It’s been a volatile stretch here for cryptocurrencies. That goes for Ethereum (CCC:ETH-USD), but also for others like Shiba Inu (CCC:SHIB-USD) and Bitcoin (CCC:BTC-USD).
Volatility hasn’t necessarily been limited to cryptocurrencies. We’ve seen increased volatility reverberate throughout other assets, namely equities.
U.S. and global stocks have been swaying as investors juggle news of another coronavirus variant and as inflation rages higher. Cryptocurrencies were weakening heading into the first weekend of December.
However, between Dec. 3 and 4, the space really took a hit. Ethereum suffered a peak-to-trough decline of 16%, while Bitcoin fell 18%. Many others fell just as much or even more in some cases.
While the dip was short-lived, it was a stark reminder about the type of volatility this space can experience. As we talk about the price, let’s look at the charts.
Ethereum Sits on a Key Level
After roaring higher from the mid-summer lows, Ethereum peaked near $4,000 and pulled back in an “ABC” fashion. From there though, Ethereum erupted again, faulting through $4,000 and giving bulls a near-perfect tag of the 161.8% extension.
Readers of my Top Stock Trades column really cashed in on that trade.
In any regard, we’ve since seen Ether pull back and consolidate, mainly chopping between $3,900 as support and $4,500 as resistance. In early December, Ethereum’s push through $4,500 stalled near $4,775. That put a higher low on the chart.
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From here, the setup is pretty simple.
Ethereum bulls need to see it hold above $3,900. As it continues to teeter near this level, bulls are keeping a close eye on the price action.
On a move above $3,900, and then $4,000, puts the 10-week moving average on the table. Over this measure and Ethereum’s short- to intermediate-term moving averages are on the table. I mainly want to see it clear $4,500 though in the next few days, if possible.
Not only would that give us a potentially potent weekly-up rotation, but it would send Ethereum above all of its major daily moving averages. That puts the all-time high on the table near $4,875, then $5,000-plus.
On the flip side, a move below $3,900 puts the Dec. 11 low in play near $3,833. Below that and the 21-week moving average is in play, followed by the 200-day moving average and the December low at $3,470.
Is Ethereum Going to Last?
My answer to that question is yes.
To the dismay of traditional investors or those that are not bullish on digital currencies, I believe Ethereum will be here for the long haul. I think Bitcoin will too. We have countries like El Salvador moving to a Bitcoin currency.
Companies like Tesla (NASDAQ:TSLA), Block (NYSE:SQ) (formerly Square) and others are buying a massive amount of Bitcoin. It’s a way to diversify, while both of these leading cryptocurrencies act as a store of value. Long-term holders have seen the value of Ether and Bitcoin explode in recent years, despite the routine volatility in the space.
Think of what will happen to Ethereum when the first big company scoops some up.
Beyond corporate buyers and the stores of value, Ethereum and Bitcoin have practical applications as well. Regarding Ethereum specifically, it’s helping to fuel the NFT marketplace. It also allows for fast transactions (faster than Bitcoin!) and transferring funds. It also can work with smart contracts, which can unlock portions of funds when certain contractual obligations are met.
In short, I am bullish on the future of select digital currencies, with Ethereum being one of them. That said, these assets are prone to huge swings in price, and therefore I will put a huge emphasis on the technicals.
On the date of publication, Bret Kenwell did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Bret Kenwell is the manager and author of Future Blue Chips and is on Twitter @BretKenwell.
