Since December 16, within one week, the Ethereum price surged from $83 to $138, by just over 66 percent.
Throughout the past week, Ethereum (ETH) has seen a record-high number of shorts on major cryptocurrency trading platforms in the likes of BitMEX and Bitfinex.
As the price of Ethereum surged amidst a strong corrective rally triggered by oversold conditions, short contracts were squeezed out, allowing the price of the asset to recover.
Although the Ethereum price has increased by 66 percent in a short period of time, it is still down 91 percent from its all-time high at $1,448.
In traditional markets, a 20 percent drop from an all-time high is considered a bear market. As such, even with a massive corrective rally, Ethereum and the rest of the cryptocurrency market are in a bear market and struggling to recover out of it.
A sudden breakout of major resistance levels can also leave an asset vulnerable to large drops in the short-term, especially if it cannot be sustained with high volume.
Hsaka, a cryptocurrency technical analyst, suggested that Ethereum is a better asset to short because of its high volatility and recent rally.
“Quite a substantial difference between the ETH and BTC structure. If you were betting on correlation remaining the same, and both reverting to structural equilibrium, $ETH seems to be the better play for shorts, and BTC for longs,” the analyst said.
Currently, a cryptocurrency trader with the online alias “The Crypto Dog” explained that Bitcoin is facing several major resistance levels in the range of $4,000 to $6,000 and until the dominant cryptocurrency breaks out of that range, it is difficult to call a bottom in the cryptocurrency market.
The trader said:
$4,000 – $4,500 is major resistance and we could stall out soon. It’s also possible this could go higher, but I do not think it goes much higher than $5,400, certainly not higher than $6,300.
In the second half of December, Bitcoin, Ethereum, Bitcoin Cash, Ripple, and many crypto assets experienced relatively large gains against the U.S. dollar.
An ideal scenario for the cryptocurrency market is a gradual increase in value from the current point to January of next year so that the market can enter 2019 with a positive sentiment.
Prior to Ethereum’s 66 percent rally, the Bitcoin Cash price tripled from $75 to $238, and the price of Bitcoin surged from $3,210 to $4,000.
Major crypto assets have been demonstrating strong daily volumes, with the daily volume of the crypto market surpassing $20 billion. As long as Bitcoin and Ethereum can sustain their volumes, small market cap cryptocurrencies are likely to follow the price trend of the two digital assets.
As Joseph Lubin, the co-founder of Ethereum, said:
I am calling the crypto bottom of 2018. This bottom is marked by an epic amount of fear, uncertainty, and doubt from our friends in the 4th and crypto-5th estates.
Featured Image from Shutterstock. Charts from TradingView.
Last modified: May 20, 2020 1:20 PM UTC