- ETHUSD bounces off one-month lows
- ETHUSD is still bearish despite the bounce back
- Russia sanctions are good for cryptocurrencies
The overall cryptocurrency market is in recovery mode heading into the weekend after a massive sell-off over the past few days. Ethereum is one of the heavily battered cryptocurrencies that is trying to bounce back after a recent drop to one-month lows.
ETHUSD technical analysis
ETHUSD slumped to a swing low of $2,301 on Thursday before bouncing back by 13%. Amid the bounce back, the pair remains susceptible to further losses given that the market has turned bearish and short-sellers are in control. A drop below the $3,000 psychological level affirms the bearish momentum, with short-sellers likely to come into the fold on any bounce back.
The chart above clearly shows that ETHUSD is trading inside a descending channel that kick-started a sell-off from all-time highs. Failure to find support above the $3,000 psychological level has left the second-largest cryptocurrency by market cap in a bearish mode.
After the recent bounce back above the $2,600, ETHUSD needs to find support above the $2,600 level to avert the risk of edging lower. A sell-off followed by a daily close below the $2,500 level could reignite renewed sell-off that could see the pair slumping to eight-month lows below $2,100.
Fuelling suggestions that short-sellers could eye new lows is that ETHUSD is trading below the 200-day Moving Average, affirming the bear case. The Relative Strength Index, RSI, another momentum indicator is trading below the 50, also signals strong bearish momentum, affirming possible further downside action.
Why did Ethereum bounce back?
Cryptocurrencies have been trading in tandem with the US stock market. Whenever benchmark indices rally, flagship cryptocurrencies led by Bitcoin and Ethereum have also followed queue rallying as well. US stocks ending slightly higher on Thursday also helped offer some support in the cryptocurrency market, all but fuelling demand for riskier assets.
The rally in the equity and cryptocurrency market came at the backdrop of the US president Joe Biden unveiling new harsh sanctions against Russia in response to the ongoing invasion in Ukraine. The new sanctions seek to impede Russia’s ability to do business in the world’s major currencies, along with sanctions targeting some of the country’s big banks and state-owned enterprises.
The tough sanctions are sending a loud message signaling the west is looking to do all it can to cripple the Russian economy and try to bring the situation under control.
Why sanctions could be good for cryptos
Russia being banned from using some of the world’s biggest currencies could be a big boost for cryptocurrencies which explains why Ethereum and Bitcoin rallied. Removal of Russia from the SWIFT payment network is more than expected to boost transaction volumes in cryptocurrencies in the near term.
Increased crypto usage is one factor that could accelerate its evolution into the mainstream sector, something that could see Ethereum and Bitcoin emerge as some of the biggest beneficiaries. The sanctions will more than boost the value of digital payment networks of which Ethereum is at the center.
While ETHUSD has turned bullish in the short term, the long-term outlook is uncertain. The escalating tension in Europe is one factor that will continue to trigger extreme levels of volatility in the sector. Therefore, the recent bounce back may be short-lived, and Ethereum could edge lower, given that the lower move started way before tensions between Russia and Ukraine escalated.
However, Russia is forced to turn to crypto use could be one factor that could improve sentiments in the sector resulting in a bounce-back following the recent sell-off.