Bitcoin’s 30% Drop And Ethereum’s 20% Drop: The Charts

In most markets a 6-week sell-off of 30% might lead to a sense of lessened enthusiasm for those markets. Even 20% slippage might result in the intense asking of difficult questions about what’s next and how did we get here?

With cryptocurrency enthusiasts, however, it’s just another one of those slightly annoying dips designed (by their words) for more buying. The “hold on for dear life” sentiment seems to keep up the interest and keep down what would be a sense of deep concern, maybe even panic, in most other assets.

The price of Bitcoin peaked in early November at about $68,000. This morning, you could buy one for about $48,000. The price of Ethereum (or ether) in early November peaked at $4800 and now goes for about $3800. In the meantime, stocks like Procter and Gamble

keep hitting higher highs and few take notice.

The Bitcoin daily price chart looks like this:

You can see the negative divergence between price and momentum indicators (RSI, above the chart and MACD, below the chart) that took place from October to November. The sell-off that followed bottomed with that big red volume bar in early December.

Since then, the price of bitcoin has traded between the high of that bar and its low, up and down. While the 50-day moving average (the blue line) is now trending downward, it looks as if the 200-day (the red line) is tending to provide support.

The weekly price chart for Bitcoin is here:

The negative divergence between the price action here and the momentum indicators is more serious on this chart because it represents more information over a longer period. Bitcoin’s price is holding at the up trending 50-week moving average. The cryptocurrency remains well above the 200-week moving average.

Ethereum’s daily price chart looks like this:

The negative divergence between price and momentum indicators appears on this chart as well, from the early September high to the early November peak. The 50-day moving average is now trending downward as well. Maybe the 200-day moving average is a downside target for this crypto?

Here’s the weekly Ethereum price chart:

The April/March highs were exceeded in early November but the negative divergences are clear on the RSI and MACD momentum measures above and below the price chart. Note how enormous the trading range is for just one year: between the summertime lows near 1750 and that November high up near 4750. On this weekly view, both significant moving averages continue to trend upward.

The words of securities regulators may be having an negative effect on these cryptocurrencies. It may also be that the allure of something new and exciting in the investment world has begun to wear off and fade a bit.

Not investment advice. For educational purposes only. Always consult with a registered investment advisor before making any decisions.