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An analysis on the ETH price decline

I think ETH will break through the ~$1700 low first established on May 23rd. This low was first tested again on June 26th and again today, July 20th. The bearish trend is still intact, with lower consecutive highs since the peak on May 12th. How low it will go is anyone’s guess, but as long as the bearish trend is intact, the price will continue to go lower in my opinion.

Average trading volume across cryptocurrencies has also declined significantly over the past 2 months, indicating a declining “interest” in crypto, possibly from many retail and non-serious traders exiting the market since the big drop in May. The lower trading volume also coincides with lower Total Value Locked in liquidity pools across the board like Uniswap (don’t quote me on this, I just glanced over the numbers).

Overall, declining trading volumes would suggest that the prospect of a trend reversion into a bull run in the short-term seems to be unlikely. From my observation, price rallies generally need that catalyst in volume to support a sustained increase in price like we saw in in the beginning of 2021 up to mid May.

It’s important to put things into perspective. As of July 20, 2021 ETH is trading at $1700-$1750. Despite being 60% down from the 52 week high of $4380, ETH at current prices is still up +127% from $770 on January 1, 2021 and +645% from $235 on July 20, 2020. These are **massive** 6 month and 1 year returns.

A price decompression after bull rallies is standard occurrence in almost everything that has a price, be it crypto, commodities, or stocks. I didn’t use the term price correction because anything above a 10% drop is generally considered a bear market, not a correction.

I mentioned above that the bearish trend is still in tact, but I was talking in the context of a 3 month horizon. If you look at a 5 year, 10 year chart of ETH and other coins, the longer term trend definitely appears bullish.

However, we are here to make money, and trading is a game of timing. If you had bought near the peak of around $4000, then you may have to wait quite a while before your returns revert to back positive. “Quite a while” is anyone’s guess. It could be 6 months, 2 years, or 8 years, and that is if you believe that that long term prospects of ETH and cryptocurrencies remain positive in the “long-run”. Nothing is guaranteed. But then again, there is no reward without risk.

Sorry if this post sounds negative. Writing this helped me conclude my analysis as well. Sometimes writing definitely helps clarify thoughts. Hopefully some people find this helpful.

Disclaimer: The analysis provided above is entirely my opinion and does not constitute investment advice. Apologies in advance if some of the numbers or facts I mentioned turned out to be inaccurate.

What do you think?

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4 Comments

  1. Nice analysis. It’s been two months or more since the last ATH, and we’ve been at a gradual decline since then. Indeed, no one knows how low this thing could go or how long we’ll remain here. The only hopium right now is when you look at this from a long term perspective.

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