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Ethereum rushed to a new swing high above $1,600. This week, the asset showed a huge growth of 36% after the gradual transition of the network to the PoS algorithm. At the moment, the price of ETH touched $1,600, after which it pulled back and started a consolidation. However, the altcoin fell by 4% due to the publication of Tesla reports, which indicated that the automaker sold 75% of its savings in Bitcoin. As a result, Ethereum dropped to the support area at $1,460.
We have already noted Bitcoin's influence on the future ETH and the altcoin market. As one would expect, the flagship cryptocurrency indicates the movement of the entire market. The hype surrounding Tesla's reporting and the 2% drop in Bitcoin's price caused the altcoin market to fall, forcing the market capitalization of digital assets to shrink by 4%. However, the area near $1 trillion has now become key support. In other words, the market remains bullish until market capitalization is above the level of $1 trillion.
The price of ETH/USD has strong support near $1,400. Despite the local sell-off with a hint of panic, the situation around ETH remains bullish. Yesterday's sales volumes failed to overlap the previous impulse bullish candlestick, indicating a lack of sellers in the market. At the same time, we see a pause in the price movement because the asset is overbought now. The RSI and the stochastic oscillator have reached the overbought zone above 70 and are beginning to decline. This indicates that the price may fall to the support level.
The MACD indicator continues its upward movement in the green zone. This suggests that the long-term trend is stronger and more stable than the short-term impulses. Taking into account the approaching transition to PoS, as well as the stabilization of the market situation, we can expect short-term bullish impulses. The network activity confirms the bullish sentiment of ETH investors. Trading volumes and the number of active unique addresses in the ETH network continue to grow, indicating a growing demand for the asset.
Despite all the positive factors, Ethereum has proven its dependence on Bitcoin. Considering the high correlation between the assets, we have to state the fact that the potential upward movement of ETH price is limited by the situation around Bitcoin. Clouds are looming around the first cryptocurrency due to three fundamental factors. The first is that whales have started to sell their savings. The third-largest wallet has transferred more than 132,000 BTC to crypto exchanges in three days. This is a colossal volume of cryptocurrency, which is likely to put pressure on the price and prevent Bitcoin's upward spurt.
The US dollar index is finishing a correction and a consolidation near 107. The DXY fell after hitting a 20-year high of 109 and the Fed's printing press working to stabilize the euro and other currencies. As a result, the index reached the support of 106 where it continued to consolidate. Technical indicators on the daily chart are signaling the beginning of an upward movement. The stochastic oscillator completes a bullish crossover and the RSI is moving above 40, indicating strong demand for the US currency.
The third factor is the Fed meeting on July 26, where a 100 basis point key rate hike is planned. Despite a general decline in trading activity and players adapting to the new conditions, such a tightening of monetary policy will have a negative impact on Bitcoin's bullish plans. Considering the cryptocurrency's correlation with stocks, the probability of an upward movement of the asset is highly unlikely to happen.
Given the correlation of the main altcoin with BTC, we can conclude that Ethereum's bullish potential is exhausting in the current cycle. It is likely that the asset may break through the level of $1,600, but a decline in trading activity due to the Fed meeting is expected next week. Subsequently, a local drop to the key support level of $1,200-$1,250 is likely. However, in the long term, there is no doubt that the altcoin may quickly recover and continue its upward movement.
IntoTheBlock notes active accumulation of ETH by large wallets, and the futures market recorded the largest purchase of more than $1.7 billion. All of these facts indicate that Ethereum will be the main driver of the market in the coming months. However, another volatile period is needed before an even larger growth phase.
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