After hitting a 214-day low on August 12, the digital currency has defied expectations and embarked on an impressive journey upward. Moreover, this resurgence was accompanied by a rare and bullish divergence in the Relative Strength Index (RSI).
But what does all of this mean for the future of Ethereum's price? Let's break it down.
Ethereum's Rocky Path and The Bullish Turnaround
For months, Ethereum had been stuck in a descending parallel channel, which began back in April. This decline took it below the crucial $1,650 horizontal support level, eventually hitting a low of $1,521 on October 12 - the lowest price in over seven months. It seemed like Ethereum was in dire straits.
However, Ethereum's fortune took an unexpected turn. The key indicator to watch was the daily Ethereum RSI. RSI serves as a momentum indicator, helping traders assess whether an asset is overbought or oversold. If the RSI is above 50 and trending upwards, it favours the bulls; if it's below 50, the bears take the upper hand. And here's where it gets interesting.
A bullish divergence occurred when Ethereum's RSI reached an astonishingly low value of 18 on August 18. This divergence indicated that despite the price falling, momentum was increasing - a sign often interpreted as bullish. Such a low RSI value hadn't been seen since December 2018, which was a signal of a potential price bottom.
Rare as a Gem
Just how rare is this RSI signal? Well, an RSI value as low as 20 had only been witnessed during the crypto winter of December 2018. Even during the infamous ETH price crash in March 2020, RSI didn't reach such extreme lows. The only other time in Ethereum's history when the RSI exhibited bullish divergence in oversold territory was in December 2018, and after that, the price soared by an astounding 345%.
What's Next for Ethereum?
So, where does this leave Ethereum's price? Considering the RSI readings and the price action, the most likely prediction is a bullish one. The descending parallel channel is often seen as a corrective pattern, meaning a breakout is expected. The bullish divergence in the RSI might be the catalyst for such a breakout.
In the case of a breakout, Ethereum's price could potentially surge by 33%, reaching the $2,100 horizontal resistance area. But remember, the cryptocurrency world is notoriously unpredictable, so it's important to keep an eye on the market for further development.
Caution on the Horizon
While the Ethereum (ETH) price prediction is bullish, it's important to remain cautious in the unpredictable world of cryptocurrencies. As we've seen, the bullish divergence in the RSI has provided a glimmer of hope, but there are no guarantees. A breakdown from the descending parallel channel could potentially invalidate this divergence and throw a curveball into the mix.
In such a scenario, a 10% drop might be in the cards, taking Ethereum down to the next closest support area at $1,400. This is a reminder that the crypto market is highly volatile and can change course swiftly. So, investors and traders should be prepared for all possible outcomes, both positive and negative.
