What can we expect from Ethereum and Altcoins in Q1 2021?
Bitcoin has risen very much in value in recent months; it went from around US$20,000 to over US$40,000-USD at its highest point. Yesterday was the first major correction after a months-long period of growth. In this correction, Ethereum and other Altcoins showed their strength, as their value did not fall much harder than Bitcoin's, while it normally does. Although Ethereum and other Altcoins are showing strength, they are still very much behind compared to Bitcoin's rise in value. The question now is: what will the first quarter of 2021 look like for Ethereum and other Altcoins? And is there a chance that they will outperform Bitcoin?
By Steven Eblé
Money flow in the crypto currency world
To understand why the value of Ethereum and other Altcoins is so behind Bitcoin, we need to understand money flow in the crypto currency world. Money flow is a valuable and easy to understand concept. The money flow of crypto currency is determined by human psyche.
The money flow in crypto currency starts with Fiat. Every purchase in crypto initially requires Fiat. Bitcoin is the largest and most well-known crypto currency, so investors will often start by purchasing Bitcoin. The more people purchase Bitcoin, the harder the price rises. Then, there comes a point where investors are satisfied with their profits and they want to use these profits to spread their risk to other crypto currencies. This money will initially go to large caps, which mainly means Ethereum, but eventually medium to smaller Altcoins will come into play as well. It is therefore beneficial for the entire Altcoin market if Ethereum does well.
Ethereum Technical Analysis
According to the money flow of crypto currency, Ethereum is always the first to follow Bitcoin after it has experienced an increase in value. This was also quite noticeable in the months of December 2020 and early January 2021. But unlike Bitcoin, which is over 50% higher than its all time high, Ethereum has not yet managed to break its all time high of December 2017. In this technical analysis, I'm going to show why things are looking very good for Ethereum in the coming months.
The chart below shows that Ethereum has hit the support zone (orange lines). This support zone lies between 900-US dollar and 800-US dollar. If this support zone holds, we can use the Fibonacci extension tool to set price targets for the next impulse wave (indicated in black).
The 1,618 Fibonacci level is then around 2,400 US dollars per Ethereum. This value could be realized as early as the first quarter of 2021 according to my analysis.
Ethereum compared to Bitcoin
Another important chart is the Ethereum/Bitcoin ratio. That chart shows that Ethereum can do well, but if Bitcoin does better, it is still not attractive to invest. It can be seen that Ethereum is between the two lower orange lines. This is called an accumalion range. If Ethereum breaks out of this accumalion range in the coming months, 0.055 Satoshi will be its first target. If Ethereum reaches that target, 1 Ethereum would be worth almost 2,000 US dollars at a Bitcoin price of 35000 US dollars.
The Ethereum/Bitcoin chart is also very important when talking about altcoins. A strong Ethereum, gaining ground against bitcoin, is the first starting signal for altcoins to experience violent price increases.
In short, things are looking good for Ethereum in the first few months of 2021 in my opinion. Both the Ethereum/USD chart and the Ethereum/Bitcoin chart look bullish, and price targets between US$2,000 and US$2,400 are definitely achievable. I expect Ethereum to gain ground against Bitcoin in the coming months. This will also give other Altcoins room to grow.
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