Ethereum Big Picture (22.02.2022)

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Coinmonks

5 min readFeb 22, 2022

A look on the daily Ethereum chart

Ethereum might be one of the crypto assets with the biggest potential, from a financial and technical aspect. There is defenitely lots of attention for Ethereum at the moment, and with the current technological changes, Ether might gain even more attention in the future.

The technical chart reflected that attention when carrying the price to an ATH in November 2021. But at the moment, Ether walks the narrow path between enduring a correction and suffering from a crash. Can we find out if we are in a crash yet?

The big picture

I like big picture analysis because it helps remembering where we came from and where we are today.

The primary trend

The long-term primary trend is an upward trend. This can be determined by looking at the higher-lows that follow each other and can be connected by drawing a trendline (grey circles):

Higher-lows on the Ethereum daily chart, connected by drawing a trendline

We’ve seen two big price drawbacks (60% and 53,60%) during this primary trend:

But as long as the price remains above the blue trendline, the current primary trend is intact.

The secondary trend

The secondary trend is a downtrend, because we can see a series of lower-lows, accompanied by lower-highs, on the chart (lower-lows marked by grey arrows):

Every security and asset can’t go up forever, so it is only a matter of time until the price starts a correction. Since the ATH in November 2021, the price declined from ~4870 to ~2170, or by roughly 54%.

The big question is: Is this still a healthy correction or are we already facing a crash?

Crash or correction?

According to Forbes directory, a crash is a decline of 10–20% from the last high. But the time this was written, I doubt that they had already Crypto assets on the radar, where high volatility and strong movements are quite common. A “correction” of 20% is something that is often considered as a dip in the Crypto world, and many traders and investors see those occasions as buying opportunities.

Currently, we are at more than 50% correction, so it’s a valid question if this has gone too far and it is actually a crash that we see.

It helps to zoom out again to determine the current status. Yes, there is a rapid decline, but as mentioned in the section about the primary trend, the chart still has valid higher-highs on the long term. The decline stopped at the blue trendline and bounced upwards, forming higher-lows during a tertiary trend (blue arrows):

Etherum chart showing the tertiary trend

But what some called the beginning of a recovery, turned out to be a bearish pull-back. After the second higher-low, the price failed to overcome the recent higher-high and stopped underneath it. Since then, we’ve seen 6 consecutive days of decline. It is now essential that this decline stops near or above the blue trendline and does not break though this level. As long as this is the cas,e the primary trend is intact and the big dump since the last ATH is a correction.

But if the price falls below this blue trendline, thus forming a lower-low on the big time frame, we might enter crash terretory and selling pressure might increase. There would still be hope, though, if the price stopped at the previous higher-low at ~1720 from July 2021.

What to look for if you want to enter a new trade or investment

At the moment, it is not clear yet if the price will go down further, so there is a huge risk when entering a trade or investment at the moment. It makes sense to check the chart for possible pro-cyclical signals. To determine relevant levels that must be reached for triggering such signals, we have to look at the chart again:

ETH/USD chart with important support and resistance areas

The grey bars mark areas of great importance, as they have acted as support and resistance in the past. The purple horizontal lines mark the current Fibonacci levels that are usually taken into account by many traders and investors around the world.

Looking at the recent chart patterns, price developments and the levels described above, it should be easy to determine two possible areas where going long could be considered as less risky than now (grey ellipses):

Ethereum: Possible entries for a long trade/investment

Those areas are:

Above 3410 USD
Above 4000 USd

With “above” I mean that the daily candle must close above those marks to trigger a pro-cyclical signal.

If the price reaches one of those regions, it does not mean that there is a guarantee for a next rally. It just means that if you wait with a long trade or investment until those signals are triggered, the risk of loosing money is lower than it is in the current situation.

Typically, pro-cyclical areas are zones where lots of money flows into the asset, and you could be someone riding that wave.

In the current situation, entering an anti-cyclical position would be tempting, but also very risky. There is no way of knowing if the price declines further, so number one priority should be protecting your money and not gambling on a quick rebound on the trendline again.

Not a financial advise. Act on your own risk.

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