Ethereum Down for Four Days in a Row: Bullish or Bearish?

While most crypto market watchers are focused on Bitcoin’s ongoing struggle with $31,000, Ethereum recently closed above the psychologically important $2000 level for the first time in weeks. Now poised to close in on four consecutive days of decline, let’s take an evidence-based approach and determine whether four consecutive days of decline for Ether is historically bullish or bearish. Let’s dive in!

Ethereum Closes Above $2000 After Pullback

After closing to an impressive multi-week high on July 13 and clawing back above the $2000 level, Ether has pulled back for four consecutive sessions, this is one of the conditions we will be testing momentarily. To better add context to the test, we’ll also add two more conditions that require that (1) ether is above its 200ma and (2) its 200ma is rising. Why? Both the 200ma and its slope act as simple filters to help determine the market regime. For example, this latest four-day drop in Ether occurred in a bullish market with ETH above 200ma. If the current four-day decline is taking place in a market bearish phase, we would need ETH to hold its decline below the 200ma.

Ethereum Daily Chart | ETHUSD on Tradingview.com

What does this decline in Ethereum indicate for its price? To find out, we’ll look at all the signals from the very beginning, and compare those signals to a simple “buy and hold” approach. This will provide us with a baseline to better understand today’s test results.

four days down compared to buy and hold

The holding time graphic below shows historical results for Ether’s current technical setup at the top, with a simple “buy and hold” approach at the bottom. In other words, we will only show hypothetical results using different holding times when Ethereum has closed bottom for four consecutive days while rising above 200ma at the top. The bottom result will serve as a baseline, assuming a hypothetical buy of ETHUSD with no conditions and exit after n-days.

average business comparison | Source: Rectelligence, Tableau

While both approaches show positive average trading results on every exit we tested from 7 days to 90 days, our baseline “buy and hold” actually outperformed the current technical setup of a four-day decline. The only exception is the “Exit in 90 Days” in which the current setup slightly outperforms the historical average “Buy and Hold” trade, beating it 62.1% to 59.4%.

But while the average trade figure is important, it doesn’t always tell the whole story. When comparing the largest hypothetical loss for both approaches using the same conditions described earlier, note that the largest loss (i.e., the worst trade) for the current four-day setup is comparable to a simple “Buy and Hold” I have very little. Approach This biggest loss comparison indicates that while the current setup may not outperform a “Buy and Hold” in the case of an average trade, Ethereum may currently have less than normal risk exposure – something that most experienced traders will appreciate. .

Comparison of the biggest loss | Source: Rectelligence, Tableau

While the past does not predict the future, based on our analysis, Ethereum looks set for a potential rally in line with general “buy and hold” expectations. In other words, not overly exciting and obviously not a meaningful edge at this point in time. That said, the risk also appears lower than normal when compared to the “buy and hold” biggest loss statistics. Attention Traders. Ethereum may now offer its own unique return profile based on its current technical setup, but with lower overall risk exposure.

DB is the author of The Quant REKIntelligence Report Newsletter on Substack. follow @REKTeligence On Twitter for evidence-based crypto market research and analysis. Important Note: This material is purely educational in nature and should not be considered as investment advice. Featured images created with Tableau. Chart from Tradingview.com.