Ethereum falls under $ 600 because the XRP debacle weighs closely on altcoins
XRP has shown massive weakness as the cryptocurrency is being sued by the SEC. The price fell significantly from $ 0.65 to $ 0.21 within four days, a 67% crash.
Meanwhile, other altcoins have also corrected significantly in the past 24 hours as investors likely fear XRP isn't the only coin on the SEC's radar.
Ether (ETH) fell 14% on December 24th, then rebounded at $ 550. While Chainlink corrected 38% to a current low of $ 8. In Sushiswap (SUSHI), the biggest correction and biggest flash crash fell from $ 2.75 to $ 1.10 – a 61% crash.
The question now is whether the XRP debacle will continue to weigh on the altcoin market in the short term. Let's take a look at the tech specs to identify the current areas of support and resistance.
Ether is looking for a new higher low after the recent decline
ETH / USD 1-week chart. Source: TradingView
The weekly chart for Ether looked great and the recent drop-down list hasn't changed it. In that regard, the construction is still bullish and on trend.
The recent high of $ 675 confirms a new higher high, after which a higher low will ensure the continuation of the bull market for ether. That higher low is most likely to hit the $ 450 region. This is the previous zone of resistance eager to get support before the continuation takes place.
However, to receive such a correction, Bitcoin (BTC) should see a major correction. Otherwise, this scenario is unlikely to occur. As long as Ether stays above USD 450, another rally could drive Ether towards USD 1,200 to USD 1,300 next year.
The USD 620 resistance is the next critical level
ETH / USD 1-day chart. Source: TradingView
Ether's daily chart looks less bullish as it breaks below the critical $ 620 threshold that should have been broken for an immediate bullish continuation. A break above $ 620 would guarantee a new high for the ETH price.
However, the previous resistance zone and $ 620 rejection suggest that more downside moves are likely in the short term.
Hence, the key support zone for Ether is now the USD 550 area as this is the most recent higher low. As long as it stays that way, the bullish case is still on the table.
The price is likely to drop to $ 450 if $ 550 goes down after another $ 620 rejection as support. This $ 450 level is the previous resistance zone and a significant area of support on the weekly timeframe.
Bitcoin dominance is turning parabolic
Bitcoin Dominance 1 Week Chart. Source: TradingView
The weekly chart of Bitcoin dominance shows a breakthrough towards 70%. The main reason behind this rally is XRP's weakness as it is the second largest altcoin.
The dominance chart will continue to rise as the XRP continues to decline. At the same time, the weakness of ETH / BTC will not help for a mid-season at the beginning of 2021 either.
One thing to watch out for, however, is the potential spike in the Bitcoin dominance table as it usually occurs in December. Since 2016, the dominance chart has peaked in December. After that spike, altcoins saw massive gains in the first quarter.
The ETH / BTC pair is vital here as it must bottom out before a possible rally in altcoins.
ETH / BTC 1-week chart. Source: TradingView
Unfortunately, Ether's weekly chart shows a clear breakdown under the support of the BTC pair, suggesting that further weakness for altcoins is likely.
However, as long as ETH stays above 0.021 sats, bullish arguments can be made for more upward movement, as the upward construction would still be intact.
Ideally for ETH, a Sats level reclaim of 0.026 would indicate strength and more continuation, so traders should watch this level first. If this is not the case, the next area to watch is the 0.021 Sats zone next to the $ 450 region.
The views and opinions expressed are those of the author only and do not necessarily reflect the views of Cointelegraph. Every investment and trading step is associated with risks. You should do your own research when making a decision.