From the beginning of 2021 to the all-time high reached in November 2021, Ethereum (quotation ETH) earned a whopping 500%. Since that all-time high, Ethereum has now dropped by around 75%. It is currently trading at around $ 1.200, and there doesn't seem to be much hope for a quick rebound.
The WMA at 200 weeks
The 200-week moving average (WMA) serves as an indicator for determining the overall health of an asset. The idea is that if the asset is trading above the 200 WMA, conditions are considered favorable. When the asset falls below the WMA 200 trend line, times are considered difficult.
In Ethereum's history, it has dropped below 200 WMA only twice. This does not mean that Ethereum has rebounded rapidly from these levels. The first time Ethereum crossed the 200 WMA, it stayed there for nearly six months. It ultimately rose above the trend line for just a month and then retraced below the 200 WMA for about another four months, before returning above it in July 2020.
Today, Ethereum has met this trend line again. For the first time in nearly two years, Ethereum is on hand to drop below the WMA 200. As history has shown, Ethereum could certainly trade below this indicator for more than a time, but it is likely that from here onwards it does not go down too much.
This is more than likely a protracted process
But this represents a great buying opportunity for investors. Ethereum is likely to have short rallies where it flirts with the WMA 200, looking like it can turn this band from resistance to support.
For the time being, it might be plausible to think that a similar situation occurs to the one that occurred between July 2019 and July 2020, when Ethereum has been hovering around the WMA 200 for quite some time without making significant gains. This could be the perfect opportunity for investors to build a broader position in Ethereum.
Relative strength index
Another indicator that can be used to provide context is the Relative Strength Index (RSI). The RSI serves as a momentum indicator to measure whether the asset is overbought or oversold. Values above 70 indicate excess purchases and values below 30 indicate excess sales.
Currently, Ethereum's weekly RSI has just hit an all-time low of 27,27. The last time Ethereum approached these levels was at the end of 2018. Since that 2018 low, Ethereum has risen by more than 300%, rising from around $ 85 to nearly $ 315 in June 2019.
Continue without stopping
Current prices are more than humiliating, but Ethereum is still the second most important cryptocurrency. And for good reason. Without Ethereum, the cryptocurrency industry would likely not be in the condition it is in today. Decentralized Finance (DeFi) would never have had the success it has had if it weren't for Ethereum and its programmable smart contracts. These smart contracts allowed developers to create lending and lending platforms, DEX, tokens, NFTs, and so much more.
Yet Ethereum's dominance of the DeFi market hasn't changed. As of mid-June, Ethereum still supports nearly 65% of all DeFi.
These times can be tough for investors. But keeping perspective is key. Ethereum has a proven track record of providing real utility. Its smart contracts helped solidify DeFi's nascent economy. Without Ethereum, DeFi probably wouldn't exist.
Despite the current downward trend, these claims are still valid. Although Ethereum may slide further and will likely remain sideways for some time, a buying opportunity presents itself. Ethereum is not going anywhere anytime soon. Use this opportunity to gain additional exposure to prices that will look like a bargain in the years to come.