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Ethereum is now trading at $4,600, up more than 120% over the past two months.
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Van de Poppe believes ETH is overextended. Charts show the risk of a 20-30% decline.
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He recommends selling a part of your holdings in order to secure gains, and prepare yourself for re-entry at lower levels.
After a strong rally, Ethereum is on the verge of its all-time record high. However, well-known trader Michael van de Poppe urges investors to be cautious. In a recent market update, he explained why ETH could be overextended short-term and why taking partial profit might be the better move.
Ethereum’s Rally and Mispricing Risques
Ethereum has risen over 120% in just two months from $1,500 to $4,700. Van de Poppe compared Ethereum’s current surge with its 2022 lows, when the asset traded near $1,300, after falling from $4,800. The downside risk at that time was limited and the upside potential was enormous.
He said that Ethereum now appears “slightly overpriced on the upside.” When ETH was hovering around $4,000 earlier in the year, it suffered a sharp 65% decline to $1,380. Van de Poppe warns of the increased risk involved in buying at these levels.
Why Profits Matter
The trader emphasized the importance of securing gains instead of holding through volatility. “If you don’t take profits, you run the risk of being stuck in the next bear market,” said the trader, noting that compounding is a better strategy over simply hoping for higher price.
To illustrate, Van de Poppe shared a portfolio scenario. He said that selling 30% of ETH after a major rally would cushion the impact of a subsequent correction, and provide cash to purchase back at lower prices. Investors can accumulate more ETH while keeping their risk under control.
On the charts, Ethereum shows signs of overboughtness. Van de Poppe noted high RSI values on multiple timeframes and noted that trading volume suggests shorts have been liquidated, while longs are heavily uncovered.
He also cited past examples when ETH broke through previous highs, only to crash 40-50% soon after. He said that a drop to the $3,600-$4,000 area would not be unexpected.
Rotation Into Altcoins Likely
Van de Poppe said that money flows in crypto move from Bitcoin to Ethereum, then onto altcoins. He said ETH has entered a range phase, where liquidity is shifting to ecosystem projects such as Optimism and Arbitrum that still have upside potential. He said that nothing goes up forever. “Securing profits now will ensure you are safe and not sorry.”
Related: These 8 Altcoins Could 4x in 4 Months, Says Michael van de Poppe
Van de Poppe believes Ethereum is strong in the long-term, but argues that short-term risks are to the downside. He advises selling 20-40% of ETH, locking in profits and remaining flexible for the next purchase opportunity.
