Consolidation of Liquid Cryptocurrencies Could Be the Lift the Market Needs


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Ethereum prices attempted to break out in February but ran into resistance near 290, and then retraced. The sharp move down might be thought of like a round of profit-taking, as prices appear to have held support levels and are consolidating. Liquidity in the cryptocurrency market remains robust, but a few places are beginning to reduce their offerings because of a lack of liquidity. The US dollar is finally beginning to weaken which could help put a floor under Ethereum prices.

If an effort to boost liquidity on the Bitfinex platform, the company has decided to consolidate its trading offerings and delist several cryptocurrency pairs, according to Coin Telegraph. Most of the pairs that will be delisted are cross cryptocurrency pairs. These are pairs that are not offset with fiat currency like the dollar or the Euro. Instead its cryptocurrency versus cryptocurrency. That list includes about 30 trading pairs including altcoins like OKEx token and Verge (XVG). Additionally, there are several Bitcoin cross currency pairs that the platform will delist.

Prices Are Consolidating

Prices attempted to break through a downward sloping trend line and for 12-trading days it appeared that ETH/USD was on its way to higher levels. Then the bottom dropped out and prices failed, dropping lower and consolidating in a tight range below former support now resistance near 255. Prices are capped near the 10-day moving average at 235 and have support near the 50-day moving average at 217. A break below the 50-day moving average would likely lead to a test of 2020 lows near 130.

Short term momentum on ETH/USD has turned positive. The fast stochastic, which is a momentum oscillator that measures accelerating and decelerating momentum, generated a crossover buy signal. This is when the oscillator crosses above a slower oscillator that measures a broader range of days. The crossover buy signal also occurred when the fast stochastic was in oversold territory. The default for the fast stochastic describes that reading below 20 is considered oversold while readings above 80 are considered overbought.

Medium-term momentum is beginning to decelerate. The MACD histogram, which is a momentum indicator that divides zero as the mid-point between buying and selling has peaked and is beginning to decelerate. The trajectory of the MACD histogram is declining and heading toward zero, which means that negative momentum is decelerating.

The consolidation of price action can best be described by the movements of the relative strength index (RSI). The RSI is a momentum oscillator that also measures accelerating and decelerating momentum with an index that oscillates between 1-100. Readings on the RSI below 30 are consolidated oversold while readings above 70 is considered overbought. The current reading on the RSI is 49, while is right in the middle of the neutral range and reflects consolidation.

Declining Yields Should Buoy Cryptocurrencies

If you are looking to trade Ethereum and want a catalyst that could drive prices, than declining US yields and a falling dollar could be what you are looking for. The dollar was benefiting from strong capital flows but that has been reversed with the arrival of the coronavirus on US shores. The rapid decline in the US 10-year yield to all-time lows breaking down to a low of 1.03%, has pushed the yield differential away from dollar assets, which punished the dollar. With cases of coronavirus continue to appear, its hard to see how the global economy will gain traction and avoid a recession.

The Weaker Dollar Could Buoy Ethereum

Since most of the Ethereum that is traded is versus the US dollar, a stronger dollar makes Ethereum more expensive in other currencies. The drop in the greenback has helped to buoy Ethereum and help it avoid falling through support levels.

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