(December 1, 2020 8:30PM EST)
Outlook: Ethereum went back and forth on Tuesday, experiencing a surge in volatility as the ETH 2.0 beacon chain launched, swinging wildly down and up to reach a new local high before dropping, ultimately closing the daily candle slightly negative at just below $600. This is a rather large bearish Doji candle, which despite contributing to a new local high, also indicates that perhaps ETH is near the top of its range and is stalling around the $600 level which has been resistive of late. Now that ETH 2.0's beacon chain launched and the focus will shift to sharding at some point later in 2021, I think there are probably not too many bullish catalysts to support ETH for a while, so I expect short-term profit-taking and a return to gravity, probably closer to the $500 level.
ETH has been and continues to trade in a pretty wide and well-defined ascending channel, with $600 being at the upper end of that range, so a pullback here makes sense. All ETH news has been positive and continues to be so, so I don't think there's any reason to fear a large drop to $400 or lower, breaking the channel's rising trendline. Similar to Bitcoin, I think the ETH chart could be pretty boring for the next few months, as there are no known significant catalysts as we wait for sharding and staking to take shape. That being said, I think we could see some sideways trading over the next few months as ETH digests the recent gains and consolidations a bit, which would provide an extended accumulation zone for what I portend to be an increasingly bullish 2021-2023 period.
The beacon chain's launch is a momentous occasion that officially checks a box in Ethereum's long-awaited network upgrade from a Proof of Work consensus mechanism to Proof of Stake, which is only one of many paradigm shifts to be expected by Ethereum's layer-2 scaling solution. While we are currently learning as the ETH team goes -- this is completely unchartered territory from a technical standpoint -- the next ETH 2.0 network upgrade would be the implementation of sharding which would help ETH 2.0 to scale by increasing the maximum throughput of transactions per second on Ethereum. While today's beacon chain launch is exciting and fundamentally important, as long as there are no critical bugs, we should continue to see even more dynamic and pragmatic network capabilities and upgrades over the next 2-3 years, which should be even more bullish catalysts for ETH's price. Additionally, as the ETH 2.0 network upgrade nears its completion, this will attract more real-world use cases, and thus, investors with deep pockets.
Support: Look for support at $500, which is former resistance and a large, round psychological number, and a level of support as ETH just bounced off it following a nasty holiday weekend selloff. $500 should be pretty strong support, but below that I'll look for value underneath around $450 which is near the 50 Day EMA and ultimately $400, which should be ironclad support.
Resistance: $600 remains resistance as ETH has yet to break impulsively above it, making a few brief closes above before returning back below. If ETH can print an impulsive candle breaking above $600, then eyes will turn to $700, $800, then $1,000. I don't forsee any major bullish catalysts in the near-term, so I think $600 is our number to watch for now.
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