This Smart Money Indicator Uncovers Early Signs Of An Ethereum Reversal
Ethereum has been leading the cryptocurrency market higher, helping to push Bitcoin through $10,000 and restart the overall market bull run.
But before new highs are set, the smart money indicator is hinting that a strong reversal is coming, and already may be underway.
Ethereum Carries Crypto Market Higher, Helps Bitcoin Push Through Critical Resistance
Ethereum has absolutely exploded from Black Thursday lows. Like Bitcoin, the second-ranked crypto asset spent months consolidating below resistance. While Bitcoin built momentum below $10,000 – resistance that it finally cracked – Ethereum surged through $250.
Since the top altcoin took out that resistance level, it has climbed a further 50% and then some, tapping highs around $400 and above.
Related Reading | Fund Manager: DeFi Will Propel Ethereum To $1 Trillion Market Cap
But while crypto investors FOMO into the smart-contract focused altcoin at the center of the DeFi trend, smart money could be taking profit from recent gains, according to the On-Balance Volume indicator.
Current price action resembles a healthy pullback, but given the indicator’s potential signal, a deeper reversal is also possible.
Ethereum ETHUSD On-Balance Volume AKA Smart Money Indicator | Source: TradingView
Smart Money Indicator Calls for ETHUSD Correction, Or Potential Reversal
According to the On-Balance Volume indicator on ETHUSD 4-hour price charts, a head and shoulders pattern has formed on the indicator.
Chart patterns are more effective when drawn over price action, however, charting indicators is also a common strategy and yields positive results.
The indicator gets its name due to the idea that volume precedes price action. This concept suggests that smart money and other high wealth investors take positions ahead of the herd. On-Balance Volume shows this taking place right under the noses of unsuspecting market participants.
Related Reading | Ethereum Beats Bitcoin, Gold, and Stocks In Stimulus Check Investment
The indicator can, however, supply false signals, so its always worth waiting for a confirmation in price action to follow smart money’s lead.
If smart money is showing its hand through the OBV indicator, it is suggesting that Ethereum is ready for a strong reversal, and according to today’s drop, it potentially has already begun.
Any investors or traders who happened to spot this taking place on the OBV indicator could have pre-empted today’s broader market move.
Ethereum and other cryptocurrencies like Bitcoin are following precious metals, which are experiencing a healthy correction after enormous performance. Ethereum beat out all other investment types in total stimulus check investment return, for example.
That performance is nothing compared to Ethereum and Bitcoin returns recently, so any correction in crypto may be more severe by comparison. Both assets are showing signs of starting a new bull market, so bulls have a strong chance of staving off a full reversal.