In a rapidly fluctuating digital currency market, Ethereum, a notable altcoin, has experienced a tumultuous journey. Despite reclaiming its foothold at the $2,000 mark earlier this week, recent inflation data in the US resulted in a sharp drop, pulling Ethereum’s price below this critical level. This drop has brought into light Ethereum’s struggle in recent months, even as other cryptocurrencies experienced a bullish trend. Notably, seasoned market analysts point at key indicators that hint at a potential turnaround for Ethereum.
Is a Comeback on Ethereum’s Radar?
Prominent Chartered Market Technician (CMT), Tony Severino, recently hinted at a possible recovery for Ethereum in his post on the X platform dated March 28. He highlighted a critical indicator for Ethereum that is currently mirroring the levels observed during the 2018 bear market.
Severino’s analysis draws upon changes in the 1-month Relative Strength Index (RSI) indicator visible on Ethereum’s monthly chart. A widely used momentum indicator in technical analysis, the RSI measures the speed and change of price movements of an asset. Employed to identify overbought or oversold conditions, the RSI can anticipate potential trend or price reversals. An RSI exceeding 70 often signifies overbought market conditions, while values below 30 indicate oversold conditions.
In his observation, Severino noted that Ethereum’s monthly RSI is matching the values seen during the bear market in 2018. Similar bottoming was also observed following the cryptocurrency market capitulation instances in May and November 2022.
Source: @tonythebullBTC on X
Historically, these RSI levels have been followed by a significant rebound in Ethereum’s price. Referencing the 2018 cycle, Ethereum witnessed an impressive 4,000% rise from approximately $120 to its maximum mark of $4,878 after it hit this RSI plateau. Similarly, in early 2024, Ethereum bounced back to its record-high price after reaching this RSI bottom in 2022. If past patterns hold true, Ethereum may be poised for another rise from its current position.
However, it’s important to note that the 2018 RSI bottom was preceded by a near-94% price drop from Ethereum’s all-time high during that period. Currently, Ethereum’s price is only about 56% adrift from its local high and 63% off its record peak. Therefore, whether Ethereum is at risk of further decline remains uncertain.
Ethereum’s Current Market Position
At the moment of this writing, Ethereum is trading at approximately $1,880, which represents a nearly 7% drop within the last 24 hours.
The price of ETH on the daily timeframe | Source: ETHUSDT chart on TradingView
Featured image from Unsplash, chart from TradingView
Frequently Asked Questions
Is Ethereum a promising investment?
Investing in Ethereum, like any other digital currency, comes with its degree of risk and potential. Although its scalable architecture and lower transaction fees have attracted attention, investors should consider market trends, development updates, and competitive standing before making a decision.
What role does the RSI play in cryptocurrency investment decisions?
The Relative Strength Index (RSI) is a key technical indicator used to estimate the momentum of price movements. It helps identify potential overbought or oversold conditions, enabling investors to anticipate possible price reversals and strategize their trades.
How did Ethereum perform during the previous RSI bottom?
In 2018, when the RSI indicated oversold conditions, Ethereum’s value surged by nearly 4,000%, reaching its all-time high from around $120. Similarly, a strong rebound followed the RSI bottom in 2022 as well. However, past performance doesn’t guarantee future results, so careful analysis is crucial.
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