Some traders think that the price of Ether (ETH) may drop after it reached a whole new high on January 25, and rose nearly 100% in January. It surpassed Bitcoin (BTC) this year thanks to the growing number of Ethereum users.
Primarily due to the growing demand for DeFi, the Ethereum network has seen an increase in user activity and transaction volume.
It also greatly increased the popularity of the term “Ethereum” in Google Trends, surpassing the previous high since January 2018.
Ether declines to Bitcoin as BTC begins to rise
Ethereum price found an inverse relationship with Bitcoin last week. ETH / BTC rallied strongly against Bitcoin, reaching the highest level since September 2019.
But all too often, when bitcoin’s price rises, ETH pulls out and vice versa. Altcoins also underperformed as Bitcoin grew, indicating profits are flowing in and out of Bitcoin based on market sentiment.
If the market is more confident and attracted to high-risk bets, altcoins tend to rally, and bitcoins are being consolidated.
Therefore, when the market becomes focused on Bitcoin again, altcoins and ether usually consolidate as BTC sees an explosive uptrend.
Bitcoin exited its four-day range on January 25, accumulating more than 7% in the day. During the same period, the ETH / BTC pair is down around 4.9%.
Loma, a cryptocurrency trader, said the ETH price action indicated the drawdown is likely to confuse lagging buyers. He said:
“There is something about PA $ ETH telling me that we will be washing some broken ATH centers in the next few days.”
A trader expected a drop when ETH crossed $ 1,470, and the price of ETH has fallen by more than 5% since then.
The writing opportunities end soon
One of the variables that may influence the development of Ether’s price in the short term is the expiration of options.
The options expire around $ 400 million on January 29. Since it is likely that many traders will adjust their positions before expiration, ETH may face a significant increase in volatility.
Outlets could play for ETH or put pressure on it from sellers. If the ETH price falls sharply in the next few days and pushes it towards the $ 800 level, that could lead to an intensification of the downtrend of ETH.
The term “maximum pain” in options refers to the price point at which most traders will suffer the largest losses.
ETH is unlikely to drop nearly 50% to $ 800 by Jan.29, especially given the momentum. However, due to the unique demand for ETH and the high volatility of the cryptocurrency, a small pre-maturity drawdown could have a negative effect on the short-term price cycle of ETH.
Even so, the fundamentals of ETH remain strong, according to analysts from Intotheblock. They wrote:
“# Ethereum’s price today surpassed new ATH to $ 1,475. We wrote Friday about several reasons why we are optimistic about the ETH dollar, including: – Growing shortages of offerings – Rapid growth in DeFi through 2020 – Network adoption and growth.”