Ethereum rallied again this week, building off of last week's explosive move up and forming another higher high on the weekly chart to print ETH's highest price since mid-June. While it seems like the short-term downtrend from May is all but kaput, ETH will need to slice through resistance around $3K before we can start looking to new ATHs again.
(July 31, 2021 8:30 PM EST)
ETH is still above the 50 and 200 Week EMAs, meaning the long-term uptrend is well in-tact, and dips continue to be buying opportunities. There is still downside potential, however, as ETH remains tethered to BTC which is leading the recovery charge and back above $41K at the time of writing. A BTC pullback could drag ETH down, and a BTC rally could take some wind out of ETH's sails as BTC dominance breaks out to the upside.
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Overall, when you zoom out you can see clear as day that ETH is by all definitions in a bull market and long-term uptrend. Thus, it should be treated as such. With a deep mid-cycle correction now out of the way and improving fundamentals by the day, ETH should continue to recover and outperform BTC as it has by a nice margin YTD. If ETH breaks above $3,000, we could see a quick move to $4K, as there's little resistance in between the two price levels. If ETH falls back below $2,000, look for support at the 50 Week EMA and 100% fib retracement around $1,700.
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With EIP-1559 due to go live in early August, ETH is anticipated to become non-inflationary and possibly even deflationary, as well as capping gas fees, and a few other network upgrades. This could be a trigger for a rally as the crypto sees a supply shock similar to Bitcoin's halvings. ETH 2.0 is coming along smoothly and the official switch to Proof of Stake is scheduled for late 2021/early 2022. This is extremely bullish for ETH's price as if ETH2 can deliver what it's been in development for years for, it will become a truly scalable general purpose blockchain network that would make many TradFi companies, platforms, and technologies undeniably obsolete.
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ETH/BTC continues to consolidate around the 0.06 ETH/BTC level which has been support since the initial selloff in May. While it's impressively held thus far, I wouldn't be surprised to see ETH drop below to maybe 0.05 before bouncing and resuming the uptrend. Now that the short-term downtrend/selloff is all but over, BTC appears to be leading the pack in crypto, as it historically tends to do, which could suck a little capital out of ETH and into BTC for the time being. If that's not the case, then 0.06 may well be a good re-accumulation zone before ETH resumes higher as well.
