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Ethereum Faces a Steep Drop After Rallying to One-Year Highs: Indicator
Nick Chong | Aug 03, 2020 | 10:00
- Ethereum has seen extremely strong performance over the past two months, growing against the dollar and Bitcoin.
- Before the crash the other day, the price of ETH against the dollar hit $415. And against BTC, the price of ETH reached as high as 0.0347 — a more than one-year high.
- This extreme strength has been predicated on a number of fundamental trends, including the growth in DeFi and the imminent launch of ETH2.
- The leading cryptocurrency may see a drop against Bitcoin as per the Tom Demark Sequential, which printed a sell signal. The last time this indicator printed a sell signal, a four-day correction was seen.
- Certain analysts beg to differ, arguing that it may be ETH that outperforms Bitcoin early in this bull cycle. They cite fundamental developments around Ethereum and the asset’s market structure relative to BTC.
Ethereum Could See a Strong Retracement: TD Sequential
According to a Telegram channel tracking the Tom Demark Sequential, Ethereum is printing a reversal candle on its daily chart against Bitcoin.
The asset has formed a “Sell S-13” as per the sequential, which is a time-based indicator that prints “9” and “13” candles at inflection points in the trend of an asset.
Per the indicator, Ethereum will likely see a correction against Bitcoin in the days ahead. The indicator, importantly, doesn’t predict where the asset will retrace to.
Chart of Ethereum’s price action against Bitcoin over the past few weeks by a Telegram channel tracking the TD Sequential and its signals.
Chart from TradingView.com
Certain Analysts Beg to Differ
Chris Burniske, a partner at Placeholder Capital, is not convinced of the bearish sentiment about ETH/BTC.
The former ARK Invest crypto-asset analyst explained that ETH should naturally outperform Bitcoin due to its market structure:
“Since ETH is more illiquid & higher risk than BTC, it tends to overshoot BTC’s gains in a bull market, ultimately ending up higher than it started in ETHBTC terms… then allowing more BTC to be bought with ETH, and so the cycle continues.”
Since $ETH is more illiquid & higher risk than $BTC, it tends to overshoot $BTC's gains in a bull market, ultimately ending up higher than it started in $ETHBTC terms…
…then allowing more $BTC to be bought with $ETH, and so the cycle continues. pic.twitter.com/HhJDqLH2xG
— Chris Burniske (@cburniske) July 30, 2020
He added that with the recent strength in the price of Ethereum against Bitcoin, the two are “reinforcing each other in bull markets.” This means that “on a long time frame, ETH [is] being set up to continue to gain on BTC.”
This optimism about ETH has been echoed by Raoul Pal, a former Goldman Sachs head of hedge fund sales.
The investing veteran wrote earlier this year that he expects for ETH to outperform Bitcoin in this phase of the market. He shared the chart seen below, which indicates that ETH/BTC was then to see a breakout that favored Ethereum bulls.
Bloomberg chart of Ethereum to Bitcoin ratio shared by Raoul Pal
Pal confirmed late in July that he recently acquired exposure to Etherem for the first time ever. He has previously cited the development of the DeFi sector as a reason to be positive about the cryptocurrency.
Featured Image from Shutterstock Price tags: ethusd, ethbtc Charts from TradingView.com Ethereum Faces a Steep Drop After Rallying to One-Year Highs: Indicator
