Ethereum Should Break Above $2,650, But Why Won’t It Give Up?
Ethereum continues to struggle after dropping below $3,000. This price point has been critical for bulls to hold and since bears dragged the price below it has been a continuous display of dips and crashes. For a cryptocurrency like Ethereum, there are resistance and support levels that are very important for the digital asset. One of those support levels is just above $2,500.
So far, the digital asset has managed to stay above this point. This shows that bulls are getting significant support. However, with momentum declining and selling pressure mounting, things remain shaky at this point. If Ethereum is to maintain any semblance of equilibrium towards a bull rally, it must beat its next resistance point. This is now above $2,600, but what’s the price doing?
50 day SMA continues to resist
For the near term, there are some key milestones that Ethereum must beat to secure a bullish trend. One is the 50-day moving average. This points to the average where investors have bought the cryptocurrency in recent weeks. A position above or below this SMA always tells whether investors are willing to keep buying the coins at a certain price or whether they have pulled out.
Related literature | Russian Cryptocurrency Volumes on Various Exchanges Drop 50%
For Ethereum, it traded largely above this 50-day SMA for most of 2021. However, the new year is set to prove more daunting than expected as crashes have shaken the market. As a result, Ethereum fell along with the rest of the market. But more importantly, ETH has fallen so far that it has started trading below the 50-day SMA.
This puts the digital asset at a disadvantage in the short term as investors are no longer willing to buy at the average price they have had in recent weeks. At $2,574, Ethereum is well below the 50-day moving average of $2,891.
ETH Drops Below 50-Day SMA | Source: ETHUSD on TradingView.com
Falling below this SMA doesn’t necessarily mean a bearish trend for the long term, but for the short term, the 50-day SMA paints a pretty bleak picture for the digital asset. Combined with the fact that ETH has also fallen below its 20-day SMA, it looks like this period of downtrend could continue.
But can Ethereum bounce back?
Current trends point to what could be considered the early stages of another elongated bull market, but it won’t be the first time investors have fallen into a bear trap before. If so, Ethereum may not be done with its rally yet. Rather, another pump-up could be happening.
Related literature | Abra CEO predicts Ethereum could hit $40,000 – but some fintech analysts disagree
Some of the longest bullish rallies have been characterized by extended periods of low momentum, such as the one the market is currently in. Usually as a result of investors piling up on what they believe to be ‘discount prices’, taking more supply out of circulation and driving up value.
However, to do that, ETH must safely beat the next resistance point at $2,654. After that, a solid week of trading above the 50-day SMA. If met, the digital asset could see itself on another bull rally.
Featured image of Admiral Markets, chart from TradingView.com