Meanwhile, other altcoins also corrected significantly in the past 24 hours as investors probably fear that XRP may not be the only coin on the SEC's radar.
Ether (ETH) dropped by 14% on Dec. 24 and then bounced at $550. While Chainlink corrected 38% toward a recent low of $8. Sushiswap (SUSHI) saw the largest correction and flash crash dropping from $2.75 to $1.10 — a crash of 61%.
So the question now is whether the XRP debacle will continue to hurt the altcoin market in the short term. Let's take a look at the technicals to identify the current support and resistance areas.
Ether looks for a new higher low after the recent drop
The weekly chart for Ether was looking great and didn’t change through the recent dropdown. In that regard, the construction is still bullish and trending up.
The recent high at $675 confirms a new higher high, after which a higher low will ensure the further continuation of the bull market for Ether. This higher low is most likely going to happen at the area around $450. This is the previous resistance zone eager to flip for support before continuation is going to happen.
However, to have such a correction, Bitcoin (BTC) should see a severe correction. Otherwise, it’s unlikely this scenario will occur. As long as Ether remains above $450, a renewed rally can push Ether towards $1,200-1,300 next year.
$620 resistance is the next crucial level
Ether’s daily chart is looking less bullish as it broke beneath the crucial threshold of $620, which should have been broken for immediate bullish continuation. Breaking above $620 would all but guarantee a new high for ETH price.
However, the previous resistance zone and rejection at $620 suggests that more downside is likely in the short term.
Therefore, the crucial support zone to hold for Ether is now the $550 area as that’s the recent higher low. As long as that sustains, the bullish case is still on the table.
The price will likely drop to the $450 region if $550 fails as support after another rejection at $620. This $450 level is the previous resistance zone and a significant support area on the weekly timeframe.
Bitcoin dominance going parabolic
The weekly chart of Bitcoin dominance shows a breakthrough toward 70%. The primary reason for this rally is the weakness of XRP since it's the second-biggest altcoin.
The dominance chart will continue its surge if XRP continues to plunge. At the same time, the weakness of ETH/BTC is also not helping the case for an altseason in early 2021.
However, one thing to watch for is the potential top in the Bitcoin dominance chart as it typically occurs in December. Since 2016, the dominance chart has peaked in December. After this top, altcoins saw massive gains in Q1.
The ETH/BTC pair is key here because it has to bottom out before a potential rally in altcoins.
Unfortunately, Ether’s weekly chart shows a clear breakdown below support on the BTC pair, indicating that further weakness for altcoins is likely.
However, as long as ETH remains above 0.021 sats, bullish arguments can still be made for more upside as the upwards construction would still be intact.
Ideally for ETH, a reclaim of the 0.026 sats level would indicate strength and further continuation, so traders should watch that level first. If that fails to hold, the next area to watch is the 0.021 sats zone alongside the $450 region.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.