According to a technical setup provided by independent market analyst Wolf, it appears that the original Ethereum (ETH) token is continuing its steady move towards a reversal of $4,000.
Does the classic bullish reversal pattern work?
A pseudonymous chart analyst discussed the role of at least three levels of support in pushing ETH price close to 30% from the local low of $2,160. These lower prices included the 21-month exponential moving average (EMA), the 0.786 Fibonacci retracement chart that was plotted from the $1,716 down swing to the $4,772 swing high, and the lower bound of the ascending triangle pattern.
ETH/USD daily chart with three support levels. Source: Trading View
Wolf indicated that the triple support scenario could push the Ether price to $3,330. By doing so, it activates a confluence of a classic bullish reversal pattern called the Inverted Head and Shoulders (IH&S).
In particular, the IH&S pattern may contain ether forming three consecutive bottoms, with the middle bottom (head) deeper than the other two (right and left shoulders). Meanwhile, all bottoms will be hanging upside down below a regular resistance trend line called the neckline.
In an “ideal” scenario, a break in the IH&S neckline could push the price of ether to the maximum neck-to-head distance. This puts the price of ETH at $4,000.
ETH/USD daily chart with IH & S settings. Source: Wolf, TradingView
But if ETH is rejected in front of $3000, it means a pullback to the ascending triangle support.
ETH bulls are not from the jungle
As Cointelegraph reported earlier this week, the ongoing Ethereum price rally is part of a broader correction that started after ETH reached an all-time high above $4,850 in November 2021. At the same time, the Ethereum token fell as much as 55, 65% to $2,159 before a 30% retracement to reach the current price levels.
The downturn may be a temporary respite in the overall decline in Ether. As a result, the price may continue lower, according to the bear pennant chart shown in the attached chart below, with a target lower around $2000.
ETH/USD daily chart in a bear flag pattern. Source: Trading View
Several network indicators are in line with bearish expectations. Data from Glassnode, for example, shows that the balance of Ethereum on all exchanges has increased since the beginning of December 2021, coinciding with the decline in the price of ETH.
Ethereum balance on all cryptocurrency exchanges. Source: glass knot
The increased amount of ETH in the stock markets makes it more likely that traders will sell it in exchange for other assets. In particular, the annual decrease in the amount of ETH held by exchanges coincided with an increase in the price of Ether from $730 to over $4,800.
For Ethereum, there are whales against fish
Other negative signals for the Ethereum token are related to the apparent absence of strong buyers in the market. For example, some Glassnode surveys show that since the beginning of 2021, the number of ETH wallets with more than 100 ETH and less than 1,000 ETH has been steadily declining.
The number of Ethereum addresses with a balance of at least 100 ETH. Source: glass knot
Nor is Ethereum immune to current macroeconomic trends. For example, the recent rate cut came primarily after the Federal Reserve’s plans to accelerate the withdrawal of $120 billion per month for the Covid-19 stimulus program by March 2022, followed by at least three price increases.
The US Federal Reserve’s plans to cut investments have dampened investors’ appetite for riskier assets, destroying technology stocks, gold and cryptocurrencies. As a result, Ethereum’s fundamentals are in danger of becoming very bearish.
Related: Altcoins Get 30% Gains When Bitcoin Price Chases $39,000
However, retail investors do not appear to be concerned about macroeconomic developments. On February 1, the number of ETH addresses with a non-zero balance reached a new all-time high at over 74.137 million. Last week, the total number of wallets with at least 1 ETH peaked at around 1.414 million.
The number of Ethereum addresses with a balance of at least 1 ETH. Source: glass knot
Ethereum addresses with a balance of at least 10,000 ETH – real whales – are also showing a slight improvement. More specifically, their number rose from 1,157 to 1,163 during the January 2022 price correction, which indicates a decline in buying by the richest portfolio holders.
Weakness will return
According to Nick, a market analyst at Ecoinometrics, the cryptocurrency market remains in a “risk zone” due to the hawkish Federal Reserve. But there is still hope that the central bank will return to quantitative easing if the stock market drops another 15-20%.