Ether price prediction for January 2020: the coin could rise next month
Ether prices continue to trend lower, but the seasonals are on its side
Ether prices have trended lower in the second half of 2019. Like Bitcoin, Ether prices dropped after one of the largest cryptocurrency scams in history in China. The strength of the US dollar and the attractiveness of riskier assets such as stocks has also weighed on the price.
Technical analysis shows that Ether is oversold, but buy signals created by both the RSI (relative strength index) and the fast stochastic in 2019 did not bring robust gains. At the same time, while Ether has only been actively trading for half a decade, returns in January are generally positive so the price could rise next month.
The catalyst for the downtrend
Ether prices moved in tandem with Bitcoin and moved downwards after the unwinding of one of the largest cryptocurrency scams. In the Chinese PlusToken scandal more than 2-billion in PlusTokens hit the market, reducing liquidity and causing negative sentiment toward cryptocurrency.
Ether price next month: what do seasonals say?
During the past five years, ETH/USD returns in January have been robust. Prices declined in January 2019, but the previous three years have been solid. On average, Ether has been higher 75 per cent of the time with an average annual gain of 57 per cent. Returns in early 2019 were solid after ETH/USD ran up in December of 2018, but prices started to reverse as riskier assets gained traction.
The dollar and riskier assets
Cryptocurrency prices have also been affected by returns in riskier assets such as stocks. With stock prices hitting fresh highs, investors have shied away from cryptocurrencies such as Ether.
Interestingly, Ether prices have been correlated to the VIX volatility index in the second half of 2019, with movement of the VIX and the change in Ether prices in tandem. One might infer that when stocks begin to finally correct, and the VIX rises, Ether prices could receive a boost.
What is happening with Ether price: technicals
The downward trend in Ether prices could continue and touch long-term support near the February 2019 lows at 98.56. Additional support is seen near the December 2018 lows at 82.37. Resistance is seen near the 10-day moving average at 137, and the 50-day moving average at 161.
ETH to USD chart
Momentum is negative to neutral with the MACD (moving average convergence divergence) index recently generating a crossover sell signal. This occurs as the MACD line (the 12-day moving average minus the 26-day moving average) crosses below the MACD signal line (the 9-day moving average of the MACD line). The MACD histogram is red, with a downward sloping trajectory pointing to lower prices.
What is your sentiment on ETH/USD?
Recently daily prices have moved out of oversold-territory. The fast stochastic, a momentum oscillator, generated a crossover buy signal in oversold territory. Levels on the fast stochastic below 20 are considered oversold, while levels above 80 are considered overbought. The index has registered short-term bounces in the past 12 months but these have failed to bring substantial rebounds during the second half of 2019.
The daily relative strength index (RSI) has also moved from oversold into the neutral range. This is considered a short-term buy signal. While the RSI signalled a bottom in late 2018, it failed to predict a robust rebound in ETH/USD in November 2019.
Ether price in January: take away
Ether prices have been under pressure for several reasons. Reasons include the Chinese Bitcoin scam, the climb in riskier assets and the strength of the US dollar. The technicals show the coin recently has been oversold, but this has not been a sign of an impending rebound while prices were trending lower in the second half of 2019.
However, the seasonals point to higher prices for the coin, as January has historically brought positive returns.
Ether prices have also been positively correlated to the VIX volatility index during the second have of 2019. It could mean that a correction in stock prices may lift the coin price.
FURTHER READING: What will 2020 hold for Ethereum and its cryptocurrency Ether?