Ethereum has been struggling to maintain above $2000 since April. It has been trading at around $1820 for almost four months now.
Coinbase Premium Index (CPI) has recently fallen into negative territory, indicating that Institutional investors in the US are losing interest.
Is this an indication that a sell-off is underway or is this an indication of something positive?
The Coinbase Premium Index on Cryptoquant measures the price difference between Coinbase’s BTCUSD pair and Binance’s BTCUSDT pair. As Coinbase Pro is considered an entry point for institutional investors in the U.S. it can be interpreted as a sign of what whales are doing.
If the value is in the positive territory and is high, it indicates that Coinbase whales are accumulating, while if the value is in the negative, it indicates that they are selling their coins.
On July 21, the Ethereum CPI fell into its negative territory and made continued falling down to August 4 when it reached -0.16. These levels were last seen in late November 2022. A minor recovery has been made since the start of August but it is still in the negative zone.
Comparatively, we see that the CPI was mostly negative when the price of Ethereum made a new price low. November 21 was the previous time we have seen these levels but from there, a new and sustainable uptrend started.
So can we potentially make a case for this metric to indicate positive price action ahead?
The price reached $2143 at its highest point on April 17 but shortly after fell to $1800 on April 26. April’s high has just barely made it past the prior one made in August 2022.
As the price reached a significant horizontal resistance zone, it is no wonder why it is struggling to keep up its upward momentum and instead has been moving sideways. Unlike the price of Bitcoin, which made a new lower low on 21 last year compared to June 18 last year, the price of ETH made a higher low in November.
This is why a higher high was expected than in August 2022, but the one that came in April was been very shy, barely making it above the horizontal resistance and quickly falling back down. However, the price is still in an ascending triangle from June 18, 2022, so this sideways move could be interpreted as a consolidation range before the price breaks the horizontal resistance.
In its bear cycle, ETH reached $880 at its lowest point on June 18, 2022. Considering that the price made a significant recovery from there, reaching $2000 in August the same year, there was a possibility that it could have marked the beginning of a bull cycle.
A downtrend that followed from August to November 2022, ended on a higher low after which the price increased again. This could be interpreted as bullish but the price increase from November to July this year hasn’t made a new higher high, or at least not by a significant difference.
Looking at the bear market wave structure we can see that since its start in May 2021, the price moved in four waves until now. If the increase seen from June 2022 – July 2023 is an ABC correction and the fourth wave from WXYXZ correction, then the final Z wave would now be expected to start.
This wave Z is in this case the final bear market move that is going to lead the price of Ethereum to a new bear market low, below June 18. The next significant support below the June 18 low of $880 is around $600 where we would expect that the price could potentially stop and bottom out.
There are some negative signs, but we still don’t have a clear validation of either scenario. Since the price is in an ascending triangle, it would be wise to wait for a breakout direction to assume the next dominant trend.
Ethereum is approaching triangles apex, and a breakout would be expected in the following days. If the ascending support level holds and the price bounces, it will most likely break out to the upside and continue for a new yearly high.
On the other hand, if the ascending support level gets broken, it could signal a larger descending move, potentially leading the price of Ethereum to the $600 zone.
Please note that the contents of this article are not financial or investing advice. The information provided in this article is the author’s opinion only and should not be considered as offering trading or investing recommendations. We do not make any warranties about the completeness, reliability and accuracy of this information. The cryptocurrency market suffers from high volatility and occasional arbitrary movements. Any investor, trader, or regular crypto users should research multiple viewpoints and be familiar with all local regulations before committing to an investment.