysis of the Ethereum price is brought to you in collaboration with the Coin Trading and its algorithmic trading solution finally accessible to individuals.

Ethereum in Weekly time unit:

Ethereum is in a downtrend in weekly time units.
Ethereum price against the dollar (1W)

Ethereum is clearly bearish in this unit of time since the breakout of $2,150. We will have to wait for buyers to change this dynamic to hope for a return to the rise on this asset. The dynamic is bearishbut, for the moment, the area to $1,700 was not broken by sellers. The course is on the same levels as last summer, but the dynamic is not not in favor of a rebound.

All is not lost, buyers need to regain strength by recovering the level to $1,950. It could be very complicated, yes, but not impossible. Just as there was a DETOUR above $4,000 in November 2021, it is quite possible to experience one at the bottom of the range under $1,950. For the moment, it does not seem improbable to find the course at $1,350 as in February 2021.

The momentum is bearish in this unit of time. The trendline shows a significant sales force and it doesn’t seem to be calming down yet. It will take several weeks before there is any potential buying flow on this asset.

Ethereum daily

Ethereum daily price is showing a bullish divergence.
Ethereum price against the dollar (1D)

On a daily basis, Ethereum finds itself between support and resistance. Buyers are trying somehow to maintain the level at $1,700but, if the sellers manage to close the price below, next support is at $1,350.

The momentum shows a bullish divergence on a daily basis, this shows that the sellers are running out of steam. Buyers would have to take advantage of this for the price to rebound. In the event of a rebound, the first stop (0.382 Fibonacci retracement) seems like a possible target at $2,400.

For the moment, the dynamic is bearish and buyers must show up for reverse. Ethereum remains very fragile and undergoes the movements of Bitcoin.

The behavior of actors regarding the leader of altcoins

For this, we will study different elements such as derivatives markets (perpetual contract), theon-chain analysis and the market sentiment. Investor behavior provides clues for the sequel.

Binance’s Ethereum Perpetual Contract

It is interesting to study this contract, because it is the one that generates the most volume. The perpetual contract allows actors to use theleverage by borrowing from the platform. It is difficult to generate money through this, you have to be vigilant. However, it allows us to understand the behavior of actors who are aggressive in the markets.

The derivatives market seems to show that players are buying with leverage.
Chart of Ethereum against the dollar on Binance’s perpetual contract (1D)

the funding rate is fallingbut it remains globally positiveeven after more than 60% of fall. It would seem that the players are in the perspective of a rebound and this is not positive in the short term. The long/short ratio still does not fall and theopen interest (position openings) rest raised. As long as these actors do not change their behavior, it seems hard to imagine a rebound.

market sentiment

Since November 2021, the market decrease. The market is currently in the fear :

Market sentiment is very low right now.  The actors are scared.
Market sentiment of players regarding Ethereum. source: Santiment

This data is collected using social networks. The higher the peak, the more confident the actors are. Conversely, the more the hollows are marked, the more the actors are in fear. As can be seen, the period clearly shows that the actors are pessimistic and have fear price movements.

Historically, these periods have allowed reboundsor even dynamic changes. This does not mean that the bottom is current, it only gives information concerning the actor behavior.

On-chain analysis for Ethereum

It is interesting to analyze the behavior of the actors thanks to the transactions carried out at the level of blockchain. The situation is totally different compared to 2018:

Recently, players have deposited Bitcoin on the exchanges.
Bitcoin deposits (green) and withdrawals (red) on exchanges (30D)

We see it, the situation is very different of that known in 2018. In 2018, many ETH were deposited on exchanges (green) while there are mainly withdrawals currently. However, we see that behavior is changing, because actors are beginning to deposit non-negligible amounts of Ethereum on the exchanges. Is it only temporary, or will the trend continue? We will see that in the weeks and months to come.

Ultimately, ethereum is in the hot seat. It is imperative that the buyers retake the important level at $1,950. Otherwise, the sellers may well push down to the next support at $1,350. A daily divergence is confirmed, buyers need to take advantage of it. A divergence only means a loss of strength on the sell side, it is not yet won for the bulls. At the level of the behavior of the actors, it is not won either. The actors are not confident, but it seems they are still looking to buy with leverage. The period is complicated and this is likely to last given the global market context and in particular when we observe inflation which continues to climb.

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