Ethereum’s Ether (ETH) token entered its “oversold” territory on June 12, for the first time since November 2018, according to its weekly Relative Strength Index (RSI).
This is the last time ETH was oversold in the weekly (not confirmed here yet).
I had no followers, but macro bottom ticked it.
Note, you can push way lower on weekly rsi, not trying to catch a bottom. https://t.co/kLCynTKTcS
— The Wolf Of All Streets (@scottmelker) June 12, 2022
This is the last time ETH was oversold in the weekly (not confirmed here yet).
It had no followers, but it marked the macro bottom.
Note, you can push much lower on the weekly RSI, not trying to catch a bottom.
ETH posts an oversold bounce
Traditional analysts consider an asset to be oversold when its RSI reading drops below 30. In addition, they also see the pullback as an opportunity to “buy the dip,” believing that an oversold signal would lead to a trend reversal.
Ether’s previous oversold reading came in the week ending November 12, 2018, which preceded a roughly 400% price rally, as shown below.
While past returns are not indicative of future trends, the RSI’s latest move below 30 raises the possibility that Ether will suffer a similar – if not just as strong – pullback in the future.
Suppose ETH posts an oversold bounce. So, the immediate challenge for the ETH/USD pair would be to reclaim its 200-week EMA (200-week EMA; the blue wave) near $1,620 as support.
If it does, the bulls could see an extended move higher towards the 50-week EMA (the red wave) above $2,700, an almost 100% rally from the current price.
If not, the Ether token could resume its downtrend, with $1,120 as the next target, a level that coincides with the token’s 0.782 Fib line, as shown in the chart below.
Macro Headwinds and a $650 Ether Price Target
The bullish outlook based on the RSI comes in the face of a flurry of headwinds, ranging from persistently higher inflation to a classic technical indicator with a bearish bias.
In detail, the price of Ether is down more than 20% in the last six days, with most of the losses occurring after June 10, when the US Department of Labor reported that inflation reached 8.6% in May, the highest since December 1981.
The rise in the consumer price index (CPI) reinforced fears among investors that it would force the Federal Reserve to raise interest rates more aggressively, while also reducing its $9 trillion balance sheet. This reduced appetite for riskier assets, hurting stocks, Bitcoin (BTC) and ETH.
Independent analyst Vince Prince fears that ETH’s latest decline will extend until the price reaches $650. At the core of his downside target is a giant “head and shoulders” setup – a classic bearish reversal pattern with a 85% success rate in meeting your profit goal, according to Samurai Trading Academy.
The massive head-and-shoulder formation forecasted earlier for #Ethereum has now been completely confirmed…
… USDETH is now headed towards the USD 650 USDT area!!! pic.twitter.com/R2KaqiorEd
— Vince Prince (@Vince_Prince_) June 12, 2022
Meanwhile, Glassnode’s top on-chain analyst, known by the pseudonym “Checkmate,” highlighted a potential DeFi token crash that could drag Ether’s price down further in 2022.
The analyst noted that the ratio between the market capitalization of Ethereum and the top three stablecoins grew to 80% on June 11.
Ratio is now at 80%
Market Cap of:#Ethereum = $181.58B
Top 3 Stablecoins = $144.28B
TVL in DeFi = $101.67BUSDETH at USD 1215 makes for equal Ethereum and Top 3 stablecoin market caps.The principle risk here is levered USDETH collateral in DeFi loans getting liquidated in a cascade https://t.co/26u0vXnMMY pic.twitter.com/q555clRaap
— _Checkɱate ⚡ (@_Checkmatey_) June 12, 2022
Since “most people borrow stablecoins” by providing ETH as collateral, the possibility of the Ethereum network becoming less valuable than higher dollar value tokens would make the value of the debt greater than the collateral itself. .
check mate he pointed:
“There are nuances, since not all stablecoins are borrowed, and not all are on Ethereum. But nevertheless, the risk of liquidations is much higher than it was three months ago.”
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