Ethereum Breaks Out Despite Strong Gains in the US Dollar

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Ethereum Breaks Out Despite Strong Gains in the US Dollar
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Ethereum prices are on the rise and poised to break out as momentum has turned positive. Later this year, Ethereum 2.0 is scheduled to be released providing users with higher transaction throughput and new security processes. The haven status of Ethereum has helped the cryptocurrency gain traction as the Wuhan coronavirus spreads and investors look for an alternative to fiat currencies. Despite a strong rally in the US dollar, Ethereum has continued to rise. ETH/EUR has crossed above the 200-euro per ETH mark, which had been a strong barrier in the past.

Ethereum 2.0

The next iteration of Ethereum which is the world’s leading smart contract blockchain is expected to be released at the beginning of the Q2 of 2020. The new smart contract cryptocurrency software is expected to increase transaction throughput and have a new security model under Proof-of-Stake (PoS). As a PoS network, coin holders are rewarded for pledging their coin holdings to protect and validate the network. 

There is also an audit taking place for the process of staking Ether, the coin that comes from the Ethereum network. Currently, the number of validators could run into the millions with one researcher claiming up to 10 percent of ether’s supply. 

How is the Coronavirus Effecting Ethereum?

The spread of the new coronavirus is creating a rush to haven currencies. The dollar has surged higher and investors are looking for alternatives to fiat currencies other than the US dollar. With few occurrences of the coronavirus in the US, the dollar has become the fiat currency of choice. This issue has also driven many investors into cryptocurrency which has helped Ethereum gain traction. Ethereum has outpaced the gains seen in the US dollar and has broken out to fresh 4-month highs despite the rally in the greenback.

Ethereum prices have gapped higher breaking out and poised to test 4-month highs. This comes despite a strong rally in the US dollar. A close above the $225 mark on the cryptocurrency would lead to a test of the June 2019 highs near 345. There appears to be strong support near the 20-day moving average on ETH/USD at 180. Additionally, there is support near the 50-day moving average t 155.

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Momentum on ETH is positive. The RSI (relative strength index) which is a momentum oscillator that measures accelerating and decelerating momentum as well as overbought and oversold readings, is surged higher. This reflects accelerating positive momentum. The only caveat is that the RSI is printing a reading of 80, which is above the overbought trigger level of 70 and could foreshadow a correction.

The fast stochastic, which is also a momentum oscillator, generated a crossover buy signal. The fast stochastic is also rising at a brisk pace which reflects accelerating positive momentum and points to higher prices. The only caveat here is that the fast stochastic is printing a reading of 93, well above the overbought trigger level of 80 which could foreshadow a correction.

Medium term momentum on ETH/USD is also positive. The MACD (moving average convergence divergence) is a momentum indicator that measures the change in multiple moving averages. The index recently generated a crossover buy signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses above the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram, which is a momentum indicator, also recently crossed above the zero-index line with is a buy signal. The MACD histogram is printing in the black with an upward sloping tractor which points to higher prices.