Analyzing the short-term profitability of Ethereum (ETH)

Ethereum (ETH) is the second largest cryptocurrency by market capitalization and one of the most popular platforms for decentralized applications (DApps) and smart contracts. Since the beginning of 2024, Ethereum has been on a strong upward trend, reaching new all-time highs and outperforming Bitcoin (BTC) in terms of percentage growth. In this article, we will explore the latest market updates and news about Ethereum, market insights and strategies shared by analysts and traders, and investment strategy recommendations and tips that can help you make money in the short term with Ethereum.

Notable developments and events

Ethereum, the second-largest cryptocurrency, has been in the news for a long time due to its ambitious upgrade called Ethereum 2.0. This multi-phase project aims to address issues of scalability, security, and efficiency, paving the way for wider adoption and more use cases.

Moving to PoS mechanism: Ethereum 2.0

The core of the upgrade is the transition from a “Proof of work” (PoW) consensus mechanism to a “Proof of stack” (PoS) consensus mechanism. This change, which has been initiated with:

• Launch Beacon Chain in December 2023, significantly reducing energy consumption and environmental impact. 
• The Merge, scheduled to take place in the first half of 2024, will fully integrate the Beacon Chain with the existing Ethereum network, marking the end of the PoW era. 
• The Shard Chains phase, expected in late 2024 or early 2025, will introduce sharding, splitting the network into parallel chains to significantly increase throughput and transaction capacity.

Ethereum Improvement Protocols (EIPs)

The Ethereum network thrives on constant innovation, driven by Ethereum Improvement Proposals (EIPs). Two important proposals are shaping the future:

• EIP-1559: Scheduled to be implemented in the London update in July 2024, this proposal introduces a base fee (which is burned) and a commission fee (for miners), making transaction fees more predictable and transparent. It also reduces inflation by creating deflationary pressure on the Ethereum (ETH) supply.
• EIP-3675: This specification serves as a blueprint for The Merge, allowing for a smooth transition from PoW to PoS.

Recognition of potential and value

Ethereum’s potential as a valuable asset and platform for innovation is attracting increasing interest from institutional investors. Here are some notable examples:

• CME Group: The world's leading derivatives exchange has offered a range of Ethereum-based products since 2018, including spot rates, futures and options. These instruments allow institutions to hedge ETH exposure and participate in price movements.
• Grayscale Ethereum Trust (ETHE): Launched in 2019, the trust provides qualified investors with access to ETH without directly owning or storing it. In February 2023, Grayscale announced the conversion of ETHE to an exchange-traded fund (ETF), making it more accessible and liquid to retail investors while reducing fees and premiums.
• Visa: In March 2022, Visa announced the ability to settle payments using USDC, a stablecoin built on the Ethereum network. This promotes faster, cheaper, and more secure transactions for Visa partners and customers, while boosting the demand and utility of ETH.

Market analysis and investment strategy

Ethereum is riding a wave of strong momentum, surpassing previous highs and fueling excitement in the cryptocurrency market. While history suggests a potential new high in July, navigating this dynamic requires a smart strategy. This section equips you with the latest insights and strategies to capitalize on Ethereum’s potential, manage risk, and make informed investment decisions.

Current market situation:

• Ethereum is in a strong uptrend, surpassing its previous all-time high (ATH) and reaching $4,000 by May 2023.
• Historical cycles suggest a potential new ATH around July 2024, within 700 days from now.
• The expected bull run could last 1064-1071 days, similar to the 1071-day bull run of the previous cycle.
• Technically, the price is retesting the trend and experiencing high interest, which is likely to lead to further upside.

Technical analysis:

• A false breakout and correction to the 0.236 Fibonacci level (around $2.644) is possible before the upside continues.
• Alternatively, price consolidation above $2,788.8 could establish a local bottom for further upside.
• While not an Elliott wave expert, combining Fibonacci analysis, trend analysis, and historical bubbles can provide valuable insights.

Fundamental analysis:

• Bullish market sentiment is mainly due to:
  • Deploying Dencun update, opening up new opportunities for users and developers.
  • Ethereum ETF Approval Predicted After Bitcoin ETF Success.
  • Expectations of a traditional price rally after the Bitcoin halving event.
• Price has been moving in an upward channel since 2023, currently in the upper half, indicating strong demand.

Potential price movement:

• If the trend continues, reaching $3,000 within a month is possible.
• Resistance can occur at the upper boundary of the channel or due to overbought indicators.

Support level:

• $2.400: Price impact from December 2023.
• $2.700: Old high of 2024, broken with strong demand.
• The average line and the lower boundary of the current channel.

Strategy:

• Buy on dips: Look at technical indicators and news/events to identify entry points near support levels or positive developments.
• Sell on a strong rally: Monitor technical indicators and market sentiment for overbought signals or negative news/events to take profits.
• Trend Trading: Use technical and fundamental analysis to determine trend direction and trade accordingly.
• Diversify your portfolio, use stop-loss orders, and consider derivatives to manage risk.

Investment Opportunity Analysis/Investment Direction for ETH

While Ethereum is in a correction phase, smart investors can use this time to build a strategy and position themselves for potential future gains. This section will cover up-to-date information and practical investment strategies to guide your decisions in the current market environment.

Trading strategy:

• Buying Opportunity: Consider opening a long position at $2700 with a target of $3200. This recommendation is based on the convergence of the technical and fundamental factors mentioned above, along with an attractive risk-reward ratio of over 1:3. However, please note that this is just a suggestion, and careful consideration and analysis are important before making any investment decisions.
• Exit strategy: Establish a clear exit plan, including stop-loss orders and profit protection strategies based on your risk tolerance and investment goals. Remember, risk management is paramount.

Technical analysis:

• Important support: Ethereum price is testing the important support line $2300, a significant historical level with many confirmations. If the price drops below this level, it could signal further consolidation, so keep a close eye on it.
• Key price: Keep a close eye on the support level $2300, the rising trend line, $2145 and the resistance level $2383. These levels can provide valuable information about potential price movements.
• Positive indicators: Despite the correction, technical indicators such as higher lows, higher highs, and moving averages and MACD support indicate potential for an upward trend. This gives a glimmer of hope to long-term investors.

Basic elements:

• DApp & Smart Contract Hub: Ethereum's core strength lies in its role as a platform for DApps and smart contracts. Continuous upgrades, growing DeFi adoption, and the booming NFT space contribute to its long-term value, providing a solid fundamental foundation.
• Positive beliefs: Positive sentiment about Ethereum’s future is growing, fueled by technological advances and its potential to disrupt various industries. This optimistic outlook could drive buying pressure.
• Organizational interest: Accumulation at current levels and growing institutional interest indicate strong buying pressure, underscoring Ethereum’s appeal as an investment asset. This institutional interest could be a strong indicator of future potential.

• Macroeconomic barriers: Ethereum can act as a hedge against inflation and currency depreciation, which is attractive in the current uncertain economic climate. This added benefit may appeal to investors looking for diversification.

Conclude

Ethereum’s journey has been a winding one, with periods of strong growth and periods of price correction. While the current period may seem difficult, remember that corrections are normal and often present opportunities. By combining technical analysis with the fundamental strength of the dApp and smart contract ecosystem, you can navigate this maze with more confidence.

Consider the $2700 entry with a target of $3200 as a potential springboard, but always do your own research and manage your risk meticulously. Remember, discipline, emotional control and staying informed are your allies in this dynamic market.

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