The rally is not accompanied by any significant rise in trading volumes which may cause a trend reversal.
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The global crypto market’s capitalization has finally broken into the trillion dollar club to currently stand at $1.02 trillion. As the crypto market seems to be breathing a sigh of relief, top crypto assets have started witnessing weekly gains. Ethereum (ETH), in particular, saw its price rise by 40% from $1,000 on July 13 to over $1,400 on July 16. At the time of writing, ETH was trading close to $1,500, marked by a 10% daily gain and a 30% weekly gain. In today’s article, let us analyze if ETH is setting up for further bullish momentum or not.
The Anticipation Ahead of the Merge
One of the major reasons for the sudden surge in ETH’s prices is the buy momentum ahead of the most anticipated Merge upgrade. The developers announced last week that the Beacon Chain would merge with the Ethereum Mainnet on September 19. This event would entail Ethereum network’s transition from the energy-intensive proof-of-work to the more efficient proof-of-stake.
The Merge, along with the gas fees on the Ethereum network falling to significantly low levels, has caused the bullish reversal. Historically, too, we have witnessed ETH Prices skyrocket during times when gas fees reduce drastically. ETH’s all-time high of $4,890 was reached during one such phase when the gas fees had hit bottom levels.
Data from crypto analytic firm Santiment shows that 131 whales holding 1,000 to 100,000 ETH have returned to the network in the past 10 weeks. The on-chain metrics, accompanied by low gas fees, could soon cause ETH prices to rally to $2,000. But the Ethereum network has annualized 1.2 million ETH at an 85% burn rate, which may cause ETH prices to remain deflationary until the Merge.
ETH has overcome some crucial resistance levels in the past week, including the 50-day EMA. ETH has also broken out of its long-term trendline resistance forming since February. Its RSI stands at a robust 65.
ETH has successfully tackled the horizontal psychological resistance at $1,280 (the resistance line of the ascending triangle). However, the breakout hasn’t been accompanied by significant trading volumes, which may cause the momentum to weaken and may result in a fakeout.
<source: Binance, Tradingview>
ETH has outperformed Bitcoin, which has managed to gather just 8% weekly gains in the last week. The ETH/BTC pair has also witnessed a stark rise in value since July 13. It rose by over 26% in the next few days and currently stands at 0.067. The peak comes after ETH/BTC pair created a series of higher lows to finally spike to its current level, a little above .618 fib retracement.
<source: Binance, Tradingview>
Should investors practice caution?
The rally is not accompanied by any significant rise in trading volume, which may be another area of concern, and we may see the prices dipping once again. Also, since ETH seems to have broken out of an ascending channel 9as shown in the chart above), there are chances that the rally may be short-lived, and investors are advised to tread with caution.
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Disclaimer: This article was authored by Giottus Crypto Exchange as a part of a paid partnership with The News Minute. Crypto-asset or cryptocurrency investments are subject to market risks such as volatility and have no guaranteed returns. Please do your own research before investing and seek independent legal/financial advice if you are unsure about the investments.