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Ethereum Daily RSI Hits Third-Lowest Point in 5 Years – ETH Price Action During Similar Drops

Published
Valdrin Tahiri
Published
By Valdrin Tahiri
Edited by Peter Henn

Key Takeaways

  • Ethereum’s (ETH) daily RSI fell to 21 on August 5.
  • The price of ETH nearly reached $2,000 before bouncing.
  • How has Ethereum previously reacted to similar RSI readings?

The price of ETH fell for three consecutive weeks, at one point declining 40%. The downward movement culminated with a low of $2,111 on August 5, causing the daily RSI to fall to 21. This is the third-lowest RSI reading since 2019.

What does Ethereum’s RSI reading mean, and can the price close above $2,688 this week, negating its third successive bearish candlestick by doing so?

Ethereum’s Daily RSI Falls to 21

Ethereum’s price has fallen since its yearly high of $4,093 on March 12. It created lower highs in May and July and then accelerated its rate of decrease in August. On August 5, ETH fell to a low of $2,111, the lowest price since January 2. The price of ETH has bounced since and trades at $2,524 today.

Ethereum's Daily RSI
ETH/USDT Daily Chart | Credit: Valdrin Tahiri/TradingView

The daily RSI has been lower than 21 only twice (red line) in the past five years, in June 2022 and August 2023. Below, we will look at the Ethereum price movement after those RSI readings and use them to forecast the future price outlook.

How Did the Price React Before?

The two previous instances (white icons) where the daily RSI fell to 21 both followed large declines. The first instance followed a 75% drop while the second one followed 27% decrease.

After June 2022, the price of ETH never returned to the previous lows. Rather, it broke out from a descending resistance trend line, created a higher low in November, and resumed its ascent.

In August 2023, the price of Ethereum  returned to the previous lows twice, though it did not fall below them by a lot. Then, it began an upward movement in October, broke out from a resistance trend line, and continued to increase until it reached the yearly high of $4,093.

Ethereum Price Movement
ETH/USDT 2-Day Chart | Credit: Valdrin Tahiri/TradingView

So, both times Ethereum’s daily RSI indicator fell to 21 marking a local bottom. While the price did return to a similar level once, it did resume its upward movement shortly afterward and reached a new yearly high.

Ethereum’s Decline Raises Concerns

The weekly Ethereum chart concerns the bulls because of an unprecedented RSI reading that was not present in the previous bull run. More specifically, this is an RSI decline below 50 (black circle) after the indicator went into overbought territory.

The RSI did not fall below 50 between March 2020 and January 2022, all of the last cycle’s bull run. Nevertheless, it is worth mentioning that the RSI briefly fell below 50 in September 2023. So, the readings are not identical to the previous cycle’s bull run.

Ethereum Long-Term
ETH/USDT Weekly Chart | Credit: Valdrin Tahiri/TradingView

Also, the price of ETH bounced at a long-term ascending trend line that has supported the upward movement since the local lows of June 2022. Therefore, the upward trend is still intact based on the price action.

So, even though the RSI shows signs marked the beginning of the previous bear market, the decline could have been exacerbated by the trading firm’s Jump Trading sell-off. Therefore, it is considered a black swan event rather than a regular price decline.

Ethereum Prediction: Has the Price Bottomed?

Ethereum’s wave count is unclear after the August 5 decline. The drop caused wave four to cross into wave one territory, breaking Elliott Wave rules.

Because of this, the remaining bullish count implies the increase since July 2022 is part of an expanding diagonal. In this pattern, wave four can cross into wave one territory, and each increase is a three-wave structure.

If this is the case, the long lower wick (white icon) marked the bottom of wave four. A likely target for the top is at $5,295, created by the 1.61 external Fibonacci retracement of wave four. This would signify the end of the entire bullish trend.

Ethereum Future Movement
ETH/USDT 3-Day Chart | Credit: Valdrin Tahiri/TradingView

Because of the mixed signs, it is still unclear if this is the correct count and the price of ETH will continue to increase. Reclaiming the $2,850 resistance area will confirm the correction is over, while a breakdown from the long-term support trend line will instead suggest ETH is in a long-term downtrend.

Disclaimer: The information provided in this article is for informational purposes only. It is not intended to be, nor should it be construed as, financial advice. We do not make any warranties regarding the completeness, reliability, or accuracy of this information. All investments involve risk, and past performance does not guarantee future results. We recommend consulting a financial advisor before making any investment decisions.
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Valdrin Tahiri

Valdrin discovered cryptocurrencies while getting his MSc in Financial Markets from the Barcelona School of Economics in 2017. He has been an avid investor and trader since. Valdrin has written for several cryptocurrency media companies such as BeInCrypto and CoinGape.
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