Disclaimer: The conclusions of the following analysis are the sole opinion of the author and should not be considered investment advice
Ethereum was in a steady downtrend and has remained so since April. The selling pressure is so intense that even long-term investors who had not sold ETH in a year were forced to sell. What was the most likely path for ETH on the price chart?
Since May 12, the USDT dominance metric has been falling. It fell from 6.75% on the day to 6.05% as of press time. This development suggested that people who owned Tether had deployed their capital.
Market participants who previously ran into stablecoins have now started entering the crypto markets once again, suggesting that some of the fears of the past few weeks may be allayed.
ETH – 1 day chart
In late March, the previously bearish market structure was broken and ETH teased on a bullish bias. However, as April began, ETH was forced to drop below the $3000 mark, highlighting the strength of the bears. Moreover, the previous lows of $2200 and $2500 respectively in January and February were both broken in recent weeks.
The $1750-$1950 area (cyan box) represents an area of demand that Ethereum rallied strongly from July and August 2021. However, as things stand, a rally was not yet evident.
For a start, a bullish engulfing candle can be a sign of strong buying. A move above $2150 would not imply that the market was bullish on the longer time frame, but it would indicate that $2350 could be seen again before a further downside move.
argument
The RSI remained below neutral 50 to show a bearish trend in progress. However, the RSI is forming higher lows in the recent days and it could develop into a bullish divergence if ETH breaks below the $1890 mark.
The DMI also showed a strong decline in progress, with the ADX (yellow) and -DI (red) both above 20 points. The CMF was well below the -0.05 mark in recent weeks and indicated heavy capital inflows from the market. The OBV was in line with the bearish sentiment as it witnessed a steep decline in the month of May.
conclusion
A decline below $1900 could consolidate a bullish divergence on the daily chart. A rally to $2000 and even $2200 is possible, in line with the demand zone on the higher time frame.
However, buyers will need to be wary of a dive below the $1800 mark for Ethereum, as another wave of selling could be expected next week.