Relevance until 08:00 2022-08-04 UTC+2 The company does not provide investment advice and the analysis carried out does not guarantee any results. The market analysis published here is intended to increase your awareness, but not to provide instructions on how to complete a trade.
Crypto Industry News:
The development of the market for digital assets in the first half of 2022 proved to be extremely difficult for investors. During this period, Bitcoin (BTC) prices fell by 75% versus ATH and Ether (ETH) by more than 80%. June in particular was one of the worst months on record for these two assets:
Bitcoin fell -37.9%, its worst monthly result since 2011 when BTC prices were below $10.
Ether posted a -45.4% drop, its second-worst month ever, surpassed only by March, when the 2018 bear market opened. From early December 2021, capital will rotate in favor of BTC. This trend is also similar to the bear market of early 2018, which was followed by almost three years of relative BTC strength.
A key reason for ETH’s relative weakness is the huge deleveraging that has taken place in the decentralized finance (DeFi) sector. In many ways, this is a balanced and opposite bear market reaction to the sharp rise in debt over the last few years. Deleveraging is a situation where an overly inflated market is flushed out with leveraged positions, such as dynamic cryptocurrency price declines or appreciation.
The period commonly known as “DeFi Summer” began in October 2020 when the market went crazy for “yield farming”, i.e. generating monthly or annual interest linked to owning a chosen, decentralized asset. Since then, DeFi’s Total Locked Value (TVL) has exploded, increasing more than twentyfold in 2 years, going from $10.7 billion to over $253 billion. However, in the past 7 months, most TVLs have been forgiven and recovered. As a result, it fell 71.5% and lost $181 billion in value.
The drop in TVL is the result of both falling token prices and a reduction in overall financial leverage in the market. Both of these factors influenced the price of ETH as an asset, which is one of the main means of “entry” into the world of digital assets.
The EIP-1559 update rolled out last summer. It is a real-time combustion mechanism that surfaced with the London hard fork in August 2021. This mechanism was put in place to help stabilize the high gas rates the network is known for. The purpose of the combustion mechanism was to drain Ethereum. However, the high rate of emissions caused the network to move in a different direction.
On the other hand, the long-awaited “merge” Ethereum update is expected to reduce supply with EIP-1559 by burning ETH.
Technical Market Outlook:
The ETH/USD pair had made a fresh local high at the $1,783 level and then sharply reversed back towards the upper channel line after a brief distribution phase. Momentum is weak and negative but the recovery from oversold market conditions is evident leaving the outlook bullish and higher prices to be expected. The next target for bulls is seen at the $1,915 and $1,954 levels. The key short-term technical support is seen between the $1,255 – $1,281 levels.
Weekly Pivot Points:
WR3 – $1,747
WR2 – $1,717
WR1 – $1,702
Weekly Pivot – $1,687
WS1 – $1,673
WS2 – $1,657
WS3 – $1,628
Trade Outlook:
After Ethereum’s 13 consecutive weekly bearish candles, the downtrend might have ended at the $880 level. So far, every upside and rally attempt is used by market participants to sell Ethereum at a better price, so the downward pressure is still high, but the bulls had managed to boost ETH’s price by 103% so far. The next target for bulls is seen at $1,954.
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