In this post Shawn provides us a brief overview on the Ethereum Price Update for the beginning of 2019. He discusses Ethereum's rally and the sell off that ensued.
DISCLAIMER: This ideas presented in this article should not be taken for investment advice, and are simply the views and opinions of the author
Ethereum Price Rallies
The final quarter of 2018 was looking pretty grim for Ethereum. Between early September and mid December the price of Ether saw a decline from $280 to as low as $80. Suddenly, however, Ethereum seem to have found new vigor and the price recovered to $160. This instilled a lot of new hope (and fomo?) in several people.
But just when price action took a turn for the better, Ether took another lurch downward back to $120. A lot of people who got bullish at the $150-$160 area saw staggering losses. The question is… Could this have been foreseen?
Perhaps. There were a few red flags right from the beginning. In this weeks Ethereum Price Update we’ll go over some of the signs that pointed toward this move potentially playing out.
Ethereum’s Similarities to BCH
On November 14th 2018, Bitcoin Cash was to undergo a hard fork – a big event in the crypto world. Two weeks prior to the event, Bitcoin Cash began to rally. The price surged upward from around $410 to $630. However, seven days before the actual date of the event – the price began to decline. And it do so rapidly! In the next seven days leading up to the event, Bitcoin Cash dropped all the way back down to $410. It literally gave back all it’s gains.
Ethereum, so far, seems to be following the same story line. Ethereum’s hard fork - Constantinople - is scheduled Jan 16th, 2019. This hard fork has been long awaited by the community since it delivers the Block Reward Reduction that everyone wanted.
After seeing a decline from $280 to $80, Ethereum began to rally around December 15th (almost a month prior to the fork). The price rallied all the way up to $160 and instilled excitement in the entire crypto community. Ethereum was leading the market, and the other coins (Bitcoin included) seemed to have been following suit.
But in an almost “deja-vu” sorta way, Ethereum lurched downward exactly one week before it’s long-awaited hard fork. Within a day the price of Ether declined from $150 to $120.
Apples to Apples: Events to Events
Now, a lot of people are going to say “No! the Bitcoin Cash fork was contentious! The Ethereum fork is a bullish update!”
The truth is that it doesn’t matter what the event actually was. All that matters is the crowd-psychology and the emotions people go through leading up to the event. For example, these are a couple of possible mindsets:
Bitcoin Cash Fork: “Omg, this is my chance to get free coins! I’ll buy and sell right after the fork”
Ethereum Fork: “Omg, this update is so bullish. I’ll buy before the update and sell when things get crazy!”
In both situations, ‘investors’ are being baited to buy the top – and then inevitably get dumped on.
Remember, BCH gave back 100% of what it gained in the seven days leading up to the fork. Now the question is: Will Ethereum also undergo the same retracement that BCH did?
Perhaps. It’s key to note, however, that the BCH rally spanned only one week. The Ethereum rally, on the other hand, spanned almost a month. Usually, these things come down as fast as they went up. So Ethereum may take a bit longer to see the same retracement.
Things come down as fast as they went up!
That being said – all it takes is one big player to change things. A big player with a large enough sell order can cause a quick retracement to the downside. Similarly, another big player with a large enough buy order can cause a real market turn around to the upside.
Yeah, I get it - this is probably not helpful. But this a probability game – and nothing is for certain. If you’re trading (or ‘investing’) in this market, you need to come to terms with that.
However, if you’re thinking about being a buyer at these prices there’s one more thing I’d like to discuss.
The Impetus to the Big Dump at 6k
Bitcoin was sitting around it’s major $6000 support at the time of the BCH fork event. Leading up to the event, bitcoin saw itself rally to $6500. Again, this instilled a lot of hope in the market. But the Bitcoin Cash dump seemed to have led the way for the rest of the market as well. Bitcoin was rejected at $6500, and went on to break the key $6000 level that it was being supported at for a long time.
The Bitcoin Cash fork & dump seemed to have been the impetus for the major 6k break. Today the major level everyone is eyeing is the $3000-$3200 region.
Will the Ethereum fork prove to be next impetus for the major break? It will be interesting to see how things play out .
Until then, just remember: The Trend Is Your Friend. Going against the trend is like trying skiing uphill. Protect yourself.
(None of this is financial advice.)
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