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Ethereum

Ethereum Shows Red Flags Following 60% Rally

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Key Takeaways

  • Ethereum has gained over 1,200 points since Jul. 22.
  • Multiple indexes now anticipate a correction given the significant gains.
  • Transaction history shows that ETH’s downside potential might be capped at $2,770.

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Market participants have rushed to buy ETH following Ethereum’s much-anticipated London hardfork. Although prices have risen due to the growing demand, some technical and on-chain metrics suggest that a spike in profit-taking is underway. 

Sell Signals Appear for Ethereum

Despite the bullish momentum, Ethereum could be facing an imminent correction.

ETH has enjoyed an impressive run-up after breaking out of a descending triangle on Jul. 22. Since then, the second-largest cryptocurrency by market cap has surged by nearly 60% to reach a high of $3,200. Now that the projected target has been met, multiple red flags are beginning to pop up.

The Tom DeMark (TD) Sequential indicator has presented a sell signal on ETH’s daily chart. The bearish formation developed as a green nine candlestick, anticipating a one to four daily candlesticks correction or the beginning of a new downward countdown. 

Source: TradingView

Ethereum’s Market Value to Realized Value or MVRV adds credence to the pessimistic outlook. This on-chain metric quantifies the average profit or loss of all addresses that have purchased ETH within a specific period.

The 30-day MVRV ratio is currently hovering at 26.58%, suggesting that all addresses that have bought ETH in the past 30 days sit at an average profit of 26.58%. According to behavior analytics platform Santiment, the higher the MVRV ratio, “the higher the risk that Ethereum holders will begin to sell and reduce their exposure.”

Source: Santiment

Given the significant unrealized profits among ETH holders, Ethereum is currently in a danger zone. Historical trends indicate that a spike in profit-taking may be underway, translating into a short-term correction.

Ethereum Sits on Top of Stable Support

IntoTheBlock’s In/Out of the Money Around Price (IOMAP) model reveals that Ethereum is sitting on top of multiple demand barriers that could prevent it from a sudden downswing. 

The first significant interest area is between $2,960 and $3,050, where nearly 320,000 addresses have previously purchased over 1.4 million ETH. The second and most crucial support barrier lies between $2,670 and $2,860. Around this price point, more than 1.12 million addresses have acquired 2.63 million ETH. 

Such a critical support wall suggests that a spike in selling pressure could be short-lived as the bears may struggle to push prices down. 

Source: IntoTheBlock

On the other hand, the IOMAP model shows no supply barrier will prevent the second-largest cryptocurrency by market cap from advancing further. There is only one area of interest between $3,340 and $3,430, where over 360,000 addresses are holding nearly 390,000 ETH.

This supply zone may have the ability to absorb some of the recent buying pressure, but if ETH can slice through this hurdle, it could climb to $3,500.

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Bitcoin

MicroStrategy and Bitcoin mining stocks rally as BTC price rebounds

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Bitcoin (BTC) price soared to a 3 month high at $46,293 after bulls confirmed that they intend to take full control of the market. While crypto traders might be in the green again and pro traders are looking to add larger leveraged positions, no every class of investors to obtain direct exposure to Bitcoin. 

For institutional investors, a fund administrator sets the rules for what percentage of the portfolio is invested in various asset classes and different companies have varying appetites for risk. Reasons investors may be piling into these assets versus simply holding BTC include the aforementioned restrictions and the regulatory uncertainty surrounding the purchase of Bitcoin directly.

Because of this, a number of entities are restricted from investing directly in Bitcoin and other cryptocurrencies but there are other ways to obtain exposure to the crypto sector. 

Companies that specialize in Bitcoin mining have also generated immense profits and a handful are listed and can be an off-set play for investors looking to gain some exposure to BTC in their stock portfolios. 

The recent miner crackdown in China has led to a more distributed mining network and prompted several rounds of fundraising and expansion for listed Bitcoin mining companies that could potentially benefit from the reshaping of Bitcoin’s global mining network that is likely to continue for years to come. Here’s a few listed companies that offer investors exposure to Bitcoin.

MicroStrategy’s bet on Bitcoin provides a boost

The software company MicroStrategy (MSTR) and its CEO Michael Saylor have become well known across the cryptocurrency sector for his wild support for Bitcoin as a store of value and the massive amount of BTC the company purchased in the last year.

Along with helping educate the world about the promise of Bitcoin and blockchain technology, MicroStrategy has amassed a Bitcoin portfolio in excess of 105,000 BTC in its treasury as a way to hedge against inflation.

As a result, MicroStrategy’s stock price has become somewhat correlated with the price performance of BTC and it has been observed moving in tandem with the top cryptocurrency.

MSTR/USD 1-day chart. Source: TradingView

As seen in the chart above, the price of MSTR reached a low of $474 on July 20, the same day as the low in Bitcoin, and has since increased 65% to trade at $781.

Bitcoin mining stocks soar

Listed companies that specialize in Bitcoin and cryptocurrency mining have also benefited from the price growth in BTC.

Perhaps the most well-known Bitcoin mining firm is Riot Blockchain, a company that operates warehouses full of ASIC miners to help process transactions on the network in return for BTC rewards.

RIOT/USD 4-hour chart. Source: TradingView

Since hitting a low at $23.86 on July 20, the price of RIOT has increased by 66% and reached an intraday high at $39.94 on Aug. 9.

Related: COIN price fails to impress as more crypto firms are eager to go public

Another company that focuses on Bitcoin mining as well as purchasing BTC with its treasury holdings is Marathon Digital Holdings (MARA).

MARA/USD 4-hour chart. Source: TradingView

Data from TradingView shows that after reaching a low of $20.52 on July 20, the price of MARA has rallied 83% to an intraday high of $37.77 on Aug. 6, making MARA the top-performing Bitcoin mining stock over the past two weeks.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.