After reaching its record high of $4,867 on November 10, 2021, Ethereum’s native token Ether has fallen by more than 20%. ETH’s sharp price decline does not mean that it cannot set a new record in the coming months, as many technical, macroeconomic, and on-chain indicators suggest.
These indicators project Ether’s price to reach $5,000 in the first quarter 2022, while others see support for the bullish bias.
Wedge falling for ETH price painting
The recent price correction by Ether is pointing to a classic bullish reversal pattern, the “falling wedge”.
The falling wedges are essentially a wide-ranging pattern that begins at the top and contracts as the price falls. The result is that the price action takes on a conical shape, with the reaction highs and lows becoming more convergent. Only when the price breaks through the resistance of the wedge, traders can recognize a bullish bias.
Therefore, there are high expectations that the ETH price will break through its falling wedge resistance during the next sessions. It would then rise to the maximum distance between the upper and lower trendlines of the wedge, measured from the breakout point.
Literally unchanged…$ETH is going to $5k pic.twitter.com/11mAQiJxJS
— Kong Trading (@KongBTC), January 4, 2022
This puts Ether’s price target at approximately $5,000
Drop in ETH deposits to exchanges
Traders move their tokens to exchanges when trading them for fiat, stablecoins, or other cryptocurrency.
A higher volume of transactions to crypto trading platforms generally indicates a high selling sentiment. If token transactions plummet, it indicates a strong market holding sentiment.
Glassnode, a blockchain analytics service, has revealed that on-chain Ether deposits to Exchanges fell to its lowest level in 23 months on Jan.
ETH number of foreign exchange deposits. Source: Glassnode
Another Glassnode metric, which tracks Ether addresses sending Ethereum to exchanges, also saw declines in the past 30 days. This coincides with the drop in the ETH/USD rates of nearly 11%.
Number of Ethereum addresses that send to exchanges. Source: Glassnode
ETH’s total balance on all exchanges is in a downtrend depuis Aug. 2020. This suggests that ETH investors are in it long-term as its price rose from almost $400 to just over $3,800 during the same time.
Ethereum balance on exchanges. Source: Glassnode
Are you looking for cheap money?
Ether’s plunge of $1,000 plus between Nov. 2021 and now was largely due to the Federal Reserve’s hawkish turn.
To stem rising inflation, the U.S. central banking decided to accelerate the dismantling of its $120 million a month asset purchasing program. It then followed with three rate increases in 2022 from near-zero levels. Similar price rises in Ethereum, Bitcoin (BTC), and other crypto markets were caused by its loose monetary policy.
Weekly price chart for ETH/USD/BTC/USD Source: TradingView
The Fed’s attempts to control inflation from 6.8% with three rate increases may not have a long-term impact on Bitcoin and Ethereum prices. Antoni Trenchev is the managing partner at crypto lender Nexo and believes that cheap money will be around for the long-term.
“The No. He stated that central bank policy is the No. He also said:
“Cheap money will not go away, which has enormous implications for crypto. The Fed lacks the strength and resilience to withstand a 10%-20% stock market collapse, as well as adverse reactions in the bond market.
Thomas Peterffy, a billionaire of Hungarian descent, also stated that investors should allocate at most 2% to 3% of their net portfolio for cryptocurrencies such as BTC or ETH to protect themselves from fiat money.
Related: More billionaires turn to crypto because of fiat inflation fears
Ray Dalio, founder of Bridgewater Associates, revealed that he had been keeping BTC and ETH in a portfolio to protect against cash devaluation due to higher inflation.
com. You should do your research before making any investment or trading decision.