Ethereum suffered a brief lapse in its recent ascent above $3,000, with a 7.92% sell-off from the historical level of resistance at $3,350.
If the world’s second-largest cryptocurrency can begin to establish support in the $2,900 region, it will likely provide a platform for continuation to the upside over the coming month.
At the time of writing it was trading at $3,060, which is just above the eight-hour 50 exponential moving average.
While Ethereum remains relatively strong on its own merit, its trajectory will depend on the direction of Bitcoin.
Bitcoin has stalled at the $48,000 mark this week with a plunge back to the $44,000 level of support following a period of tremendous upside pressure.
If Bitcoin can take out the $48,000 level on significant volume, Ethereum is expected to move up to at least $3,580 in the short term.
However, it’s worth noting that cryptocurrencies often fall victim to corrections of more than 30% regardless of market structure. This is caused by a build up in leveraged positions, in this case long positions.
Open interest on derivative exchanges for Bitcoin has risen from $10.6 billion to $13.8 billion in four weeks, indicating that a large portion of long positions have opened up above the $40,000 level.
It would not be unexpected for a long squeeze to play out, which would, in turn, cause Bitcoin and Ethereum both to slump back towards last month’s lows.
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Ethereum was launched by Vitalik Buterin on July 30 2015. He was a researcher and programmer working on Bitcoin Magazine and he initially wrote a whitepaper in 2013 describing Ethereum.
Buterin had proposed that Bitcoin needed a scripting language. He decided to develop a new platform with a more general scripting language when he couldn’t get buy in to his proposal.
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Disclaimer: The views and opinions expressed by the author should not be considered as financial advice. We do not give advice on financial products.
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