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3 tips for trading Ethereum this year

Regardless of the coin you trade, the industry of cryptocurrency is well-known for its volatility. When trades don’t go your way, it’s easy to get discouraged during periods of extreme volatility. When you get lucky, it’s easy to get too confident and blame your trading strategy, even though the price often goes up or down for reasons you didn’t expect.

There are still strategies you can use to trade certain tokens successfully despite the uncertainty. Ether (ETH) may be where you could succeed this year. There are three things you can do to help.


  • Understand what affects ETH price movements

Depending on the model used and how much weight is given to a particular set of conditions, different price valuations will be given to a given cryptocurrency. There are many ways to analyze the price of a cryptocurrency.

However, wrong weighting can lead to incorrect conclusions. A cryptocurrency, for instance, may generate widespread buy signals, but other factors may cause the market as a whole to plummet.

Bitcoin (BTC), which is traded by a lot of institutional and hedge fund money that is tied to interest rates and traditional financial markets, has a strong correlation with the crypto market. At the moment, the correlation between ETH and Bitcoin is 0.9.

Between May 2021 and November 2021, the price of ETH increased significantly. This was cited as a result of major announcements, such as the European Investment Bank’s decision to offer a two-year bond on the Ethereum blockchain. Additionally, Visa announced plans to accept USD Coin (USDC) transactions over Ethereum.

In summary, the price of Ether will be influenced most by the price of Bitcoin, decisions regarding interest rates, institutional investment, and macroeconomic conditions that discourage investment.

However, fundamental blockchain indicators may strongly suggest appreciation in the medium term, possibly throughout one to three years. These indicators suggest that Ethereum is a powerful blockchain with a thriving ecosystem that is poised for expansion.

 

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  • Anticipate the seasonality

Like other cryptocurrencies, ETH experiences ups, and downs in performance throughout a given month. It performs poorly in September, June, and March, suggesting that those months might be ideal for purchasing.

On the other hand, it performs well in February, April, and May, when traders issue sell orders and buy-and-hold investors might simply avoid investing in these months (though other criteria should also be taken into consideration).

Studies have demonstrated that, at least when it comes to Bitcoin, certain times of the day are not more profitable than others for investment. The days of the week are the same.

 

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Even if there are specific days or times to trade Ethereum, only active traders will be able to accurately interpret this information and endure the higher fees of more routine trades. For the most part, seasonality can be applied monthly or even quarterly, which is more realistic.

Because there are clear monthly trends, seasonality should be taken into consideration.


  • Consider dollar-cost-averaging

Dollar-cost-averaging (DCA), which Benjamin Graham first popularized and applied to the equity market, is a popular and research-backed method for trading Ether and any other asset.

DCA allows you to invest smaller sums at predetermined intervals. You could, for instance, set a predetermined monthly investment amount. This reduces volatility by ensuring that you experience all of the highs and lows—at least from month to month.

Because it doesn’t require any technical knowledge or a lot of time, it’s a great way for newcomers to get started in the market. Even though you can clearly do this on the side, you are not required to conduct research or learn statistical models or correlations.

Additionally, DCA can serve as a solid foundation for more innovative investments. You can, for instance, combine it with seasonality by selecting three to four months during which Ether has historically been priced at a low end.

By spreading out your investment over time, DCA can, at the very least, assist you in avoiding the volatility of the cryptocurrency markets. In an industry that is frequently overshadowed by hype and profits, the importance of holding on to your investment is often overlooked.

 

Other points to keep in mind

Users will be able to withdraw staked ETH, which was worth more than $20 billion as of mid-January, during the upcoming Ethereum Shanghai upgrade in March. However, it is still being determined whether investors will seize the opportunity, which would be bearish, or will continue holding their ETH, which would be bullish.

Active addresses, forks, functional upgrades, node diversification, speed, and other fundamental blockchain indicators are frequently not taken into account in the price for a short time horizon. For instance, Ethereum’s Merge reduced waste by 99.9% but did not affect the price because it was overshadowed by other economic factors.

However, over a longer time frame, these are unquestionably useful indicators. The price of Ethereum will eventually reflect the work done to improve the ecosystem and blockchain.

In this regard, Ether is a beautiful investment opportunity for late 2023 and 2024, given recent innovations.

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