According to Wolf, an independent market analyst, Ethereum’s native token Ether is ready to continue its rebound toward $4,000 according to a technical setup.
Is there a classic bullish reversal pattern?
A chart analyst who is not named was able to discuss the role of at most three support levels in driving the ETH price upwards by almost 30% from its local bottom at $2,160. These price floors comprised a 21-month exponential moving Average (EMA), the 0.786 Fib level in a Fibonacci retracement chart drawn from $1716-swing low up to $4,772-swing highest, and the lower boundary for an ascending triangular pattern.
Daily price chart for ETH/USD with the three-supports Source: TradingView
Wolf pointed out that Ether could reach $3,330 under a triple-support scenario. The confluence could trigger a bullish reversal setup known as inverse head and shoulders (IH&S).
The IH&S could see Ether form three consecutive valleys. The middle trough (the top) is deeper than the two other troughs (the left and right shoulders). All troughs will be upside-down below a common resistance trendline called the neckline.
A break above the IH&S neckline could push the Ether price as high as the maximum distance from the neckline to the head in a “perfect” situation. This would bring the ETH price to $4,000.
Daily price chart for ETH/USD with IH&S setup Source: Wolf, TradingView
However, ETH could be rejected during the $3,000 mark. This would signal a pullback towards the ascending triangle support.
Bulls from ETH aren’t far away
Cointelegraph reported earlier this week that Ether’s price rebound is part of a larger correction that began after ETH hit a record high of $4,850 in November 2021. The Ethereum token plunged by as much as 55.65%, to $2,159, before rebounding upwards by 30% to its current price levels.
This could be a temporary respite from Ether’s overall downtrend. According to the attached chart, Ether’s price could still fall, as a “bear-flag” setup shows. The downside target is near $2,000.
Daily price chart for ETH/USD featuring the ‘bear flag pattern. Source: TradingView
Many on-chain indicators support the bearish outlook. Glassnode data, for instance, shows that Ethereum balances on all exchanges have been increasing since December 2021. This coincides with the decline in ETH’s prices.
All crypto exchanges have Ethereum balance. Source: Glassnode
Increasing numbers of ETH being held by exchanges increases the possibility of traders selling them to buy other assets. A year-long drop in ETH reserves in exchanges has coincided with an increase in Ether prices from $730 to more than $4,800.
Ethereum is whales against fish
The market lacks influential buyers, which is a sign that the Ethereum token has more downside risks. Glassnode’s metrics reveal that there has been a steady decline in the number of Ether wallets holding more than 100 ETH, and less than 1000 ETH since 2021.
Number of Ethereum addresses that have a balance of 100 Ethereum. Source: Glassnode
The ongoing macroeconomic trends are not insurmountable for Ether. Its recent price fall was mainly due to the Federal Reserve’s plans for accelerating the withdrawal of its $120 Billion a Month COVID-19 stimulus program until March 2022. This will be followed by at least three rate increases.
Investors’ appetite for riskier assets has been impacted by the U.S. central banks tapering plans, which have adversely affected tech stocks, gold, and cryptocurrencies. The fundamental outlook for Ethereum is now extremely bearish.
Related: Altcoins gain 30% as Bitcoin price chases $39,000
Retail investors are not affected by macroeconomic changes. The number of ETH addresses that have a balance of at least 1 ETH reached a record high of 74.137million on February 1. The total number of wallets that have at least one ETH reached 1.414 million last week.
Ethereum number of addresses that have a balance of at least 1 ETH. Source: Glassnode
The real whales, Ethereum addresses that have at least 10,000 ETH in balance show a slight improvement. Their numbers rose from 1,157 to 1,163, indicating that the most wealthy wallet holders were buying the dip.
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Nick, an Ecoinometrics market analyst, said that the Fed’s hawkish turn has put the cryptocurrency market in a “danger area”. If the stock market drops another 15%-20%, there is still hope that central bank will once again switch over to quantitative easing.
Nick stated in his latest analysis that “it is only when there is blood on streets that you can find good chances to make money.”
“Even though there may be more downside, or simply a prolonged period with weak price action before the Fed returns to its senses,” now is a good time. You should do your research before making any investment or trading decision.