Ethereum has been getting hammered all summer. For most of 2018, Ethereum would closely follow Bitcoin’s trend. In the past month or so, we have seen a big divergence, and major relative weakness come into Ethereum. In the past month, for every 1% BTC drops, ETH has been dropping 2 or 3 percent. After hitting a high in the 1400’s this year, it is now trading at just under $200 a coin. We have seen an over 80% decline in the past 8 months in the second biggest crypto in the world:
This is not a situation to try to catch the falling knife. Many people are mistakenly thinking that ETH is getting too oversold and “has” to bounce. In all honesty, it looks like we covered too soon, and wants even lower. There is big money that is trying to get out, and they are not very patient. I thought we would get a decent sized bounce after testing the $200 support level, which held as support during the runup from last year. All we saw was a light bounce for a few hours, and then it continued to plunge into the 180’s.
Our ETH Short Trade
I knew the $250 support level was key. You can see on its daily how ETH’s downtrend had accelerated in the past few weeks. It was bear flagging nicely on the daily short, so it was on the top of my watchlist for short when it broke the $250 support level. I didn’t think it would break the support on the first test of it, so my plan was to get short in anticipation of the second test (below is a screenshot from the Cryptostreet Chatroom):
We got a huge flush on the break of that support level. It was starting to get very oversold so I decided to take off half of my position in the $220’s to play it safe. I then waited a few days for the next move lower. The selling pressure showed no signs of letting up. I covered the last half at $200, because it was a support area from last year.
In hindsight the two covers look dumb because it ended up going to the $180’s, but you never know how far these will go, and it was starting to get extremely oversold. If ETH continues to downtrend like this, it may see the low 100’s by the end of the year. Let the bottom pick itself, do not try to guess when it is still in the backside of the move. It is still possible to make decent money in the crypto markets, you just have be willing to learn how to short sell, and be very selective on the trades you take.
Kunal Desai is an American day trader (stocks and cryptos) and founder of Bulls on Wall Street and Bulls on Crypto Street, two online trading academies and informational publications. He has been featured in many high profile publications like Inc, Forbes, Buzzfeed, and Fortune. He has spoke at trading and business events all across the World.