It is hard to talk about cryptocurrencies nowadays without talking about Elon Musk and his questionable actions. Recently, he caused turmoil in the crypto markets by first announcing that Tesla would no longer accept Bitcoin as a means of payment, and then hinting that Tesla would sell its Bitcoin holdings. In essence, this is a classic pump and dump scheme, but it was done differently. As a result of Musk’s actions, Bitcoin’s price dropped to under 45000 USD per unit, and the price of other cryptocurrencies such as Ethereum also dropped to new recent lows. The picture now looks less optimistic than before.
Ethereum technical analysis
Since December 2020, Ethereum has been moving in an uptrend. A clear trend line can be drawn from the bottoms. A remarkable feature of the trend is its strong momentum, even in comparison with trends in other cryptocurrencies. Yet, despite the rise in price, recently the price has dropped as if it has fallen off a cliff. The change in the weekly price movement is obvious. Musk’s announcements have left their mark, as a glance at the price of Ethereum on trading sites will attest.
Ethereum technical analysis: daily and 4 hour time frames
On the daily time frame, it seems that the price is falling hard and on its way to meet different moving averages. If successful in that, it might continue falling until it meets the rising trend line. Then, there are two scenarios. The price can either bounce back or continue falling. The third scenario would be consolidation then either bouncing back or falling still. The price has previously reached a peak at 4360 USD and now it is trading at around 3200 USD. It has lost more than 1000 USD in value in a matter of one or two weeks.
On the 4 hour time frame, the price seems to have broken a short term trend line, and it is still declining. It is getting close to the 200 period moving average, and if it manages to clear that level, then more decline can be expected. After that, the next target would be the trend line.
Overall outlook and forecast
Despite the recent decline, Ethereum can still rise up again. Enthusiasm about crypto can still receive a new push if a celebrity or a famous person makes new comments about the use of crypto. The recent decline can be a correction in rising trend. Fibonacci retracement levels can be used to identify potential points where the upward trend might resume.
If the price manages to go below the trend line, then long positions are not recommended. If the price rises above 4400 USD, then this might mean that the momentum is back, and we might see the price reaching 5000 USD, if not higher. Changes in the price of the US dollar can also impact the price of Ethereum, although factors related to the use of crypto are in a better place to move the price. Traders are not encouraged to open long positions just yet before receiving a confirmation signal. As for short positions, then they are only recommended if the price falls below the trend line.