Time To Pay Attention: Indicator Hints At 50% Or More Correction In Ethereum

Tony "The Bull" Severino

Last Updated: June 11, 2024 2:15 pm

3 mins read

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Ethereum has been outperforming most of the crypto market. It was also among the best-performing mainstream assets to invest in, with the $1,200 stimulus check. Those who did, more than doubled their money by putting it into the smart-contract-focused altcoin.

But it may now be “time to pay attention” as the creator of a popular technical analysis indicator, would say. The tool this wise trader and analyst created could be signaling that a between 50 and 70% drop in Ethereum is coming, according to how the tool is utilized.

Bollinger Bands Explained In Brief: Fast Facts On The Technical Analysis Tool

The Bollinger Bands are a technical analysis tool that is used to find support, resistance, gauge volatility, and act as a buy or sell signal. This extremely versatile tool is among the most popular tools among cryptocurrency analysts.

The tool itself was created by traditional market wiz John Bollinger. Bollinger, however, often watches cryptocurrencies and shares his commentary regarding Bitcoin and how it reacts with the indicator.

As someone who knows the tool inside and out, Bollinger regularly warns of “head fakes” or calls out when its “time to pay attention.”

Bollinger isn’t calling out one of those critical moments here, but that’s because he rarely comments on Ethereum. And its Ethereum that is exhibiting the ominous signal.

ETHUSD Weekly Bollinger Bands | Source: TradingView

Indicator Points To Between 50 and 70% Correction In Ethereum

Bollinger Bands are used all over the world of finance, not just crypto. But because cryptocurrencies are especially volatile, the volatility measuring tool can be especially handy.

When the tool squeezes, it means volatility is low and about to soon explode. When bands widen, it means volatility is highest.

As much as 90% of the price action takes place within the bands, so when assets close outside the bands, it is either a sign a reversal is near, or if supported by strong volume, strong continuation is likely.

When Ethereum first closed outside of the Bollinger Bands on its recent rally, volume helped carry the altcoin higher for three more consecutive weekly closes. The tide just recently started to turn on cryptocurrencies, just as the dollar began to rebound.

It has caused Ethereum to start to fall and is currently being supported by the upper Bollinger Band. Closing back inside the bands, likely means the rally is over, and significant downside will follow.

This scenario is one of the downsides of crypto assets growing so quickly – they correct even harder than most other assets. This is also why the Bollinger Bands are so helpful in cryptocurrency technical analysis.

In the past, Ethereum closing back inside the Bollinger Bands after a strong rally resulted in a between 50% and 70% crash (pictured above).

ETHUSD Weekly Bollinger Bands | Source: TradingView

A 50% fall from the current high, would take Ethereum back to around $240-250 to confirm the level as support. If the retracement happens to go deeper – as much as the higher end of the data – Ethereum could drop back to prices around $140.

That deep of a retracement at this point seems unlikely, but past corrections have resulted in as much. Ethereum’s all-time high, where the first major weekly close back within the Bollinger Bands took place, resulted in a more than 90% fall.

The 2019 top to Black Thursday, took Ethereum down 70% again. Will the third time be the charm and final fall before the bull market begins?

Tony "The Bull" Severino

Tony "The Bull" Severino, CMT, is a distinguished figure in the cryptocurrency analysis sector, renowned for his in-depth technical expertise and innovative approach to market trends. As the Head of Research at NewsBTC, Tony leads a team dedicated to providing cutting-edge insights and forecasts, helping both novice and experienced traders navigate the complexities of the crypto market.
A seasoned Chartered Market Technician, Tony's prowess in identifying and capitalizing on market patterns is unmatched. His academic and professional journey in market analysis has firmly established him as a leading authority in technical trading strategies. Tony’s approach is heavily influenced by the principles of Elliott Wave Theory, a method known for its rigorous assessment of investor psychology and price movements.

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Before his ascent in the financial analysis world, Tony honed his skills in journalism. His background in this field has endowed him with a unique ability to present intricate market dynamics in a clear and compelling manner, making his insights highly sought after by a broad audience that ranges from casual readers to professional traders.
His professional affiliations underscore his commitment to excellence and continuous learning. As a partner of Elliott Wave International and TradingView, Tony collaborates with other leading experts to enhance his knowledge and skills. His active membership in the CMT Association further aligns him with the highest standards of industry practices and ethics.

Tony’s nickname, "The Bull," aptly reflects his aggressive and optimistic outlook on the cryptocurrency markets. His forecasts often anticipate significant upturns, earning him a reputation for bullish predictions that have frequently led to lucrative outcomes for those who follow his advice.

In summary, Tony "The Bull" Severino, CMT, is more than just a technical analyst; he is a mentor, educator, and innovator whose influence in the cryptocurrency space continues to grow. His dedication to advancing the understanding of market forces and his commitment to providing high-quality, reliable analysis make him a pivotal figure in the world of cryptocurrency trading.

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