The markets are profit-booking after a rally that took crypto prices to multi-month highs. Ethereum rallied more than 40% just in January 2023. Currently, more than 57% of ETH wallets are in profit. The 4-hour charts are neutral, whereas daily charts indicate further fall.
Santiment Says the Correction Is Healthy
Leading blockchain market intelligence firm Santiment has a positive outlook for this profit booking and market correction. They expect that this profit booking can help prices in the mid-term.
📉 #Ethereum fell back down to $1,527 on a market-wide dip. Forewarned by the massive profit taking transaction ratio spike on January 20th, this drop has $ETH being discussed in 21% of #crypto asset discussions. This #FUD could benefit prices mid-term. https://t.co/xc6IDJMgBj pic.twitter.com/A4TA7ZbP4J
— Santiment (@santimentfeed) January 25, 2023
Such observation might be the reason that minor corrections discourage risky players who are just driven by greed. Further, cooled-off prices can discourage panic selling. Moreover, investors are also eager to pocket some passive income.
Will the Current Profit Booking Continue?
The profit booking level is minor, considering a rally of about 40% in just under a month. Let us look at price analysis to discover some price trends. Let us consider the 4-hour chart to understand short-term trends (within a week) and the daily chart to understand medium-term trends (for 1-2 weeks).
Ethereum (ETH) Price Analysis (4-Hour Charts)
Under the 4-hour charts, Ethereum has broken strong support and has taken new support at $1,550. As long as this support continues, prices may bounce back soon. However, if the support of $1,550 is broken decisively, the crypto can move toward $1,511. On the upper side, if prices stabilize near $1,550, there can be a pullback toward $1,620.
Technical indicators show that an upward movement might be possible after a few days. The RSI is very close to oversold, but MACD has not shown any convergence yet(meeting the orange and blue lines). As soon as MACD converges with a rising RSI, Ethereum can be bought with a near-term target of $1,620.
Ethereum (ETH) Price Analysis: Daily Charts
On the daily charts, Ethereum is in the overbought region as per RSI. Further, the MACD’s negative convergence shows that there might be negative price action in the medium term. Daily chart data and indications precede due to a greater time frame.
Trade Setup
The chart with the greater timeframe dominates the lesser one. Hence, after analyzing the data from both charts, it can be concluded that Ethereum prices can fall in the near term.
Traders with a risk appetite can take a leveraged short trade which looks more promising.
Target: $1,511
Stoploss: $1,555, trail stoploss after $1,530
Trade Criteria: Ethereum moves below $1,545 and sustains.
Why Profit Booking Occurs?
As the name suggests, profit booking occurs when the markets move rapidly upward after recovering from a downward journey. Traders book profits to mitigate the risk of potential losses, whereas investors book profits to exit at prices that might not reoccur in the near future. Further, there is also an urge to cover past losses made during the bear market.
Profit booking in Ethereum can help you buy at good prices. Crypto is a quality asset and acts as a reserve currency for many other cryptocurrencies.
Usually, there is a level beyond which prices do not fall. This is known as a support level. If prices revert from a specific support level, it is known as strong support. Further, if crypto falls below this strong support, there might be a massive selloff very soon. Hence, it is a good opportunity for both Traders and Investors.
Disclaimer: Voice of crypto aims to deliver accurate and up-to-date information, but it will not be responsible for any missing facts or inaccurate information. Cryptocurrencies are highly volatile financial assets, so research and make your own financial decisions.
