The inevitable has happened. Ethereum’s ether, which has been on a downward slide since reaching a high of $1,424 on Jan. 13, entered a death cross yesterday as its price plummeted below $400. (See also: How to Short Ethereum.)
A death cross occurs when a security’s short-term moving average falls below its long-term average. For investors, it signals a sustained fall in the security’s prices over the short term. In practical terms, this translates to a sell-off in the security. Ether’s entry into a death cross follows that of bitcoin last month, after its price crashed below $8,000. Analysts had said that the original cryptocurrency’s death cross could turn into a “bear trap.”
But they are not making the same prognosis for ethereum. “It (ethereum’s death cross) should not be an undue cause of concern as the ominous-sounding signal is often followed by a rally (working often as a contrarian indicator),” writes Omkar Godbole from Coindesk. According to him, the crash in ether’s prices since Jan. 13 indicates that traders have already finished their sale of ether, and a sustained fall in its price may not be on the cards. Indeed, ether’s nadir of $368 last Friday was followed by a rally during which its price touched a high of $423 by Monday. An increase in prices has also succeeded the cryptocurrency’s bottom of $410 yesterday night. (See also: Is It Possible Ethereum Is Not a Bubble?)
Much also depends on trading volumes for ether. A high trading volume indicates low prices for a longer period. The good news for investors is that ether’s trading volumes have moved in lockstep with its price. At 16:16 UTC, ether was trading at $420.80, down 5.23% from its price 24 hours ago. On an overall basis, the cryptocurrency is down by 43.2% since the start of this year.
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