A flash crash in cryptocurrency markets pulled the price of Ethereum’s cryptocurrency – ether (ETH) – down by 22% to a near two-week low on 7 September. The move came after a strong rally over the summer lifted the coin by more than 133% from the July low.
Has the cryptocurrency entered a new downtrend? Or will Ethereum rise to take the price to new all-time highs above $4,000?
In this article, we look at the recent price volatility and the short-term outlook. Scroll down for Ethereum technical analysis from Capital.com’s chief market strategist, David Jones, that looks at possible trading positions.
ETH pulls back after coin burn drives rally
The collapse in cryptocurrency prices during the spring saw the Ethereum price trend turn lower and the coin shed about 60% of its value. It dropped to touch the $1,700 level in July from the all-time high above $4,362 reached in May. A clampdown on crypto mining in China and moves by regulators to prevent financial companies from offering cryptocurrencies to Chinese clients weighed on the market as a step back in achieving broad acceptance.
But since then, the markets have recovered, with ether briefly touching the $4,000 level on 3 September. Supply of ether has been shrinking since the London upgrade in August, as part of its transition to Ethereum 2.0 with changes to the way the blockchain operates. The upgrade introduced coin burning to the blockchain, which removes coins from circulation each time a transaction is processed.
A total of more than 261,000 ether coins, worth over $900m, have been burned since the upgrade, according to etherchain.org. For the first time, there were more ether coins burned than there were created on 3 September, a dynamic that could result in the coin becoming deflationary and support higher prices.
There has been a spike in interest in non-fungible tokens (NFTs), which run on the Ethereum blockchain and are processed and traded in ether coins, increasing Ethereum transactions.
Sales of NFTs reached a new seven-day record of $1.03bn in the week to 29 August, data from NonFungible shows. That was up from $274.89m in the week to 22 August. This reflected higher prices for NFTs, as the total number of sales peaked earlier at 193,693 on 16 August. Sales dropped to 73,154 on 22 August, before rising to 133,923 on 29 August.
The momentum from the rise in cryptocurrency prices has also attracted more buyers into the market, increasing demand for ether as an investment and further driving up the price.
But is this momentum sufficient to take the ether price back above the all-time high, or is it time to go short? The price dropped from a high of $3,968.43 on 6 September to a low of $3,062.22 on 7 September, subsequently bouncing up to trade in the middle of that range around $3,400.
Can it put in further gains?
Ethereum price analysis: what is the near-term outlook?
Check out this video in which Capital.com’s chief strategist David Jones reviews the ethereum price chart for a potential trade.
Jones’s ETH price analysis shows that there was bearish divergence on the relative strength index (RSI) ahead of the price drop, with the price moving higher while the RSI made lower highs, indicating the rally had started to run out of steam.
On 10 September, the short-term Ethereum price prediction from CoinCodex suggested that the coin could drop to $3,212.56 by 15 September. Technical analysis oscillators such as the average directional index, RSI and moving average convergence divergence (MACD) were neutral or bearish, with the price around $3,460. But the 50-day to 200-day simple and exponential moving averages were bullish.
There was resistance at $3,525.55 up to $3,673.74, with support at $3,377.37 down to $3,229.19, the data showed.
The upward price trend is likely to remain intact as long as the price holds above the $3,200 support level. That could see the price resume its rally up to the $4,000 level and beyond.
If ETH can break out through the previous all-time high, it could see another fresh burst of momentum for further gains.
The short-term prediction from algorithm-based forecaster WalletInvestor estimates the ETH price will rise over the next two weeks to trade at an average $3,827.54. It projects the average price will rise above $4,000 in October to reach a fresh all-time high of $4,614.74 at the end of the year.
Will Ethereum go up in the future?
UK-based investment bank Standard Chartered issued a cryptocurrency guide on 7 September in which it values ETH at $26,000-$35,000 if bitcoin (BTC) reaches $175,000, with the BTC/ETH rate doubling to 0.161 – at which level the market capitalisation for ether would catch up with bitcoin.
Analysts at the bank wrote: “A range of $26,000-$35,000 may appear high compared to the current ETH price (just below $4,000), but we think the current price reflects both the relative complexity of ETH (versus BTC) and the uncertainty around ETH’s development. In other words, while potential returns may be greater for ETH than for BTC, risks are also higher.
It’s important to keep in mind that cryptocurrency markets remain extremely volatile, making it difficult to accurately predict what a coin’s price will be in a few hours, and even harder to give long-term estimates. As such, analysts and online forecasting sites can get their predictions wrong.
We recommend that you always do your own research, and consider the latest market trends, news, technical and fundamental analysis, and expert opinion before making any investment decisions. And never invest more than you can afford to lose.
How to trade ETH with Capital.com
If you are looking to invest in ETH, you can buy it on cryptocurrency exchanges like Coinbase, Binance and Kraken, and store the coins in a secure software or hardware wallet.
Alternatively, you can trade the coin against a range of fiat currencies including the US dollar and euro, as well as against the world’s largest coin by market cap, BTC, using contracts for difference (CFDs) on Capital.com.
CFDs allow you to speculate on short-term price direction without having to buy and sell the actual coin. Trading CFDs offers the opportunity to try to benefit from both bullish and bearish price action. You can either open a long position, if you expect the ETH price to rise, or a short position, if you expect it to fall.
Ethereum to US Dollar - ETH/USD CFD
As a leveraged product, CFDs are designed to maximise gains, which can be large on volatile products such as cryptocurrencies. However, you should be aware that using leverage increases the size of the loss if the price moves against your position. Be sure to do your own research before investing your money.
Make sure you understand how CFDs work before you begin, and never invest money you cannot afford to lose. Learn more about cryptocurrency CFDs with our comprehensive guide. Create an account on Capital.com to stay on top of the latest Ethereum price news and analysis, and start trading the market’s second-largest coin today.