Ethereum continues to struggle after falling below $3,000. This price level was essential for the bulls to hold and since the bears dragged the price below, there has been a continuous display of dips and dips. For a cryptocurrency like Ethereum, there are resistance and support levels which are very important for the digital asset. One of these support levels is just above $2,500.
So far, the digital asset has managed to hold above this point. This shows that the bulls are mounting significant support. However, with momentum waning and selling pressure mounting, it remains fragile at this point. For Ethereum to maintain some semblance of equilibrium towards a bullish rally, it needs to beat its next point of resistance. It now sits above $2,600, but what is the price doing?
The 50-day SMA continues to resist
In the short term, there are important steps that Ethereum must take to ensure an uptrend. One of them is the 50-day simple moving average. This shows the average where investors bought the cryptocurrency over the past two weeks. A position above or below this SMA always indicates whether investors are ready to continue buying the coins at a certain price or whether they have pulled back.
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For Ethereum, it had mostly been trading above this 50-day SMA for most of 2021. However, the new year would prove more daunting than expected as crashes rocked the market. This has seen Ethereum decline alongside the rest of the market. But more importantly, ETH fell so much that it started trading below the 50-day SMA.
This puts the short-term digital asset at a disadvantage as investors are no longer willing to buy at the average price they have been charging for the past few weeks. Sitting at $2,574, Ethereum is well below the 50-day average of $2,891.
ETH falls below 50-day SMA | Source: ETHUSD on TradingView.com
Falling below this SMA doesn’t necessarily mean a long-term downtrend, but in the short term, the 50-day SMA paints a pretty bleak picture for the digital asset. Combined with the fact that ETH also fell below its 20-day SMA, it looks like this downtrend period may continue.
But can Ethereum bounce back?
Current trends indicate what can be assumed to be the early stages of another prolonged bull market, but it won’t be the first time investors have been caught in a bearish trap before. If so, Ethereum may not be done with its rally yet. On the contrary, there could be another pump that could occur.
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Some of the longer bull rallies have been characterized by a long period of weak momentum, like the one the market is currently in. raise the value.
For ETH to do this, it would need to safely beat the next point of resistance at $2,654. After which, a solid week of trading above the 50-day SMA. If these are filled, then the digital asset may see itself on another bullish rally.
Featured image from Admiral Markets, chart from TradingView.com