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Shorting Ethereum (ETH) – Support and resistance levels

October 2, 2020 21:40
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eth, ethereum,

Many people find that Ethereum seems to be going back from a top of $490, and wonder where the resistance and support levels might be. Here, Stanko discuss shorting Ethereum from a technical perspective, and also bring along the case to go long in this cryptocurrency.

What is shorting Ethereum?

Shorting is a popular trade technique among numerous traders, gamblers, and individual investors. If you believe that the cryptocurrency Ethereum should go down, then you can apply modern short selling techniques to profit from the downfall.

After reaching a new yearly high of $490, the Ethereum surge was cut short, as the coin entered a free fall that took it to a new bottom of $320. Now, a recovery seems to be starting but there will be certainly lots of opportunities for shorting this cryptocurrency. The live cryptocurrency market is easily affected by unpredictable events and most traders are now taking advantage of declining needs. Ethereum presents a variety of opportunities that did not exist prior to its development but the price of Ethereum is extremely volatile.

Ethereum Icon

A description of Ethereum

Beyond a tradeable cryptocurrency, Ethereum is a decentralized platform that runs smart contracts. Ether is also used by application developers to pay for transaction fees and services on the Ethereum network. Crypto-markets are dominated by individual investors currently but the real growth driver will be institutional investments. It is very hard to measure the real fundamental value of this cryptocurrency and to predict where the price of Ethereum will go in the long-term but according to some analysts, Ethereum could reach a new all-time high in the coming years. The political atmosphere is also going to have a major impact on the cryptocurrency market in the long-term. In my opinion, there’s a very good reason to pay attention to it rather than Bitcoin: a lot of popular projects are launched using the Ethereum and this platform has big businesses’ attraction to its network. Ethereum uses Ether (ETH) as its token and it is important to say that ETH is the second-largest cryptocurrency in terms of market cap behind Bitcoin. The price of this cryptocurrency is correlated with the price of Bitcoin and when the price of Bitcoin drops that usually have a negative influence on the price of Ethereum.

How to short Ethereum (ETH)

Shorting the Ethereum is basically betting against the Ethereum and when you short the Ethereum you are expecting the price to go down instead of up. So you can make money when the price goes in the opposite direction and for those with great skill is a way to make some good money. One of the easiest ways to short Ethereum is through a margin trading platform. Many brokers allow this type of trading, with margin trades allowing for investors to “borrow” money from a broker in order to make a trade. It’s important to remember that there may be a leverage factor, which could either increase your profits or your losses. It’s not a good idea to hold a short position for long periods of time or to leave an open short position with no stop-loss order.

Many cryptocurrency exchanges allow margin trading at this stage, with Capital, AvaTrade, and Skilling as some of the most popular options. It is very hard to say which platform is the best because this depends on the experience, habits and preferences of each investor/trader.

Another way to short the Ethereum is to sell this cryptocurrency at a price you feel comfortable at, wait until the price drops, and buy the Ethereum again. Becoming profitable “by shorting the Ethereum” requires a strategic plan with short and long-term goals, when you will trade, the amount of capital, trading time frames. The favourite site among short sellers for Ethereum is called Skilling. It’s founded by technology focused Scandinavians, aiming to make a transparent, flexible and simple trading plattform.

Technical analysis of Ethereum

Ethereum graph
In only several days the price of this Ethereum has advanced from $311 above $365 and the next target could be around $400. The price of this crypto currently stands around $345 and at this value, the total market cap of Ethereum is around $38.30 billion. It is important to mention that Ethereum has a very big volume on the cryptocurrency market and the Ethereum trading volume indicates how many ETH are being bought and sold on specific exchanges.

On this chart (the period from October 2019), I marked major support and resistance levels that can help traders to understand where the price could move. The more often price tests a level of resistance or support without breaking it, the stronger the area of resistance or support is. When the price passes through the resistance, that resistance could potentially become support. Ethereum remains in the „neutral- bullish phase“ and if the price advances $400 the next resistance could be located around $450. The current support level is $350 and if the price breaks this level it would be a “SELL” signal and we have the open way to $320 and $300 to the pleasure of those looking to go short in Ethereum. If the price drops below $300 which represents very strong support, the next target could be located around $250.

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Conclusion
The price of Ethereum will probably strengthen even more in the upcoming weeks but despite this, there will be certainly lots of opportunities for shorting this cryptocurrency. It is very hard to measure the real fundamental value of this cryptocurrency and to predict where the price of Ethereum will go in the long-term but according to some analysts, Ethereum could reach a new all-time high in the coming years. The price of this cryptocurrency is correlated with the price of Bitcoin and when the price of Bitcoin drops that usually have a negative influence on the price of Ethereum. The current support level is $350 and if the price breaks this level it would be a “SELL” signal and we have the open way to $320 and $300. If the price drops below $300 which represents very strong support, the next target could be located around $250.