Wrapped Ether (WETH) price exploded at the beginning of the year, soaring almost 41% to mid-January. Bulls were leading the market with around 14 consecutive green bars before profit takers interrupted the rally. This capped the price under the major resistance at the $1,712 level for the rest of the month and into February. Now, WETH price is confronting this major roadblock, but there were certain key levels to watch.
At the time of writing, WETH was trading at $1,600, down 3% on the last day. However, there was a lot of trading activity for the Wrapped Ether in the last 24 hours, gaining 3.13% to $1.44 billion.
Wrapped Ether: Using WETH Funds In DApps
WETH is the wrapped version of Ether (ETH), and like other wrapped tokens, it is the tokenized version of the crypto pegged to the value of the original coin. Wrapped Ether can be unwrapped at any time, with almost every major blockchain having a wrapped version of its native cryptocurrency.
What is Wrapped Ethereum? We explainhttps://t.co/eafbqNRPKK#weth #ethereum #nftinvestor
— Crypto Dreams | NFT Art and Guides (@Cryptodreams20) January 1, 2023
The mechanism of wrapping tokens is the same as the stablecoin concept. Stablecoins are “wrapped USD” such that dollar-pegged stablecoins can be redeemed for fiat dollars at any time. In the same way, WETH and every other wrapped coin can be redeemed for the original asset at any time.
One important thing to note is that wrapped Ethereum is not the same as Ethereum itself. It’s a separate asset that is backed by Ethereum and can be converted back into regular Ethereum at any time.
— kingfischer.nft🦅 (@kingfisch3r) December 23, 2022
The role of wrapped tokens is to solve the problem of low interoperability of blockchains, given that native coins of one chain cannot serve on a different chain. For instance, Bitcoin (BTC) cannot serve on the Ethereum blockchain, and Ether (ETH) cannot serve on the Bitcoin blockchain. Wrapping eliminates this challenge as it tokenizes the coins. It then applies the blockchain’s token standard to the tokenized version of the original coin.
So, what is wrapped Ethereum? Essentially, it’s a way to use Ethereum on blockchains that don’t natively support it. For example, you can use wrapped Ethereum on the Binance Smart Chain or Polygon.
— kingfischer.nft🦅 (@kingfisch3r) December 23, 2022
Ether does not follow the ERC-20 standard, which explains the development of Wrapped Ethereum to increase interoperability between blockchains. This makes Ether usable in decentralized applications (dApps). Citing a recent post on LinkedIn:
Wrapped Ethereum is an Ethereum-based crypto token designed to facilitate the use of Ether funds on Ethereum’s dApps.
Wrapped Ethereum has become popular in the DeFi space. It allows users to access a broader range of decentralized applications and take advantage of different liquidity pools and lending rates. To wrap Ethereum, you need a custodian, such as a merchant, multi-signature wallet, or a smart contract, to hold your Ether. The custodian gives you Wrapped Ethereum in exchange.
Key Levels To Watch As WETH Price Battles Critical Barrier
At the time of writing, WETH was trading at $1,600 after weeks of consolidating under the major resistance at $1,712. The price attempted to break past this roadblock on January 24, but the breakout was premature. The price was rejected by almost 15% to a low of $1,466 on February 13.
This downward correction was a good move long term, as bulls were interested in collecting the token at discounted rates. This explains the attempted breakout that began on February 14. Therefore, investors should expect the WETH price to plummet more toward the $1,492 level before the next rally starts.
The next breakout could see bulls breach this hurdle and target high prices. A daily candlestick close above the major resistance will solidify the positive thesis.
WETH/USDT Daily Price Chart
Beyond the $1,712 level, there are certain key levels to watch for WETH price, starting with $1,877. This level provided critical support in August before the price flipped it into resistance on its way down. Another critical level to observe is $2,012, the peak price that preceded the August downtrend and sent the WETH price below the major resistance.
Wrapped Ether price enjoyed strong support downward offered by the 50-day, 200-day, and 100-day Simple Moving Averages (SMAs) at $1,573, $1,438, and $1,398 levels, respectively. These were potential filling stations where bulls could recharge and increase their buyer momentum.
The 50-day SMA was moving upwards to show more buyers coming in, which was a good sign that the WETH price could increase. The moving average convergence divergence (MACD) indicator was also in the positive region above the mean line. This signified the presence of more buyers than sellers in the Wrapped Ether market.
On the downside, if selling pressure increases, the price could continue its current downtrend, which could see the WETH price losing more value. In the downtrend, the first key level to watch was $1,492, where WETH price found synergy for a breakout that saw the price tag the major barrier in an attempted rally.
Below this level, investors should also watch the $1,223 level. This marked the beginning of the wrapped token’s impressive rally during early January. If the price plunges to this level, this could be a potential recovery zone for the price to rally north for the second time this year.
In the worst-case scenario, the price could go as low as the $1,100 support flow before another uptrend begins.
The relative strength index (RSI) and the MACD moved downward, indicating that some buyers were also exiting the market. The price strength at 48 also tipped the odds in favor of a downtrend, bolstered by the red histograms to show that bears had the advantage.
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