Like Bitcoin and other altcoins, Ethereum has been flirting with collapse over the past few weeks.
After a strong rejection at the $250 resistance, the cryptocurrency has found itself stuck in a consolidation that has seen ETH slide to $228 as of the time of this article’s writing.
Analysts say that this may be a precursor to a larger drop in the price of Ethereum, with a number of bearish technical signs for the cryptocurrency recently being observed.
ETHEREUM IS PREPARED TO RETRACE, ANALYSTS SAY
After rallying nearly 200% from March’s lows, analysts expect for Ethereum to undergo a retracement in the weeks and months ahead.
One analyst shared the chart below with the following comment, which was made in reference to his intent to short the leading cryptocurrency in the coming days:“This is exactly in line with what Renko tells me with a solid divergence already locked in for $ETH. Tired.”
Bearish Ethereum “Renko” candle chart shared by cryptocurrency trader Cold Blooded Shiller (@ColdBloodShill on Twitter). Chart from TradingView.com
The chart shows that a bearish divergence has formed between Ethereum’s price action on the 12-hour chart and a momentum indicator, suggesting bulls are losing strength.
Adding to the bearish sentiment, history suggests that the asset is on the verge of a six-month correction. As reported by Bitcoinist previously, an analyst noted that a pattern has formed where ETH rallies during the first six months of the year, then corrects lower during the latter half.
“If ETH follows its cycle this time then high of the year could be in & we’ve 6 month correction,” the analyst who shared the chart below wrote.
Ethereum price analysis by cryptocurrency trader ‘Edward Morra’ (@edwardsmorra_BTC on Twitter). The chart from TradingView.com
CAN DEFI CHANGE ETH’S FATE?
What can divert Ethereum from its bearish short-term fate is growth in the decentralized finance aspect of the crypto industry. That’s according to Vance Spencer, co-founder of Framework Ventures.
“ETH clearly up next for a rally after mainstream notices DeFi and uses ETH as a proxy for exposure, imvho (in my very honest opinion),” Spencer explained.
What he’s saying is that as DeFi continues to see adoption, mainstream investors will seek exposure to the trend through ETH. ETH is the cryptocurrency that is easiest to access and arguably core to all Ethereum-based finance apps.
Fortunately for the cryptocurrency’s bulls, DeFi is seeing growth.
Former Bloomberg journalist Camila Russo, who now operates an Ethereum-centric publication, noted that the past week has seen DeFi protocols explode in terms of adoption.
The value of tokens locked in Compound soared 300% while the total value of tokens locked in all of DeFi saw $400 million worth of growth, or 40%. This comes as DeFi has seen continued support by companies like Coinbase alongside venture capital companies.