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Blocksmith Says: ETH to Pull Back Relative to BTC

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The key upside level in Bitcoin at the present time is US$25,424. This is the spike low test of 12 May and the hard breakdown on 13 June. If price convincingly breaks up through this level, we will be looking for an upside extension potentially to US$30,000.

Alternatively, it could act as a barrier. The choppy, hesitant move up from the 19 June low at US$17,742 makes push and fail the preferred option from my point of view. Ethereum is leading and has already challenged its own key level of US$1,705 and is now toying with a breakout. And yet, into this attempt daily momentum has been quite hesitant. The preferred view is for a failure, but a clean break of US$1,783 (the 28 July intraday high) will force a rethink.

It might be worthwhile therefore to revisit the Ethereum-Bitcoin spread (XETXBT). After all if this is very lively and proactive, it would point to Ethereum pushing up and onwards here and by extension Bitcoin, although lagging should follow (the correlation between the two series from January is 98%).

The chart below shows the spread and the red rectangle top right marks the range of the April to May top, which we could look at as the resistance zone. I have drawn two legitimate converging lines showing how the spread has been funnelling in a narrowing choppy range. Typically this sort of price action after a strong push is an indication of market hesitancy. Buyers and sellers urgency is equally matched across the pattern, the dialogue between both parties has less conviction, but typically buyers become exhausted and price starts to break down.

In conjunction with this up tilting wedge price pattern momentum has been steadily declining. The preferred view currently is that XET will start pulling back relative to XBT and that blue chip crypto will start to get heavy below respective resistance levels

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