Cryptocurrency is a notoriously volatile industry, no matter what coin you trade. During times of extreme volatility, it’s easy to get discouraged when trades aren’t going your way. It’s also easy to become overconfident when you’re lucky, misattributing it to your trading strategy – when in reality the price has often gone up or down for reasons other than you assumed. .
Despite the uncertainty, sometimes there are still strategies you can use to trade certain tokens successfully. Ether (ETH) is arguably where you could be successful this year. Here are three tips that might help.
Understanding What Really Affects ETH Price Movements
There are many ways to analyze the price of a given cryptocurrency, and different price assessments will be given depending on the model used and the weight given to a specific set of conditions.
But incorrect weighting can produce erroneous conclusions. For example, a cryptocurrency may generate positive buy signals at all levels, but other factors may cause the entire market to fall.
—Pentoshi (@Pentoshi1) January 7, 2023
This is precisely what happened with the Ethereum merger, where a successful transition to proof-of-stake that reduced consumption by 99.9% was not really reflected in the price. In fact, the bearish traders drove the price down.
The crypto market also tends to be highly correlated with Bitcoin (BTC), which is traded by many institutional funds and hedge funds linked to interest rates and traditional financial markets. ETH currently holds a correlation of 0.9 with Bitcoin.
Prior to May 2021 and November 2021, ETH saw significant price increases. This was attributed to big company announcements, such as the European Investment Bank’s decision to offer a two-year bond on the Ethereum blockchain. Visa has also announced its intention to transact in USD Coin (USDC) on Ethereum.
A summary of the factors that affect the price of Ether is that it will be most strongly affected by Bitcoin’s price movement, interest rate decisions, institutional investments, and macroeconomic conditions that discourage investment. .
However, fundamental blockchain indicators can strongly point to medium-term appreciation, perhaps one to three years. Based on these indicators, Ethereum is a very powerful blockchain with a thriving ecosystem ready to grow.
Like other cryptocurrencies, ETH has specific months where it performs well and others where it performs poorly. He does the worst in September, June and March, which means that these may be good times to become a buyer.
On the other hand, it behaves well in February, April and May. This is the time for traders to issue sell orders, while long and long investors could simply avoid these months in terms of investing (although other criteria should also be taken into account).
Although some claim that certain times of the day are more lucrative than others for investing, studies have shown that this is not the case, at least when it comes to Bitcoin. The same goes for the days of the week.
Even though there are certain days or times to trade Ethereum, only active traders will be able to properly assess this information and bear the increased fees of more regular transactions. More realistically, seasonality can be applied on a monthly and perhaps quarterly basis for the most part.
Seasonality is something to keep in mind as there are definite monthly trends.
Consider Recurring Fixed-Amount Purchases
A popular and research-backed way to trade Ether (and any other asset) is dollar cost averaging (DCA), a technique first popularized by Benjamin Graham and applied to the stock market.
DCA is a way to invest smaller amounts at specific intervals. You can, for example, invest a specific amount at the beginning of each month. This ensures that you get all the highs and lows (at least on a monthly basis), smoothing out the volatility.
Related: Post-merger ETH has become obsolete
It’s a great way for newcomers to enter the market, as it doesn’t require any technical expertise or time investment. You don’t need to do research or learn statistical patterns or correlations (although you can of course do that on the side).
DCA can also be an excellent base for more creative investments, providing a stable foundation. For example, you can combine it with seasonality, choosing the three to four months where Ether has always been priced lowest.
At the very least, DCA can help you avoid the volatility of cryptocurrency markets with investments spread over time. Retaining your investment is as important as making a profit, a fact often missed in an industry often overtaken by hype and profits.
Other Points to Remember
The upcoming Ethereum Shanghai upgrade in March will allow users to withdraw staked ETHvalued at over $20 billion in mid-January, although it is unclear whether investors will take advantage of the opportunity – which would be bearish – or continue to hold their ETH, which would be bullish.
The fundamental indicators regarding a given blockchain – active addresses, forks, functional upgrades, node diversification, speed, etc. – are often not taken into account in the short-term price. The Ethereum merger, for example, reduced waste by 99.9% but did nothing for price, being overshadowed by broader economic factors.
But they are certainly useful longer-term indicators. The work that has been done to improve the Ethereum blockchain and ecosystem will eventually be reflected in its price.
In this regard, Ether is a wonderful investment opportunity for late 2023 and possibly 2024, given recent innovations.
It is, in many ways, a perfect token for a patient investor.
Daniel O’Keeffe worked for three years as a compliance analyst for JPMorgan and State Street. He holds an MSc in Computer Science from University College Dublin and a law degree from the University of Limerick.
This article is for general informational purposes and is not intended to be and should not be considered legal or investment advice. The views, thoughts and opinions expressed herein are those of the author alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.