Break of 2200 support takes ETHUSD to 1550 levels

Ethereum quotes continue to move within the framework of the downtrend. Last week, the price broke through the level of 2200 from above, making the position of the bulls in the cryptocurrency market even worse. The next frontier where ETHUSD buyers could make a full-fledged rebound from is located another 17% lower, around the 1550 mark. This support level has performed well in 2023, but now the risks of testing it again increase.

Andre Cronje of Sonic Labs attributes Ethereum's drop in quotes to internal problems and growing competition from other blockchains. Solana, Tron and XRP offer users faster and more convenient solutions, while ETH undergoes difficulties. Due to their efficiency and availability, they are pulling developers away from Ethereum. With too slow improvements in scalability and high competition, Ethereum must innovate to maintain its position in the market.

According to DefiLlama, in February, trading volume involving ETH on exchanges fell by more than 40% to $18 billion.  At the same time, the revenue of the network itself collapsed by almost 90%, to $26 million. The reasons for this are lower commissions and lower user activity. The liquidity outflow from Ethereum ETFs last month amounted to $176 million, indicating a drop in the interest of major investors. 

Mike McGlone of Bloomberg Intelligence sees the decline in ETH capitalization as a direct consequence of changing trader behavior. In his opinion, cryptocurrencies are now moving in tandem with the US stock market. Growing uncertainty and risks of recession in the US economy are pushing investors to gold and other safe haven assets. As long as these pessimistic sentiments remain the dominant force, ETHUSD has little chance to rise above the level of 2000.

The RSI indicator on the weekly chart of ETHUSD is approaching the oversold zone, but so far without signs of a reversal signal formation. The bears target at 1550 can be reached within the current downside wave.

Consider the following trading strategy:

Sell ETHUSD at the current price. Take profit – 1550. Stop loss – 2200.