Monero Price Goes Parabolic: Indicators Suggest Caution

Summary:

The Monero price is within touching distance of its $477 all-time high as the RSI enters into the nose-bleed territory, suggesting a possible pullback.

The Monero price is within touching distance of its $477 all-time high as the RSI enters into the nose-bleed territory, suggesting a possible pullback.

In a report last week, we looked at the reaction of the Monero price to the news that Greyscale Investments has been exploring the idea of a Monero ETF. A listing would give investors direct exposure to the coin and require Greyscale to hold the coins in trust.

This, along with the recent resurgence of the altcoin market, has led to the Monero price almost hitting our $477 target. Currently, the coin is trading at $472, just $5 shy of its 2017 High.

Early in my career, during the first commodity supercycle, my department head would often remind me to “never be afraid to buy the high” as “markets are usually going up for a reason.” And not to forget, “higher prices lead to higher prices.”

Whilst in principle I agree, I am also reminded to exercise caution when prices rise too fast. The 2021 performance of the Monero price is eerily reminiscent of the rally in 2017.

The daily chart shows us that the price set-off to all-time highs at the start of both years. A correction followed. The Monero price then rallied again to set a new record before correcting a second time. This second correction was the trigger for the price to embark on a parabolic move into the current price range.

There are more similarities between 2017 and 2021, and as Mark Twain famously said:

“History Doesn’t Repeat Itself, but It Often Rhymes.”

Monero Price Indicators

The Relative strength Index (RSI) on the weekly time frame has reached a level last seen during the bull run of 2017. The current reading of 86.79 is indicating the market is overstretched and may be due a period of price consolidation or correction.

The Average True Range (ATR) has increased to $55.34 and its highest point in three years. The gauge, which measures volatility, first crossed this threshold in December 2017, the same week the Monero price peaked.

This is not to say that the price can’t continue higher in the immediate future. However, when markets turn, they often do so ferociously. Investors may wish to monitor the situation closely as a material pullback from this level could result in a sharp correction.