ETH price continued to decline last week after sliding below an important psychological level. But short sellers beware, as this downside move could be a necessary precondition for setting the scene for a bullish recovery. Therefore, the new week offers the exciting promise that the trend may change in favor of the bulls.
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ETH price ready to recover
ETH has dropped 22% since January 1, breaking the 200-day simple moving average (SMA) at $3,437 and establishing a swing low at $2,927. This move exhausted the selling pressure and marked a temporary bottom.
Since then, the price recovered above the weekly support at $3,061 and is currently consolidating around this level. Market participants can expect increased buying pressure, prompting ETH to move the 200-day SMA to a support floor and revisit the 2-day supply zone, extending from $3,675 to $3,862.
In total, this rally will generate a 22% return on ETH from the current position. Even so, it is unlikely that the price will be able to break through the aforementioned supply zone and beat the weekly resistance barrier at $4,068, where the 50-day SMA currently cuts below the 100-day SMA, forming a death cross. . This move will bring the total increase to 30%.
ETH/USDT 1-Day Chart | Source: TradingView
The short-term bullish outlook is represented by Santiment’s 365-day Market-to-True Value (MVRV) model. This on-chain metric is used to determine the average profit/loss of investors who have purchased ETH over the past year.
The indicator is currently at -15.2%, which shows that holders are losing money and are less likely to contribute to selling pressure. More interestingly, the data shows that this is an opportunity zone in which long-term buyers tend to accumulate.
This could signal ETH is ready to quickly move higher.
MVRV ETH 365 days chart | Source: Santiment
Another IntoTheBlock indicator Global In/Out of the Money (GIOM) shows that ETH price will not encounter resistance on its way to $3,600, signaling ETH could easily climb higher to retest that level.
About 5.12 million addresses that bought 20.29 million ETH tokens at an average price of $3,697 are now at a loss. Therefore, any short-term rally is likely to be stymied around this barrier.
GIOM ETH | Source: Santiment
While ETH price looks poised to move higher, market participants should keep an eye on the Network Growth indicator. This on-chain metric is used to determine user interest and interaction with the project.
Currently, Network Growth is hovering at 87,300 after falling from 193,640 on Oct 28, 2021. This 55% drop reflects investors’ disinterest in ETH at current levels.
ETH Network Growth | Source: Santiment
The estimated leverage ratio is also a factor supporting the near-term bullish outlook but warns investors to be cautious. The index is hovering around an all-time high of 0.158, suggesting that many investors are accepting high risks, which could lead to catastrophic crashes if things go awry.
ETH Estimated Leverage | Source: CryptoQuant
If ETH fails to bounce off the weekly support at $3,061, it is likely that the price can return to the next hurdle at $2,712, to then collect the sell-stop liquidity located below it. If ETH closes daily below $2,636, it will make a lower low, completely invalidating the bullish thesis. This development could open the door to the next breakdown, pushing the price down to retest the $2,440 level.
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