Yesterday, the first exchange-traded fund based on bitcoin futures debuted on the NYSE. On the first day of trading, the ProShares Bitcoin Strategy ETF (NYSE:BITO) grew by more than 4%, while BTC itself gained 3.5%.
Now the leading cryptocurrency is supported by two factors: the status of an inflation hedging tool and the hype around the first-ever digital token futures fund (giving legitimacy to this asset class, which conservative investors viewed as a temporary “whim” of the market).
However, the exchange-traded fund increases the chances of crypto traders to “cash out” profits after successful trades.
At the same time, all the hype around bitcoin has pushed into the background the second largest cryptocurrency by market capitalization — Ethereum. Therefore, right now ETH may be undervalued, which provides the ETH/USD pair with opportunities for growth.
We believe that the technical picture on the daily and weekly charts supports this point of view.
ETH/USD – daily timeframe/USD – daily timeframe
Ether is trying to break out of the boundaries of the pennant, which is considered a continuation of the movement, since it was formed after a three-day rally. And although the model looks balanced (i.e. supply and demand are balanced), it may hide more complex behavior.
Bulls who were smart enough (or lucky enough) to take part in the three-day rally made a profit of 16%. This is an exceptionally good result for such a short period of time.
Consequently, they will want to lock in their profits, which involves selling ETH.
As a result, two things happen: demand decreases and supply increases. The fact of the pennant formation suggests that for every “bull” who fixes profits, there was a new buyer who bets on the further growth of the asset.
An upward breakdown of the figure will signal that the entire supply has been absorbed, and the bulls should offer higher prices if they want to buy the currency.
Please note that the three-day rally preceding the pennant followed an unsuccessful H&S reversal pattern, forcing traders to turn positions, giving momentum to the upward movement.
Moreover, the rally from the lows of September 21 takes place within the boundaries of the ascending channel, which is the product of a much larger H&S model that developed from August 7 to September 20. The pennant itself is located below the peak of September 3.
Only after everyone who wants to leave the market leaves it, the remaining players will be able to challenge the psychological barrier of $ 4,000.
Here is the conclusion that can be drawn from the analysis of the weekly chart.
Ethereum – weekly timeframe Ethereum – weekly timeframe
As you can see, after reaching a record peak in early May, Ethereum was trading within the boundaries of a huge converging triangle. While the symmetrical nature of the model suggests an equal determination of buyers and sellers, a more likely scenario is the continuation of the uptrend.
You can also notice that a fresh pennant has formed on the upper border of a symmetrical triangle. In fact, it allows the market to take a few steps back to gain speed before a new breakthrough to the border of the triangle.
Trading Strategies
Conservative traders should wait for an upward breakdown and overcoming the September peak; the subsequent correction should test the support of a new “bottom” from which it will be possible to open a long position.
Moderate traders will wait for a similar movement to minimize the stop loss.
Aggressive traders can buy before the breakdown, taking on the additional risk associated with trading without confirmation. Competent money management is the key to success.
