Ethereum catapulted higher on Tuesday, exploding higher overnight to reach up to the previous price ATH and officially grazing a new single-asset price ATH at $1,440. This is of course bullish as ETH has broken out not only to the upside but also up to and technically above the previous ATH in absolute price terms.
(January 19, 2021 8:30 PM EST)
Ethereum broke out to the upside on Tuesday, rallying to the previous ATH and setting a marginal new ATH based on absolute price. This comes following ETH setting a new Market Cap ATH last week as the total supply of ETH now vs January 2018 has increased quite a bit. As Bitcoin has shown in December, this could lead to a green wave higher as buyers pile on and FOMO is induced in emotion-driven retail traders who are having a real impact on financial markets these days. While Bitcoin trades sideways in a consolidation pattern, ETH appears to have untethered itself and is now rallying independently, perhaps in a catch-up rally as the ETH/BTC ratio appears to have found a bottom a few weeks ago and is now rallying to its first resistance level around 0.04.
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 is supported by the 50 Day EMA.
Resistance: With $1,400 seemingly behind us (nearly?) ETH should 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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