A month and a half ago, Ethereum was hovering in the vicinity of $340 a coin. The bulls seemed unstoppable after lifting the price by over 320% in six months. Unfortunately, an invisible threat was brewing under the surface.
Instead of simply extrapolating the recent uptrend into the future, we thought it appropriate to take a look at the situation through the prism of the Elliott Wave principle. It presented us with not one but two possible outcomes. Both of them called for “at least a partial decline of 25% to 30% to around $250.” The more bearish of the two, published on June 26th, is given below to refresh your memory.
The 4-hour chart of ETHUSD revealed that the rally from $80.90 had a three-wave corrective structure. It was labeled (A)-(B)-(C), where wave (B) was an expanding flat and wave (C) was very extended.
According to the theory, once a correction is over the larger trend resumes. Since Ethereum was in a downtrend prior to this recovery, it made sense to expect a bearish reversal as soon as wave 5 of (C) ended. Even if we had labeled the sequence as (1)-(2)-(3) in anticipation of a complete five-wave impulse, a significant pullback in wave (4) to at least ~$250 was supposed to occur.
Ethereum Bears Smashed the Support near $250
20 days later, on July 16th, ETHUSD fell to $190. The second largest cryptocurrency lost almost 48% of its market cap in less than a month. Instead of trying to explain why this happened after the fact, Elliott Wave analysis put traders ahead of it.
Ethereum still hasn’t been able to recover from last month’s crash, trading around $210 as of this writing. Let’s see if the updated chart below can help us find out what lies ahead for ETHUSD.
The updated chart shows that Ethereum is on the verge of completing a five-wave impulse pattern to the south. The guideline of alternation has been taken into account, since wave 2 is a running flat, while wave 4 is a simple zigzag.
If this count is correct, wave 5 down is still missing. Once it reaches the $180-$170 area, the entire impulsive wave (1) will be complete. Then, we should expect a three-wave recovery in wave (2) before the downtrend can resume in wave (3).
Ethereum might appear cheap compared to its recent high and even cheaper in relation to its all-time record. However, judging from its charts, the possibility of ETHUSD falling even further must not be underestimated.
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