Long or Short Ethereum (ETH)? The Curse of Technical Analysis in Crypto

The path to the moon isn’t necessarily straight.

Ethereum can soar to $10k, perhaps even $40k—or tank to $1k--who knows?

What we know for sure is that the rally (or sell-off) won’t happen overnight or be in perpendicular lines.

In the finance world, unless something extraordinary happens, FOMO-inducing rallies don’t print out in bursts.

Needless to say, market-wreaking drops are typical, and subsequent losses can be devastating. It transpired in January 2015, when the SNB decided to adopt negative rates and remove its peg with the ECB. The resulting was unmitigated chaos.

Losses of such magnitude have also happened in crypto.

Turning back the clock, the bear market of 2018 is an example. For ETH, BTC, and ICO-token maximalists, it was humbling and scary. Ethereum prices tumbled from a record $1.4k to $80 for an over 90 percent drop.

Analysts celebrated the move saying the elimination of speculators from the equation allowed for normal price discovery. Four years later, Ethereum is stronger, trending at more than double 2018 peaks at around $2.9k.

Even still, Peter Brandt is not confident of the current state of Ethereum though he isn’t shorting. He recently picked out a head-and-shoulders pattern in the daily chart. Ordinarily, when this candlestick arrangement prints, it signals peaking prices. And indeed, the rally of July through to September 2021 is capped as ETH bulls appeared limited, exhausted even.

Peter Brandt @PeterLBrandt

I am NOT saying I believe it and I am saying I am not shorting it -- but like it or not if you own $ETH you will have to deal with it. This possible H&S exists, whether it is completed, fails or morphs, it exists. I am NOT a hater.

The pullback of September 7 was hinting, while the confirmation of September 20 threw ETH traders and holders into disarray. Out of this, Peter remains skeptical of ETH’s strength, predicting that the coin may post even deeper losses in the medium term. Despite his preview--and perhaps to prevent the backlash from permabulls always set for the moon--, Peter clarified that he wasn’t a hater but a neutral observer.

Indeed, prices printed lower lows as ETH broke below $3k to retest $2.8k—a critical support line previous resistance. Despite the deleverage and dump, ETH prices quickly snapped back to $2.9k. The result, at the time of writing, is a double bar bullish reversal pattern bouncing off from $2.8k.

And with this, Peter Brandt said the reversal of prices is already trapping bears.

Peter Brandt @PeterLBrandt

#Bear_Trap I have a strong suspicion that recent weakness, especially overnight, successfully washed out weak longs and might have trapped some bears. Of course subsequent price action would need to confirm this. $ETH

The technical analyst analyzes that the correction from around $3.6k and retracement from September 2021 highs “washed out weak longs” and might have trapped bears. However, even with his skew and support of ETH bulls, it is clear that prices pierced below the primary support line at $3k and even retested $2.8k.

The short to medium-term trajectory depends on subsequent price action, as the chartists say—and as expected. Only time is what Ethereum requires at this juncture.

Nonetheless, the inconsistency of Peter and the inability to confidently define the short-term trend calls into question the reliability of technical analysis in crypto trading.

Konang @Konang__

@PeterLBrandt trapped bears or H&S? make up your mind lol

Indeed, in regulated markets such as the stock exchange and pretty much every traditional market, chartists and technical analysts can provide guidance and satisfactorily back up their stance.

In Crypto and Ethereum’s case, the community is vicious and marked with tribalism. Of course, if Peter predicts doom and gloom for ETH, saying the coin would go to zero, the analyst might have to block mudslinging moonboys.

Therefore, reaffirming their skew and fanning the long bubble only seems to be the safest bet for Peter—a shield from needless insults—even though his prediction isn’t financial advice.

The technical analysis depends on mathematics and may or may not be lagging—depending on how analysis is done. Price action traders might enter or exit the market promptly, making money. Meanwhile, those relying on technical indicators could miss on opportunities, exposing themselves to market risks.

Since the assumption in technical analysis is that the market is efficient and history could repeat itself, it becomes even riskier in crypto because of its nascence, and well, the market remains under-regulated. That’s not forgetting the hype element—think Dogecoin or SHIBA-INU mania, for example—rendering technical analysis useless.

Ethereum is a six-year-old project and is still in development. Day and swing traders might get lucky from time to time, riding on short-term FOMO or FUD.

The real winners in Ethereum are HODLers. Those diamond hands who think short-and-medium term volatility count for nothing.

Which side do you pick?