We have seen Ethereum (ETH) surge to levels not seen before. It breached the $650 mark quite comfortably on December 12th, and subsequently $700 on December 13th. The surge was driven, to a substantial extent, by European banks’ trust in blockchain. The surge, however, appeared to have lost its steam by December 14th, and the second largest cryptocurrency (by market cap as on December 15th), reversed its trend. It’s now in its correction mode, leaving bargain hunters waiting for the next entry point.
Fibonacci Applied to Ethereum (ETH)
We did Fibonacci analysis on the closing price of Ethereum over the past month, to identify exit points for investors. The Fibonacci analysis is applied when there is a noticeable up-move or down-move in the prices of a security. When a security moves either upwards or downwards sharply, it usually tends to retrace to certain levels before its next move, giving the investor certain identifiable entry points. The Fibonacci analysis helps identify these re-tracement levels, which provide a good opportunity to enter new positions in the direction of the trend.
The Max Pullback Zone: Identified
Now, the most significant Fibonacci re-tracement level to watch for is 0.618 (equivalent to 61.8% of the Fibonacci up-move). This level tends to be the maximum pullback zone, before the security resumes its uptrend. We identified the peak and trough of the recent price rally for Ethereum; the peak is at $753.12 and the trough at $414.41. Hence, the re-tracement levels (23.6%, 38.2%, and 61.8%), as also identified in the chart above, come out to be $673.2, $623.7, and $543.8.
When Can You Enter?
So, after minor re-tracements in the downtrend at around $673.2 and $623.7, we expect a final re-tracement leading to the onset of a reversal in trend (from downtrend to uptrend) at $543.8, which coincides with 61.8% Fibonacci level.
All of the Fibonacci re-tracement levels serve as probable entry points as one expects to see a slight re-tracement (upward move, in this case) each time the level is reached. However, for bargain hunters looking out for the max drawdown level to enter ETH before the trend reverses to an uptrend from a slide, the $543.8 level remains critical.
Disclaimer: The opinion expressed above is based on Fibonacci analysis conducted on Ethereum’s (ETH) recent price surge. But, given that unpredictability and volatility is at its highest with this asset class (cryptocurrency), the price points calculated above remain mere estimates of future performance. One cannot guarantee that the cryptocurrency market will follow the Fibonacci way!