Ethereum traders use a variety of tools to try to determine which direction the ETH market is likely to go next. These instruments can be roughly divided into indicators and chart patterns. When trying to forecast the Ethereum price, traders also try to identify key support and resistance levels, which can indicate when a downtrend is likely to slow and when an uptrend is likely to stop.
Ethereum Price Prediction Indicators
Moving averages are one of the most popular Ethereum price prediction tools. As the name suggests, a moving average presents the average closing price for ETH over a selected time frame, which is divided into a number of periods of the same length. For example, a 12-day simple moving average for ETH is a sum of ETH’s closing prices over the past 12 days which is then divided by 12.
In addition to the simple moving average (SMA), traders also use another type of moving average called the exponential moving average (EMA). The EMA gives more weight to more recent prices, and therefore reacts more quickly to recent price action.
50-day, 100-day and 200-day moving averages are some of the most used indicators in the crypto market to identify important resistance and support levels. If the ETH price moves above any of these averages, it is generally seen as a bullish sign for Ethereum. Conversely, a drop below a key moving average is usually a sign of weakness in the ETH market.
Traders also like to use the RSI and Fibonacci retracement level indicators to try to determine the future direction of the ETH price.
How to Read Ethereum Charts and Predict Price Movements?
Most traders use candlestick charts as they provide more information than a simple line chart. Traders can view candlesticks that represent the price action of Ethereum with different granularity – for example, you can choose a 5-minute candlestick chart for extremely short-term price action or choose a weekly candlestick chart to identify long-term trends. 1-hour, 4-hour and 1-day candlestick charts are some of the most popular.
Let’s use a 1-hour candlestick chart as an example of how this type of price chart gives us information about opening and closing prices. The chart is divided into “candles” that give us information about Ethereum’s price action in 1-hour chunks. Each candlestick will display ETH’s opening price, closing price, as well as the highest and lowest prices Ethereum has reached within the 1-hour period.
It is also important to pay attention to the color of the candle – a green candle means that the closing price was higher than the opening price, while a red candle tells us the opposite. Some charts will use hollow and filled candlestick bodies instead of colors to represent the same thing.
What Affects the Price of Ethereum?
Just like with any other asset, the price action of Ethereum is driven by supply and demand. These dynamics can be affected by fundamental events such as block reward halvings, hard forks or new protocol updates. Regulations, adoption by companies and governments, cryptocurrency exchange hacks, and other real-world events can also affect the price of ETH. The market capitalization of Ethereum can change significantly in a short period of time.
When trying to make an Ethereum prediction, many traders also try to monitor the activity of ETH “whales”, which are entities and individuals that control large amounts of ETH. Since the Ethereum market is relatively small compared to traditional markets, “whales” can single-handedly have a large influence on Ethereum’s price movements.
Bullish and bearish price prediction patterns
Some traders try to identify candlestick patterns when making cryptocurrency price predictions to try to get an edge over the competition. Some candlestick formations are seen as tending to predict bullish price action, while others are considered bearish.
Here are some of the most followed bullish candlestick patterns:
Here are some common bearish candlestick patterns:
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