Ethereum: How High Can It Fly?

While up to recently, Bitcoin (BTC) and ETH would pretty much move in unison, the former topped already on April 14 and is currently trading a the same price level it reached February 21. Meanwhile, ETH is 71% higher than on April 14 and gained almost 115% (!) since that same February date. Thus the two largest cryptocurrencies by market cap are heavily diverging. After running in parallel for many years, such divergence does not make my life any easier as an analyst. It means

  1. going back to the drawing board as all I can do is “anticipate, monitor, and adjust accordingly.”
  2. the more significant correction (50-70%) I anticipated in ETH has been postponed.

In my previous update, see here, I showed the monthly chart and how extremely overbought ETH had become on that time frame. But “overbought can always become more overbought” (the monthly RSI5 went from 98.7 then to 99.3 now), and, indeed, “in Bull markets upside surprises while downside disappoints.” I did not show the daily chart for ETH back then, but I would like to share it today.

Figure 1. ETH daily EWP count and technical indicators.

$2860 reached and exceeded by 45%, what gives?

Figure 1 above shows how I originally derived the $2700-2855 target zone. It was based on standard Fibonacci-extensions for a 5th wave (1.764 to 2.000x the length of the 1st wave, measured from the 2nd wave’s low). Given ETH topped right in the ideal Fib-based 3rd wave target zone/box mid-April, (red wave-iii), then bottom also right in the 4th wave Fib-based target zone/box a few days (red wave-iv) later, strongly and logically suggested the 5th wave would the top in the ideal Fib-based target zone too.

But no such luck, and ETH decided to present a very extended 5th wave. Thus, my work and method had it right two out of three times, which is about as good as it gets for us analysts. One can not get it right all the time.

Note, such extended waves can never be known beforehand. I only know they can happen, i.e., anticipate them, monitor for them, and if they occur, adjust according, which is what I am doing now. When 5th waves extend, it is even harder to forecast where they will top as then the sky is the limit. Will it end at the 3.0x wave-1 extension or the 4.0x or 5.0x extension? It is unknown. Accepting one’s analytical method has limitations provides the necessary humility and humbleness to remain objective.

Currently, this 5th wave is in an extension of an extension and can rally for another month to reach as high as $5-6K. It should now be wrapping up (orange) microwaves 3, 4, 5, to completed (grey) minute wave-v of (green) minor-3, followed by a minor-4 and -5 waves to ultimately achieve the important 3rd wave top I have been anticipating for some time.

Bottom line: The anticipated rally to the ideal target zone of $2700-2855 was completed in late April, but ETH presented us with a very extended 5th wave as it has so far added another 50% since. Meanwhile, BTC has done nothing. It is hard to know where precisely an extended 5th wave will top, but a rally for another month to $5-6K cannot be excluded. ETH will need to see at least four consecutive down days or drop below $2644, with a severe warning on a close below $3185, to tell us the dreaded 50-70% haircut is underway. And make no mistake, it will happen as nothing goes up forever.

For a look at all of today’s economic events, check out our economic calendar.