Ethereum price (ETHUSD) reached the important resistance level of $400 on Sunday this week. Since then, the price has remained in consolidation, testing a high of $413 and a low of $325. The same consolidation story has also happened in Bitcoin, whose price has remained slightly below this week’s high of $12,000.
As I wrote yesterday, there are three primary reasons why Ethereum price has been rising. First, the price has gained mostly because of a weaker dollar. The dollar index, which measures the performance of the USD against a basket of currencies, has been in a freefall in the past few months. This decline has mostly be because of the low interest rates and the vast amount of money being printed by the Fed.
Second, Ethereum price has climbed because of the anticipation of ETH 2.0, which is the biggest software upgrade of Ethereum’s network. Investors believe that the launch will make ETH more reliable, faster, and secure, which will increase its demand.
Third, ETHUSD pair has risen because of the overall growth of the Decentralised Finance (DeFi) industry. The industry, which uses mostly Ethereum, has expanded from just $1 billion in January to more than $4 billion, according to data from DeFiPulse.
These are the main reasons why Ethereum price has been in an upward trend. Indeed, it has been among the best-performing cryptocurrency in the past few months. However, a recent report by Bloomberg claimed that the recent rally has been mostly speculative. The report said:
“Ethereum has extended last year’s highs and leaped to one of the top-performing major crypto assets in 2020, but we view its rally as more speculative vs. the favorable demand vs. supply conditions supporting Bitcoin.”
Ethereum price outlook
A look at the daily chart below shows that Ethereum price has been in a strong upward trend since March. The chart also shows that the past two weeks have been relatively strong for ETHUSD pair.
However, the price has been in consolidation mode this week, which has led to the formation of a bullish pennant pattern. If you have taken our online trading course, you may have realised that this pattern is usually a bullish continuation pattern.
Therefore, I expect that the price is likely to continue rallying as bulls target the next resistance at $450. On the other hand, a move below $365 (or the lowest level on August 3 will invalidate this trend.