Some may believe if history is to repeat, there could be significant trouble ahead for Ethereum (CCC:ETH-USD) investors. But a visual survey of the ETH price chart shows some solid rhyming already and a nearby opportunity for bullish investors to profitably exploit the weeks, months and years that lay ahead. Let me explain.
Regardless of the asset class, from equities to debt markets, hard and soft commodities, real estate, art and others, bearish cycles are inevitable. So are the bullish chances left in their wake. And it’s happening today in ETH.
The pressure in Ethereum is of course, far from unique. Bitcoin (CCC:BTC-USD). XRP (CCC:XRP-USD). Dogecoin (CCC:DOGE-USD). From the largest to the most laughable, cryptocurrencies encompassing digital coins and tokens of all varieties and today numbering somewhere in the vicinity of 9,000, are in the midst of punishing corrections. And for good reasons too.
Pressure Mounts on Ethereum
Many will point blameful fingers at China, Turkey, US, India and other global regulators. Their refusal over the last couple months to play ball or call for a time out in the early innings of a new decentralized finance (or DeFi) market have been front page news alongside the corrections facing ETH investors and their crypto comrades in arms.
But today’s painful cycle in ETH could be as simple as going back to the 9,000 or so other reasons.
The proliferation of tokens and digital coins entering the market alongside ETH and a handful of more established cryptocurrencies is concerning. Worse, many of those entering the DeFi market are less-than-altruistic or promising assets and whose only utility is seemingly to exploit a red-hot market. That’s not unique either.
From the great tulip or South Sea bubbles of centuries past to more modern challenging crisis in Dotcoms, a housing-driven financial crisis, pot stocks or SPACs, we know how those overly bullish cycles turned out. An abundance of pledged forever holdings turned into worthless assets or continue to work their way toward that ignominious end game. And in cryptos right now, this time is no different.
Vehicles for Trading
For most of us, today’s utility for digital coins, including ETH, remains as trading vehicles. There is a bigger problem though. A great deal of that investment can be categorized as reckless speculation because a particular token is popular with Redditors, trending on Twitter (NYSE:TWTR) or there’s a cute meme promoting its value. Dogecoin!! That needs to change. But the crypto market isn’t forever doomed.
The good news is cryptocurrencies, some at least, have already been through a massive bubble. And today’s excessive speculation is further separating the wheat from the chaff. And in no uncertain terms the worst and best of what the crypto market offers is embodied by DOGE, a coin started and still largely a joke and ETH, DeFi’s most useful blockchain technology.
Just ask grounded and savvy billionaire businessman Mark Cuban looking for the next big thing in Ethereum. He credits ETH with cryptocurrency’s strongest functionality and smart contracts which will ultimately overshadow Bitcoin’s use. But if you’d rather, go ahead and have a good giggle alongside Tesla’s (NASDAQ:TSLA) Elon Musk and a wildly suspect Dogecoin token.
Ethereum Weekly Price Chart
Source: Charts by TradingView
If you’re going to take sides and vote with your hard-earned capital in Ethereum, undoubtedly and as some of ETH’s recent owners have come to experience, it’s still going to hurt at times. The challenges in ETH are no different than investors who owned Amazon (NASDAQ:AMZN) before there was Prime Now delivery, streaming and cloud services and the internet looked more like socksforjocks.com and other doomed ventures. But who’s laughing now, right?
The good news and today in ETH, the environment looks ripe for investors to take a discounted purchase in this cryptocurrency leader seriously.
Technically, ETH’s corrective bear phase has formed a pair of bullish weekly inside candlesticks following a massive testing candle of the contract’s 62% level tied to its March 2020 Covid bottom. Coupled with an oversold stochastics indicator on the cusp of a bullish crossover signal, a buy above the prior week’s high of $2890.60 looks extremely attractive for a classic buy-on-weakness entry that could go on to produce much more exclusive future returns.
On the date of publication, Chris Tyler holds (either directly or indirectly) positions Grayscale Bitcoin and Ethereum Trusts (GBTC and ETHE). The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Chris Tyler is a former floor-based, derivatives market maker on the American and Pacific exchanges. For additional market insights and related musings, follow Chris on Twitter @Options_CAT and StockTwits.