Ethereum rallied a bit on Monday to start off the week, rallying up to the $1,300 before getting rejected and closing the daily candle around $1,250 for a green candle. Monday was a federal holiday in the US, Martin Luther King Jr. Day, so markets were closed and trading was very light around the world. We have to take today's rally with a grain of salt but we'll know tomorrow whether this rally holds any water or if it was false hope.
(January 18, 2021 8:30 PM EST)
Ethereum recovered about $100 on Monday amid thinly traded markets during the US holiday, continuing this short-term ascending channel to near the local high and ATH. It looks like our primary view that last week's recovery was an exhausted rally and a dead cat bounce that led to a rejection to form a double-top leading to another selloff... however if today's suspect bullish momentum continues into this week, then ETH could invalidate my view and press higher to the ATH. If ETH breaks above the ATH around $1,440, then I'll officially dismiss my short-term correction view and switch back to bullish.
Additionally, the ETH/BTC weekly chart below shows ETH rallying three weeks in a row from a long, multi-year bottom and a higher low printed in December 2020. In this three week span, ETH rallied from 0.025 to now 0.034 ETH/BTC, forming a higher high and breaking above the 50 Week EMA (red line). This is a bullish development as ETH appears to be more rangebound than BTC which looks very susceptible to a sustained correction. If ETH can hang on or rally further as BTC stalls or even drops, then we could see ETH/BTC rally to retest the 0.04 level again for the first time since late August 2020. 0.04 ETH/BTC likely correlates to a new ATH for ETH, and a breakout above 0.04 could run up to the next resistance level around 0.06 ETH/BTC, possibly propelling ETH well into the four-figures, maybe $3,000 - $4,000.
To add even more intrigue, a report recently found that exchanges are rapidly depleting their ETH reserves as demand for the second-largest cap crypto increases, with ETH reserves plunging 27% in the last week. Couple this with a more affordable asset for new investors entering the space, ETH2 well underway, and Grayscale ETH.E Fund being gobbled up by institutions, a perfect storm is brewing for a massive bull market for Ethereum.
I think the best strategy here is to buy the dips and even earn ETH wherever possible. Otherwise, DCA is the way to go. In all likelihood, last week was most likely "The Dip" we've been waiting for; it will likely take a while to resolve and could grind lower for a few weeks before finding a bottom. However, I think 2021 will be substantially better for crypto and ETH in particular, although ETH has outperformed BTC in 2020 so really it's no surprise there.
Support: Look for local support around $1,000. Below that, look for support at my primary support at the 50% fib around $830, which will soon be supported by the rising 50 Day EMA just below around $766.
Resistance: Near-term resistance looks to be around $1,300, just under the ATH around $1,400. If we can break above that, then ETH will look toward $1,500 and then $2,000. Longer-term, I think a $5,000 - $10,000 ETH by 2022 is not only realistic but likely given crypto's adoption, ETH 2.0's launch, and the fiat currencies' rampant inflation.
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