Investment idea: how to act in case of market uncertainty
A popular TradingView analyst evaluated the prospects of ETH cryptocurrency and told about profitable strategies to work with the asset
Ethereum (ETH) needs no introduction. The network successfully switched to the Proof-of-Stake (PoS) mining algorithm in the fall of 2022. The features of the transition are mostly positive: reduced power consumption and increased network throughput. More and more projects and startups choose the Ethereum network as a base.
However, there was no strong upward movement. Negative news around the FTX exchange is still keeping the cryptocurrency market under pressure. The price of ETH came to the uncertainty zone and forms an equilateral triangle.
For ease of calculation, let's take the margin of error of all prices at $10. The technical analysis figure on the chart is an equilateral triangle (points A, B, C, D). The triangle has a height measured (purple rectangle) - traditionally it is the potential for movement when the price leaves the boundaries of the triangle. The breakthrough is expected after the price passes point D from left to right. That is, it is already necessary to keep an eye on the triangle boundaries.
Daily chart of BTC/USDT of exchange Binance. Data: TradingView
In classical technical analysis, an equilateral triangle is considered to be a figure of uncertainty. Volatility is gradually falling, and the range of price movement is getting lower. Therefore it is necessary to have a plan A and a plan B.
Plan A: Consider a triangle breakdown scenario (with negative news and fundamentals):
$1,200 is a very strong level. It is a round (psychological) level, a large POC, and 0.23% Fibonacci from the global high. When approaching it, the probability of an increase in trading volume and active struggle of buyers and sellers is high. I am inclined to the fact that the level will be held. Therefore, the logical conclusion: $1200 is a good support level for long-term investors, those who are waiting for the renewal of the historical maximum of $4,870.
The risks are that a breakdown of $1,200 from the top might take the price into a strong downward trend. Technically, a move lower opens support of $600, $400, and the $131 area. It is logical that when the price goes under $1,200, you should exclude new longs and cut the margin longs, opened earlier, as the price can fall another 88.55%. Likewise, $1,200 can be used for call options, which is a long position with margin, but without the risk of a "stop loss" due to strong volatility.
When playing the field of short positions, evaluate your trading skills. And with the right level of skill, pros can actively short ETH when it goes under $1,200. This will create additional pressure on its price. A short at breakdown of $1,200 is the way for very experienced traders. For everyone else, it is better to wait for a bottom and a bounce.
Plan B: Breakout of the triangle upwards (and positive news and fundamentals)
A breakup of the B-D line is a break-up of the triangle upside. A strong upward move without a deep correction is likely here. The targets of $2,462 are 0.5 Global Fibonacci. The second target at $3,000 is the circular level, 0.61 of the global Fibo and the height of the triangle. This is +82.27% of the triangle breakdown point.
In this case, it is recommended to actively gain a long position for both long-term investors and medium-term speculators. The general "bull run" principle may work here and there may be squeezes and gaps upwards due to active liquidity buying.
Where to put a stop? The benchmark is $1,200. I'm more inclined to the price going up. The best plan is to buy from $1,200 and go long with a target of $4,870 or higher. Stop loss at $600. Risk/profit: 1/5.5. (+302.49% without leverage)
The idea won't work if bitcoin (BTC) continues to update lows. This will crush the crypto market until the next halving, with increased pressure from regulators and government agencies represented by the SEC and others. The collapse of the FTX exchange has far-reaching implications and new circumstances may emerge in the investigation. In general, closer scrutiny of the crypto market may reveal problems that are now obvious only to "geeks" and not to the public. The emergence of a strong competitor or loss of competitive advantage in a niche market could also put negative pressure on the ETH price.
Because the investment horizon is about 420-460 days (waiting for bitcoin to halving), it makes sense to stack bought at $1200 "ether" to get additional income (on the average 10% to 30% per annum).
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