Ethereum Update: Santa Rally Possibly in the Works

Ethereum (ETH/BTC) is down by over 77% from the 2018 high of 0.12282435 in February 2018. At that point, the market has plummeted so deeply that we’ve reached whale territory. Ethereum is trading at price levels where high roller wallets are on the move. On November 30 alone, more than half a billion dollars worth of Ethereum was transferred. Here are just a couple of transactions from that day:

Ethereum November 30 whale activity

No one knows for sure what’s happening behind the scenes. However, one can surmise that whales are buying Ethereum in bulk at current levels and are transferring significant amounts to other wallets for security purposes. If this is true, then we can say that Ethereum is very close to a short-term bottom at least. We looked at the charts and we arrived at the same conclusion.

In this article, we reveal why we believe that a possible Santa rally is in the works.   

Drop to Key Market Levels

If you want to find the market’s key levels, one way to do it is to find the area where the smart money accumulated. The magnanimity of smart money investors is both a strength and a weakness. They’re so big that they can control markets. However, they have a hard time hiding the levels at which they’re buying.

Weekly chart of ETH/BTC

A quick look at the weekly chart immediately shows that buying was at its peak when the market traded between 0.0095 and 0.028. When the market breached the top end of that range, volume suddenly became anemic.

This information alone tells us that whales will likely do two things when the market comes close to these levels. They will take the opportunity to buy more and at the same time, they might defend the top end of the range to protect their investments.

This is something that we already saw back on December 8, 2017 when Ethereum dropped to 0.0237. The failed swing low sparked a parabolic run that catapulted ETH/BTC to as high as 0.12282435. That’s a 418.25% growth in about a month.

Daily chart of ETH/BTC

If it happened before, it will likely happen again. That’s one of the core principles of technical analysis.

Confirm Before Entering

While the analysis looks sound, nothing is guaranteed in trading and investing. We can form expectations based on historical price action. However, if there’s anything that we’ve learned in this bear market is that the winds can change when you least expect them to.

Therefore, it is probably best to wait for further developments that support our bias. What we want to see is something similar to the December 2017 price action at these levels. For Santa to come, Ethereum must show the following:

  • a clear rejection of lower prices
  • a weekly close above 0.028
  • a retest of 0.028

The confluence of these three events increases the likelihood of a Christmas rally.

ETH/BTC possible Santa rally

Take note, many traders are also looking at the same levels to see how Ethereum will react. Thus if the three events mentioned above come to pass, ETH/BTC will very likely move fast. If you missed an opportunity to buy the retest of 0.028, there’s always another chance. Breach of 0.0375 resistance signals a range breakout and a market turning bullish in the short-term.

Bottom Line

ETH/BTC may be down big but this nosedive has taken the market to whale city. The drop to current levels may inspire a Christmas rally soon but first, the market must show clear bullish signals before Santa comes to town.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.