The prince of cryptos in perpetual distress! – The year 2022 has not been kind for the price of Ethereum (ETH). Precisely, it has just undergone the second bear run of its existence after that of 2018. But observing its evolution since March 2020, we are currently witnessing a drop of almost three quarters in its market capitalization since its last ATH in November 2021, after an exponential increase of more than 5,400%.
People who have invested at the top of the cycle will unfortunately heal their wounds for a long time. To the point that a majority of them no longer put a penny on cryptocurrencies. And so is life in the financial markets. Because they feed from hope to euphoria, then from anxiety to depression.
The monumental bloodbath that the prince of cryptos has just suffered obviously reflects the dark side of the cycle of a financial asset. And in this sense, would we have ticked all the negative emotion boxes of this bear run? If so, Ethereum would be done with its purge. Otherwise, new headwinds would await us so that traditional assets such as equity indices did not really falter at the same time.
To possibly answer these questions, let’s now look at the latest technical analysis of ETH prices. With the wish that cryptocurrency investors show realism to avoid false hopes.
Ethereum in weekly units – Tensions on the $1200
Ethereum has been hovering around $1200 since FTX collapsed. Especially since we have the feeling that bulls and bears would like to extend this status quo at least until the end of the year. History that the two camps come to their senses following a rather rough year 2022 both in terms of risk management and emotions.
The last weekly candle of the year 2022 does not seem determined to move the lines. Even if this week were to be eventful on the upside with a crossing of the descending line, this may not change the price position of ETH and the Chikou Span below the Ichimoku Cloud aka the Kumo.
Especially since the Tenkan and the Kijun, which are moving horizontally close to $1400, could also play their role of resistance to thwart a possible rebound. And since that would not smile on the bulls, the prince of cryptos has not been able to tame the Kijun since mid-January last in weekly units. This remains one of the unfavorable signals that have allowed the bears to have control of prices to date.
Assuming Ethereum prices stall below $1400 for good, we would be heading straight for the lows of the year not far from the $1000 support. But in a week where there would not traditionally be major events, it would not be excluded that the graphic situation of the prince of cryptos remains nailed around $1200.
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Ethereum in Daily Units – Prices on the upswing in the direction of Kumo?
In daily units, Ethereum alternates highs and lows around $1,200 now being above the Tenkan. So much so that we didn’t know if it was at support or resistance. For their part, the bulls would hope that the first option wins. Because this would trigger a price rebound towards the Kumo accompanied by a breakout beyond the Kijun and the descending line. However, the resistance at $1,400 near the upper boundary of the Ichimoku cloud, the Senkou Span B (SSB), could make it difficult to reach $1,700.
And if we go back to some previous market points of the prince of cryptos, it is clear that prices have been struggling to gain a foothold above the Kumo since the last wave of nightmarish declines last spring. What currently prevents to break the resistances, and thus to neutralize the bear run.
Assuming the $1,200 let go, we would sound the alarm. Firstly, ETH prices and the Chikou Span would sink below the Kumo. Especially if they reached $1000. And on the other hand, with a Tenkan and a Kijun which could fall again thanks to a downward volatile movement, we would abort an umpteenth crossing of the descending line with the fear of sinking the lowest of the year thereafter.
In summary, if I could momentarily comfort the bulls, Ethereum’s bear run since its last ATH in November 2021 would show signs of settling. And as proof, we are not seeing a break of the $1000 support so far. From there to hitting a definitive low point, the prince of cryptos would be well advised to break through the resistances of $1,400 and $1,700 so that the bulls can finally breathe. But it is still necessary that the uncertainties on the financial markets decrease in intensity! This is far from being the case, because advanced macroeconomic indicators would lean towards a recession.
A recession usually means a storm in the prices of risky asset classes. And to make matters worse, inflation might not decrease significantly for structural reasons. Thus, in my personal opinion (and this is only my opinion), a stagflationary era, unanticipated by economists, would gradually set in and put an end to a disinflationary super cycle that had been going on for more than four decades.
In which case, initially, Ethereum would risk reacting badly through its correlation to risk aversion and continuing on its 2022 momentum for a good part of 2023. But if this new monetary paradigm were to impose itself on the duration, The Merge (or the merger) could be of interest. Not only would an Ethereum, seeing its quantity increase with difficulty over time, be considered a rare asset. But even better, it would be an interesting alternative to protect against inflation that could continue during the 2020s.
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