If a technical indicator is correct, Ethereum’s native token Ether will see a 30% drop in price this year.
Bearish pattern depicted by Ethereum chart
ETH’s price dropped to $2,159, a six-month low, on January 24, 2022. However, it rebounded sharply and reached $2,724 days later. This created the “bear flag” chart pattern, which suggests that the price could drop as low as $2,000, or 17% from its current level.
When the price consolidates after a strong downward momentum, a bear flag is displayed on the chart. However, the price eventually falls further after breaking out from the upward range. The price drops by the same amount as the length of the previous decline (called “flagpole”).
Daily price chart for ETH/USD with bear flag setup Source: TradingView
The flagpole’s height is $850 in Ether’s instance. This shifts Ether’s bear flag price target to $2,000. A similar decline was seen in another bear flag formation earlier this year as illustrated in the chart.
Rate increases in the future
Due to Bitcoin (BTC), Ether’s vulnerability to macroeconomic trends, the possibility of Ether reaching $2,000 in the next months is even greater.
According to CryptoWatch data, the positive correlation between Bitcoin and Ethereum has been 0.92 over the past 30 days. This means that Ether predicted the BTC price trends in January 2022 with 92% accuracy.
The last 30 days have seen a significant correlation between Bitcoin and altcoins. Source: CryptoWatch
The Federal Reserve’s dovish policies are at the heart of this bearish outlook. The U.S. central banks decision to withdraw its $120 million a month Covid-19 stimulus program in March and to raise benchmark rates from near-zero levels following that has started to hurt the so-called pandemic winner, which includes tech stocks and gold.
Paul Krugman was a Nobel-prize-winning economist who is also a long-term skeptic about cryptocurrencies. He predicted a Bitcoin price crash for 2022 and noted that it had “disturbing echos of the 2008 subprime crash”.
He stated that regulators made the same mistake as they did with subprime. They failed to protect the public from financial products not understood by the public and that many families could end up paying the price.
For ETH price, $2,000 for the first time
Many analysts believe that Ether will see a bearish trend under the shadows Bitcoin. This is due to the Ethereum token’s involvement in emerging sectors such as decentralized finance (DeFi), and nonfungible tokens (NFT).
Mark Cuban, a billionaire investor, noted last year that Ether could outperform Bitcoin in terms growth.
Eth/L2s is my favorite, and I don’t see the point in arguing about inflation, halving, or the Trilemma. It is more appealing to me because it allows me to see endless possibilities that can change the biz/consumer landscape forever. You need to purchase Eth/L2 to access them. BTC does not have this demand pull
— Mark Cuban (@mcuban) October 17, 2021
Mike McGlone, a senior commodity strategist at Bloomberg Intelligence predicted that Ether would reach $5,000 in 2022, despite Fed’s tapering policy. According to the veteran analyst, the central bank’s rate rise plans were a “win-win situation” for Bitcoin and Ether in comparison to the U.S’s high inflation over the past four decades.
Related: Ethereum hashrate scores new ATH in PoS migration
McGlone expected Ether to reach $2,000 first, before it continued its climb higher. Notably:
“A decline in the stock markets is a top force to stop central bank restraint, with implications […] Price supports exiting 2020 of approximately $30,000 for Bitcoin and $2,000 Ethereum seem solid.” You should do your research before making any investment or trading decision.