Ethereum (ETH) bulls have reached a new level of optimism this year. The daily chart for ETHUSDLongs/ETHUSDShorts shows how the ratio has now reached another all-time high. This is all happening at a time when investors in this market are deeply divided. Proponents of a bull run believe that the market has already bottomed and it is time for the beginning of another cycle before Bitcoin’s upcoming halving. However, the bears seem unconvinced by this and expect the price to decline much lower once there is a large number of retail bulls trapped in an anticipation of a pre-halving rally. This level of optimism is unprecedented and thus increases the risks of Ethereum not having capitulated yet.
The global economy is in a slowdown. At a time when commodity prices particularly that of oil and gold are eyeing further downside, the bullish optimism of Ethereum bulls does not make much sense. However, in this market the vast majority of investors lay too much emphasis on fundamentals rather than technicals although we have seen how it ends many a time in the past. There was a lot of excitement about the Bakkt launch which to the surprise of the majority turned out to be a big bull trap. It is in the interest of the big players in this market to let the bullish euphoria run as high as it can. They want to let the bulls take the prices as high as possible while they help make that happen because they want to sell their bags at higher prices and get out.
There are a large number of reasons why the big players want out. First of all, the outlook of traditional financial markets is not in favor of cryptocurrencies especially altcoins. Second of all, this market has yet to see maximum pain as it has not capitulated just yet. Third of all, they worry about regulation in the near future that hurt the cryptocurrency market. Both the US and Europe seem very concerned about terror financing and the role of cryptocurrencies in it.
This is not surprising at all considering central banks now seriously fear that cryptocurrencies could disrupt the status quo and take over their roles. They can come up with all sorts of reasons to ban them or to make it more difficult to invest in them. The daily chart for ETH/USD shows that the price has faced a strong rejection at the 200 day-exponential moving average and is now expected to begin another downtrend. The $133.83 support will not be easy to break but that is what we expect to happen nonetheless. If ETH/USD declines below the 50-day moving average again, we can expect a decline down to $100 and potentially much lower in the weeks and months ahead.