Ether Follows Bitcoin Into Death Cross Territory

The inevitable has happened. Ethereum’s ether, which has been on a downward slide since reaching a high of $1,424 on Jan. 13, entered a death cross yesterday as its price plummeted below $400. (See also: How to Short Ethereum.) 

A death cross occurs when a security’s short-term moving average falls below its long-term average. For investors, it signals a sustained fall in the security’s prices over the short term. In practical terms, this translates to a sell-off in the security. Ether’s entry into a death cross follows that of bitcoin last month, after its price crashed below $8,000. Analysts had said that the original cryptocurrency’s death cross could turn into a “bear trap.”

But they are not making the same prognosis for ethereum. “It (ethereum’s death cross) should not be an undue cause of concern as the ominous-sounding signal is often followed by a rally (working often as a contrarian indicator),” writes Omkar Godbole from Coindesk. According to him, the crash in ether’s prices since Jan. 13 indicates that traders have already finished their sale of ether, and a sustained fall in its price may not be on the cards. Indeed, ether’s nadir of $368 last Friday was followed by a rally during which its price touched a high of $423 by Monday. An increase in prices has also succeeded the cryptocurrency’s bottom of $410 yesterday night. (See also: Is It Possible Ethereum Is Not a Bubble?)

Much also depends on trading volumes for ether. A high trading volume indicates low prices for a longer period. The good news for investors is that ether’s trading volumes have moved in lockstep with its price. At 16:16 UTC, ether was trading at $420.80, down 5.23% from its price 24 hours ago. On an overall basis, the cryptocurrency is down by 43.2% since the start of this year. 

Investing in cryptocurrencies and other Initial Coin Offerings (“ICOs”) is highly risky and speculative, and this article is not a recommendation by Investopedia or the writer to invest in cryptocurrencies or other ICOs. Since each individual’s situation is unique, a qualified professional should always be consulted before making any financial decisions. Investopedia makes no representations or warranties as to the accuracy or timeliness of the information contained herein. As of the date this article was written, the author owns 0.01 bitcoin.
 

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