Relevance up to 08:00 2022-08-04 UTC+2 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade.
Crypto Industry News:
The performance of the digital asset market in the first half of 2022 turned out to be extremely difficult for investors. During this period, we saw Bitcoin (BTC) prices drop by 75% from ATH and Ether (ETH) by more than 80%. June in particular was one of the worst months on record for both of these assets:
Bitcoin fell -37.9%, its worst monthly result since 2011 when BTC prices were below $ 10.
Ether saw a decline of -45.4%, the second worst month ever, beaten only by March when the bear market opened in 2018. From the beginning of December 2021, the capital rotates in favor of BTC. This trend is also similar to the bear market in early 2018, which was followed by almost three years of relative BTC strength.
A major driver of the relative weakness of ETH is the enormous deleveraging that has occurred in the decentralized finance (DeFi) sector. In many respects, this is an even and opposite bear market reaction to the strong increase in leverage in recent years. Deleveraging is a situation in which an over-inflated market of leveraged positions is flushed out, for example by dynamic drops or increases in cryptocurrency prices.
The period commonly known as the «DeFi summer» began in October 2020, when the market went crazy about «yield farming», i.e. generating monthly or annual interest in connection with owning a selected, decentralized asset. Since then, DeFi’s Total Locked Value (TVL) has exploded, increasing more than 20fold in 2 years, rising from $ 10.7 billion to over $ 253 billion. However, in the last 7 months, most TVL has been deleveraged and rebounded. As a result, it fell 71.5% and lost $ 181 billion in value.
The decline in TVL is the result of both falling token prices and a reduction in the total financial leverage on the market. Both of these factors influenced the price of ETH as an asset which is one of the primary means of «entry» into the world of digital assets.
The EIP-1559 update was introduced last summer. It is a real-time combustion mechanism that appeared with the London Hard Fork in August 2021. This mechanism was introduced to help stabilize the high gas charges for which the network is known. The purpose of the combustion mechanism was to deflate Ethereum. However, the high emission rate prompted the network to move in a different direction.
On the other hand, the long-awaited «Merge» Ethereum update is expected to reduce supply with EIP-1559 by burning ETH.
Technical Market Outlook:
The ETH/USD pair had made a new local high at the level of $1,783 and then after a short period of distribution, reversed sharply towards the upper channel line again. The momentum is weak and negative, however the bounce from the oversold market conditions is clear, so the outlook remains bullish and higher prices should be expected. The next target for bulls is seen at the level of $1,915 and $1,954. The key short-term technical support is seen between the levels of $1,255 — $1,281.
Weekly Pivot Points:
WR3 — $1,747
WR2 — $1,717
WR1 — $1,702
Weekly Pivot — $1,687
WS1 — $1,673
WS2 — $1,657
WS3 — $1,628
After the 13 consecutive weekly down candles on Ethereum, the down trend might have been terminated at the level of $880. So far every bounce and attempt to rally is being used to sell Ethereum for a better price by the market participants, so the bearish pressure is still high, but the bulls had managed to increase the price of ETH by 103% so far. The next target for bulls is seen at the level of $1,954.