Tim Beiko, a key developer for Ethereum, has revealed that the next planned update for Shapella would take place on February 28. When epoch 56832 arrives, the Shapella network update will become operational on the Sepolia network.
The names Shanghai and Capella (Shapella) are now being considered for the forthcoming Ethereum hard split. On the execution layer client side, the fork is referred to by the name Shanghai, whereas on the consensus layer client side, the upgrade is referred to by the name Capella.
On the execution layer, some major Ethereum improvement proposal (EIP) enhancements include push withdrawals on the Beacon Chain and warm coinbase. Warm coinbase should not be confused with the cryptocurrency exchange. By using a new “system-level” operation type, the push withdrawals will make it possible for validators to withdraw funds from the Beacon Chain and send them to the Ethereum Virtual Machine. Warm Coinbase, on the other hand, has the potential to be a game-changer by lowering the network costs that builders must pay.
The piece of software known as Coinbase is what builders on the network use to be credited with newly issued coins. Each and every new transaction on the network is required to have many interactions with the Coinbase program. Because the program takes more time to “warm up,” the charge for the first engagement is higher than the fee for subsequent interactions, which decrease as the number of contacts increases. However, with the implementation of EIP-3651, the coinbase software will stay warm from the start, and users will be required to pay a lesser gas charge in order to access it.
The initial unique historical roots have been replaced by complete and partial withdrawals for validators, as well as independent state and block historical accumulators. These are some of the major modifications that have been made to the consensus layer.
The ability to make a partial withdrawal enables validators to continue verifying transactions while withdrawing ether (ETH) rewards in amounts greater than 32 ether. Validators have the option to entirely abandon the system, collect all 32 Ether and awards, and call it quits if they wish to make a full withdrawal.
The next update will provide validators the ability to transfer their staked Ether (stETH) from the Beacon Chain to the execution layer so that they may spend it. In addition, the update would bring about modifications to the execution and consensus layers, as well as the addition of new functionality; hence, it would be an essential upgrade after the Merge.
In order to take advantage of the Sepolia update, however, stakers and non-stakers who run nodes are need to bring their nodes up to date with the most current versions of the Ethereum client. The next phase would be the release of the Shanghai upgrade on the Ethereum Goerli test network, which is anticipated to begin in the month of March. This would be the following step after the deployment of the Sepolia upgrade.
Since the completion of the Merge network upgrade six months ago, the quantity of ether (ETH), the second-largest cryptocurrency in terms of market value, has been steadily decreasing across exchanges. In September 2022, the Ethereum network went through a significant upgrade that consisted of switching from a proof-of-work (PoW) network to a proof-of-stake (PoS) network during an event that was referred to as the Merge.
The quantity of accessible ETH that is now languishing on exchanges continues to decrease, as shown by on-chain data that was published by the cryptocurrency analytics company Santiment. Since the Merge, the amount of ETH available on exchanges has decreased by 37%. It is a positive indicator when there is a consistent decrease in supply on exchanges. This is because there is less ETH accessible on the market for buying and selling.
Before the Merge, there were a total of 19.12 million ETH worth $31.3 billion trading hands on exchanges in the month of September. As of the second week of February, the number had dropped to 13.36 million ETH, which corresponds to a value of $19.7 billion.
A significant portion of the Ethereum supply is now being shifted into self-custody, while the Shanghai upgrade is drawing near and many traders choose staking as an investment strategy instead. The next version for Ethereum, known as Shanghai, is expected to release in the month of March. Stakeholders and validators will be able to remove their holdings from the Beacon Chain after the Shanghai hard fork, which will combine more upgrade suggestions for network advancements and enable for this functionality.
At the now, 14% of the entire supply, or 16 million ETH, is staked on the Beacon Chain. This amounts to nearly $25 billion at the prices that are currently in effect, and it is a significant quantity that will gradually become liquid following the Shanghai hard fork.
Since it became deflationary after the London upgrade, the total quantity of ETH on the market as a whole has also decreased, in addition to the ongoing decrease in the amount of ETH stored on exchanges. The fee-burning mechanism that was first implemented as part of Ethereum Improvement Proposal (EIP)-1559 is where the deflationary model can be found.
Since the London upgrade in August 2021, a total of 2.9 million ETH has been burnt, which would have had an equivalent value of around $4.5 billion in today’s currency.
Ethereum’s native token Ether (ETH) looks poised to hit $3,500 in the coming sessions as it reclaimed a historically strong support level on Feb. 5.
Ethereum price back above key trendline
ETH price rising above its 50-week exponential moving average (50-week EMA; the red wave in the chart below) means the price also inched above $3,000, a psychological support level that may serve as the ground for Ether’s next leg up.
ETH/USD weekly price chart. Source: TradingView
The 50-week EMA was instrumental in maintaining Ether’s bullish bias across 2020 and 2021. For instance, it served as a strong accumulation zone during the market correction in the second and third quarters last year, pushing ETH price from around $1,700 to as high as $4,951 (data from Binance).
As a result, reclaiming the 50-week EMA as support has opened up the possibility of additional upside moves toward the next resistance target near the 20-week EMA (the green wave in the chart above), which comes to be around $3,500.
Meanwhile, a decisive break above $3,500 could have ETH/USD test a horizontal resistance trendline that constitutes an ascending triangle pattern. Such a move would put the Ethereum token en route to its previous record high near $5,000.
ETH/USD weekly price chart. Source: TradingView
Jobs report could play spoilers
The latest buying in the Ethereum market appeared as strong earnings from Amazon.com Inc. boosted investors’ confidence in riskier assets, including technology stocks and Bitcoin (BTC).
ETH/USD versus Nasdaq Composite weekly price chart. Source: TradingView
Ether rallied by more than 11% after the earnings release on Friday. The price jump also boosted its week-to-date profits higher to nearly 16%, its best week since August 2021.
However, the rally appeared in conflict with the latest nonfarm payroll (NFP) data, also released on Friday. Despite fears that Omicron would curtail business activity, the U.S. companies added 467,000 jobs in Jan. 2022, beating market expectations by a wide margin.
U.S. nonfarm payroll data. Source: Bureau of Labor Statistics, Bloomberg
The NFP report underscored how difficult it is for the Federal Reserve to forecast interim changes in the economy. Nonetheless, it also ensured that the U.S. central bank would go ahead with its plans to raise short-term benchmark rates at its March 15-16 meeting.
In a press conference last month, Fed chair Jerome Powell said they would continue raising interest rates after the March hike, faster than they did during the past decade if the labor market looks stronger and inflation remains above their 2% target.
Related: US Federal Reserve is making some analysts bullish on Bitcoin again
The news prompted a selloff across riskier assets, with data showing that cryptocurrency investment products processed outflows worth $61 million every week in January 2022.
“It’s important to note that there’s still significant investor demand for digital asset investment products, but institutions seemingly reacted to the Fed by offloading their positions,” noted Michael Sonnenshein, chief executive of Grayscale Investments.
Crypto investment vehicles performance in Jan. 2022. Source: CryptoCompare, FT
The pullback scenario
The bearish scenario with the price below the 50-week EMA could have ETH test its ascending channel’s lower trendline near $2,500 as support. Meanwhile, a decisive close below the trendline would bring Ether’s Fibonacci retracement levels closer, as shown in the chart below.
If the bearish scenario unfolds, the possibility of the ETH/USD pair dropping below $2,000 cannot be ruled out.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Data from Cointelegraph Markets Pro and TradingView showed BTC/USD returning to $38,000 Friday, up over 2% in 24 hours.
The pair saw a strong comeback overnight after suffering at the hands of U.S. stock sellers for two days straight.
A similar turnaround for tech stocks later on Thursday, with Amazon gaining 15%, set the stage for Bitcoin to rise in step, with BTC proponents nonetheless criticizing the over volatility of some equities.
The rebound meanwhile could go some way to averting a deeper retracement for Bitcoin, this nonetheless favored by Cointelegraph contributor Michaël van de Poppe as a “likely” move.
“Overall, most likely case is another sweep of the lows for Bitcoin around $30-33K and after that we create a bullish divergence and the fun continues,” he argued late Thursday.
For a paradigm shift to occur, he reiterated that the area around $38,600 should still be broken and held.
“BTC is still forming an indecision candle just below the key resistance of ~$38650,” Fellow trader and analyst Rekt Capital said as part of his latest tweet about the same level.
“That said, for the time being BTC is able to hold the top of last week’s candle as support. Technically, BTC is still inside the 28000-$38000 range until further notice.”
Pentoshi took on longer timeframes, punctuating months of cautious forecasts on BTC with fresh hope of a resurgence.
As $BTC enters the green zone. My Bera watch ends, and bulla watch begins
Crazy how that works. Months of macro based bear posting after a deviation.
Soon most will think it’s over, when it really just begins
Billionaires, nations, institutions compete for scarcity
(X) pic.twitter.com/0vcuRAahw6
— Pentoshi DM’S ARE SCAMS (@Pentosh1) February 3, 2022
As Cointelegraph reported, on-chain indicators continue to call such a resurgence ahead of time this week, breaking out of two months of downside.
Ethereum hits two-week high above $2,800
On altcoins, Ether (ETH) and Solana (SOL) led on the day, both posting 24-hour gains above 5%.
Related: Bitcoin whales buy at $38K as BTC supply per whale hits 10-year high
ETH/USD outpaced BTC/USD to pass $2,800, as trader and Bollinger Bands creator John Bollinger suggested that current levels were a satisfactory buy zone for his ETH allocation.
This seems like a good add-to spot for my $ethusd position.
— John Bollinger (@bbands) February 3, 2022
“Ethereum is acting even stronger than Bitcoin here,” Van de Poppe added, as the largest altcoin by market cap reached its highest levels since Jan. 21.
Ethereum’s native token Ether (ETH) has plunged by more than 20% after establishing its record high at around $4,867 on Nov. 10, 2021. Nonetheless, the sharp price pullback does not mean ETH can’t pursue a new record high in the next few months, as several widely-tracked technical, macroeconomic, and on-chain indicators suggest.
One of these indicators envisions Ether’s price reaching $5,000 in the first quarter of 2022 while others look are poised to support the bullish bias.
ETH price painting falling wedge
Ether’s recent price correction is painting a potential classic bullish reversal pattern known as “falling wedge.”
In detail, falling wedges begin wide at the top but contract as the price moves lower. As a result, the price action forms a conical shape that trends lower as the reaction highs and reaction lows converge. Traders realize a bullish bias only after the price decisively breaks above the wedge’s resistance.
As a result, expectations remain high that the ETH price would break above its falling wedge resistance in the coming sessions. In doing so, it would rise by as much as the maximum distance between the wedge’s upper and lower trendline when measured from the breakout point.
Literally unchanged…$ETH is going to $5k pic.twitter.com/11mAQiJxJS
— Kong Trading (@KongBTC) January 4, 2022
That roughly puts the price target for Ether at $5,000.
ETH deposits to exchanges drop
Traders typically move their tokens to exchanges when they intend to sell/trade them for either fiat, stablecoins, or other cryptocurrencies.
Generally, a higher number of transactions made to crypto trading platforms reflects a high selling sentiment in the market. Conversely, if the token transactions plunge, they show a strong holding sentiment in the market.
Data collected by blockchain analytics service Glassnode show that the number of on-chain Ether deposits to exchanges dropped to its 23-month low on Jan. 3.
ETH number of exchange deposits. Source: Glassnode
Additionally, another Glassnode metric that tracks the number of Ether addresses sending ETH to exchanges also reported declines over the last 30 days, the same period that saw the ETH/USD rate dropping nearly 11%.
Ethereum number of addresses sending to exchanges. Source: Glassnode
Meanwhile, the total Ether balance across all the exchanges has been in a downtrend since Aug. 2020, suggesting that ETH investors are in it for the long haul as its price rose from nearly $400 to a little over $3,800 in the same period.
Ethereum balance on exchanges. Source: Glassnode
Cheap money here to stay?
Ether’s $1,000-plus plunge from Nov. 2021 to date majorly came in the wake of the Federal Reserve’s hawkish turn.
The U.S. central bank decided to accelerate the unwinding of its $120 billion a month asset purchase program, followed by three rate hikes in 2022 from its near-zero levels, to stem rising inflation. Its loose monetary policy was one of the primary catalysts behind similar price rallies across Ethereum, Bitcoin (BTC), and other crypto markets.
ETH/USD and BTC/USD weekly price chart. Source: TradingView
But the Fed’s efforts to tame inflation from its current 6.8% level with three rate hikes may not impact Bitcoin and Ethereum prices in the long run. For example, Antoni Trenchev, managing partner of crypto lender Nexo believes that cheap money is here to stay.
“The No. 1 influencing factor for Bitcoin and cryptocurrencies in 2022 is central bank policy,” he told Bloomberg. He added:
“Cheap money is here to stay which has huge implications for crypto. The Fed doesn’t have the stomach or backbone to withstand a 10%-20% collapse in the stock market, along with an adverse reaction in the bond market.”
Hungarian-born billionaire Thomas Peterffy also said that investors should allocate at least 2-3% of their net portfolio to cryptocurrencies like BTC and ETH in case the fiat money “goes to hell.”
Related: More billionaires turning to crypto on fiat inflation fears
Additionally, Bridgewater Associates founder Ray Dalio revealed that he has been holding BTC and ETH in his portfolio against the risks of cash devaluation led by higher inflation.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Shark Tank celebrity Kevin O’Leary, also known as Mr. Wonderful, says he would be ready to increase his crypto allocations up to 20% as soon as there are clearer regulations around stablecoins.
O’Leary, a former Bitcoin (BTC) skeptic, is now a vocal advocate of cryptocurrency, which currently makes up over 10% of his investment portfolio.
Mr. Wonderful is particularly focused on U.S. dollar-pegged stablecoins, which he sees as an effective hedge against rising levels of inflation. By staking stablecoins, he pointed out, he can make up to 6% returns. He explained to Cointelegraph:
”When inflation is 6%, you’re buying power 12 months from now is 6% less. And that’s all lot […] I’m a huge advocate for solving this problem with stablecoin.”
A clear regulatory framework would allow O’Leary to convert large cash positions into stablecoins. Currently, however, he cannot invest beyond 5% into stablecoins because of regulatory constrains.
“My own compliance department consider stablecoins as an equity no different than a stock,” he said.
According to O’Leary, his excitement around stablecoins is shared by many institutional investors, who are “working quietly in the background” and waiting for regulators to make their move.
In addition to stablecoins, Mr. Wonderful is also an investor in Bitcoin, Ether (ETH), and other cryptocurrencies. However, due to their underlying volatility, these cryptos are unlikely to make up a large portion of an institutional investor’s portfolio, he claimed.
“You’re not going to get there to a 20, 30% in Bitcoin in an institutional or sovereign mandate, you’re just not. Stablecoins have that potential,” he explained.
Watch the full interview on our YouTube channel and don’t forget to subscribe!
Ethereum is having difficulty keeping its richest investors in line as its native token Ether (ETH) hints at logging more losses in the near term.
Blockchain data analytics service Glassnode revealed that the number of Ether addresses that hold at least 1,000 ETH dropped to 6,292 this Monday, the lowest reading since April 2017. At its year-to-date peak, the numbers were 7,239 in January.
Number of Ethereum addresses with balance of at least 1K ETH. Source: Glassnode
On-chain analysts typically observe Ether distributions among addresses to realize retail and institutional sentiments. They consider wallets that hold above 1,000 ETH (around $3.92 million at currency exchange rates) as “whales,” primarily for their ability to influence interim market trends via large sell/buy orders.
But as the numbers of these so-called whales drop, it reflects an ongoing selling trend among the richest Ethereum wallet owners. For instance, the number of Ether addresses that hold at least 10,000 ETH (or around $39.20 million) has also plunged, from 1,208 in June to 1,156 at the time of this writing, marking an almost 4.5% decline.
Number of Ethereum addresses with balance of at least 10K ETH. Source: Glassnode
But, on a year-to-date timeframe, the numbers have gone up from 1,065 to 1,156, just as the cost to purchase one Ether, in the same period, has jumped nearly 450%.
Small investors are accumulating
Unlike whales, wallets that hold Ethereum tokens in small quantities have been at the forefront of Ether’s 2021 price rally.
For example, Glassnode’s data shows that the number of Ether addresses with a non-zero ETH balance reached an all-time high of over 71.23 million on Monday. That included wallets with at least 0.01 ETH (~$40), whose numbers shot up to 20.31 million versus 10.66 million at the beginning of this year.
Meanwhile, addresses that hold at least 0.1 ETH (~$400) jumped to 6.44 million this Monday compared to 3.62 million on Jan. 1, 2021. That is almost a twofold rise, signaling a higher retail interest in the world’s second-largest cryptocurrency.
Number of Ethereum addresses with balance of at least 0.1 ETH. Source: Glassnode
ETH eyes bullish reversal
The latest decline in Ethereum whales appeared as Ether struggled to close decisively above $4,000, its psychological resistance level.
On Tuesday, ETH/USD dropped by over 3.27% to an intraday low of $3,880. Its drop came as a part of a wider correction that started after Ether tested a downward sloping trendline as resistance on Dec. 23.
The chart below shows that the trendline is a part of a descending channel that appears like a “falling wedge.”
In detail, falling wedges are technically bullish reversal patterns that appear after the price trends lower inside a trading range featuring two converging trendlines. The instrument in concern eventually breaks above the structure’s upper trendline ahead or after reaching the apex (where two trendlines converge).
The profit target in a rising wedge scenario is generally obtained after adding the maximum distance between the structure’s upper and lower trendline to the breakout point. That puts the ETH price en route to the $4,200-5,000 range, depending on its breakout level.
Nevertheless, Ether’s price still has enough room to decline, toward $3,200 in the worst-case scenario. The level is where Wedge’s trendlines converge.
Related: 3 reasons why Ethereum price can drop below $3K by the end of 2021
Meanwhile, independent market analyst Pentoshi says that nothing concrete can be predicted for Ether now as it remains stuck between a “bear contested” and a “bull contested” area, as shown in the chart below.
“Maybe it’s the bottom. Don’t care,” tweeted Pentoshi on Tuesday.
“I don’t like when them market gives this many times to buy an area with important historical context like this Would rather pay for confirmation.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
The narrative surrounding Ether (ETH) of it fast transforming into an independent asset has been around for some time now. However, the last few months have seen this notion gain an increasing amount of mainstream traction, as is best highlighted by the fact that, since Oct. 1, ETH has showcased substantial northbound movement against Bitcoin (BTC).
To put things into perspective, toward the beginning of November, the one-month realized correlation between the BTC/ETH pair dipped as low as 60%, its lowest ever in the currency’s decade-old history. Furthermore, since the start of the year, while Bitcoin registered gains of 105%, Ether went up by a whopping 505%, thus outperforming the flagship crypto by nearly five times.
Ether gaining an upper hand is perhaps best reflected in that, over the course of the last couple of months, the ETH/BTC pair has continued to trend north, despite there being a major market dip across the board since the start of December. In this regard, even when the value of BTC fell back below $50K, the ETH/BTC pair price continued to accrue value, quickly rising by around 13%, thus hitting a three-year high.
The ‘flippening’ narrative
Speaking with Binance’s research wing, a spokesperson for the cryptocurrency exchange told Cointelegraph that the above stated activity — wherein ETH has been able to muster a lot of independent market support against Bitcoin — has been quite unusual considering that the ETH/BTC pair tends to only rally during bull runs, adding: “This is not to say that ETH has already decoupled from BTC, but it provides a clear-cut glimpse that not all alts are correlated to BTC movements.” The spokesperson further elaborated:
“It’s important to acknowledge that ETH may no longer be considered as an alt, but it’s a token with its unique characteristics. The key drivers for the recent rise can be attributed to the growing Metaverse, GameFi, and NFT narratives, which are all largely built on the ETH network.”
Although ETH is still far from being fully decoupled, the spokesperson highlighted that such a vision can no longer be considered just a pipedream, as the overall narrative is already beginning to shift thanks to Ethereum’s new emerging use cases and adoption.
Not only that, the analyst also opined that a similar scenario could very well play out for a number of other prominent altcoins as well: “Just like in traditional equities, there will be no distinction between ‘BTC and alts,’ but rather with prices of all tokens being independently driven by both systematic and unsystematic risks.”
Igneus Terrenus, head of communications for cryptocurrency exchange Bybit, told Cointelegraph that, at the end of the day, the value of a digital asset is determined by its supporters and investors, and with more than six years of development and a plethora of smart contract applications built atop Ethereum — including those related to fledgling spaces like DeFi and NFTs — the premium altcoin has now developed an identity and ecosystem of communities that exist independently from that of BTC, particularly over the past year. “Overlaps will still remain, but there is now sufficient difference to sustain a divergence in price movement,” Terrenus said, adding:
“As the demographics of BTC and ETH camps continue to diverge, we shall also expect to see their respective price actions gradually disentangling even further.”
ETH is uniquely positioned in the market
Netta Korin, co-founder of Orbs, a public blockchain infrastructure, highlighted to Cointelegraph that ETH’s straight-up northbound movement since Oct. 1 continues to add fuel to the narrative that Ether truly could flip Bitcoin sometime in the near future. Even though a vast majority of other cryptocurrencies continue to exhibit a high degree of correlation with BTC, she said that Ether has clearly proven to be “oil for DApps.”
Korin added that Ethereum has long passed Bitcoin as the most used blockchain and, even when it comes to recovery after periods of market cooldowns, it has demonstrated significantly better performance than BTC. She further stated that the upcoming Eth2 upgrade will “enhance the demand perspective,” adding:
“New supply and demand mechanics of Ethereum and its position as the leading financial infrastructure and a crucial backbone for some of the most popular projects, like MakerDAO and Uniswap make ETH decoupling a potential reality.”
Korin also pointed out that Ethereum is a key player in DeFi and a central platform for the NFT space, which seeks to build financial applications for lending and trading on the blockchain — of which more than 3,600 DApps are currently running atop the Ethereum ecosystem. Not only that, Ether could also be an inflation hedge due to its links to DeFi and the market for NFTs, two areas that will grow exponentially in 2021, in her view. “Ether is on pace to overtake Bitcoin as the top cryptocurrency by market capitalization,” she concluded.
Could ETH’s continued independence help spur BTC?
If ETH’s decoupling is an imminent reality, will this impact a potential BTC bullish move if the ETH/BTC pair starts to grow? On the subject, a member of Binance’s research wing pointed out to Cointelegraph that, if the price spread between the ETH/BTC pair continues to grow at its current trajectory, it would still not be correct to say that the development could lead to an overall growth spurt for BTC, noting:
“Large investors will continue to buy BTC regardless of how bearish it looks on the charts or how other tokens are performing. They do so because BTC remains […] the pioneer in the space and market driver. This is further fuelled by the narrative of BTC being a digital store of value and hedge against inflation.”
That being said, the Binance analyst did concede that, when considering the other end of the spectrum, they still expect to see a feeding frenzy amongst both retail and institutional investors as they rush in to increase their exposure in ETH.
Ether’s increasing market clout has not gone unnoticed by major financial institutions around the globe, with U.S. banking giant JPMorgan Chase claiming in a recent report that ETH could be a better bet for investors than BTC, especially as the digital asset market continues to mature and evolve. According to the company’s research analysts, ETH’s fivefold rise in comparison to BTC over the last year has resulted in the altcoin accruing a market cap that is nearly half of that of Bitcoin’s.
Another aspect of ETH that has many investors starry-eyed is the network’s potential to gain a major foothold in the burgeoning Web 3.0 ecosystem, which is extremely popular at the moment even though its real-world implementation is still years away. While nobody can for sure ascertain how this space will continue to evolve, there is a good chance that ETH will capture much of the value associated with the decentralized Web 3.0 in the future.
Related:Status check: Ethereum in full deflation mode as Eth2 merge gets closer
Last but not least, it is worth noting that the Ethereum network’s recently implemented London upgrade — which went live during August 2021 — altered the way in which the currency’s gas fee rates are calculated, effectively burning a portion of all ETH-based fees and reducing the altcoin’s total supply pool. Numbers-wise, this has resulted in Ether’s annual inflation rate dipping from ~4% to ~3%.
Not only that, Ether’s ever-evolving monetary policies are also designed to help convert the asset into a deflationary one, making it attractive to long-term owners as well as institutional funds. Therefore, it stands to reason that Ether’s perception as an independent asset will only continue to garner more support.
Ethereum’s native token Ether (ETH) reached an all-time high around $4,867 earlier in November, only to plunge by nearly 20% a month later on rising profit-taking sentiment.
And now, as the ETH price holds $4,000 as a key support level, risks of further selloffs are emerging in the form of multiple technical and fundamental indicators.
ETH price rising wedge
First, Ether appears to have been breaking out of “rising wedge,” a bearish reversal pattern that emerges when the price trends upward inside a range defined by two ascending — but converging — trendlines.
Simply put, as the Ether price nears the Wedge’s apex point, it risks breaking below the pattern’s lower trendline, a move that many technical chartists see as a cue for more losses ahead. In doing so, their profit target appears at a length equal to the maximum wedge height when measured from the breakout point.
As a result, Ether’s rising wedge downside target comes out to be near $2,800, also near its 50-week exponential moving average (50-week EMA).
Bearish divergence
The bearish outlook in the Ether market appears despite its ability to bear the massive selling pressures felt elsewhere in the cryptocurrency market in recent weeks.
For instance, Bitcoin (BTC), the leading crypto by market cap, fell by 30% almost a month after establishing its record high of $69,000 in early November, much higher than Ether’s decline in the same period. That prompted many analysts to call Ether a “hedge” against the Bitcoin price decline — also as ETH/BTC rallied to its best levels in more than three years.
But it does not take away the fact that Ether’s recent price rally has coincided with a decline in its weekly relative strength index (RSI), signaling a growing divergence between price and momentum.
ETH/USD weekly price chart featuring divergence between price and RSI. Source: TradingView
Additionally, the recent ETH price pullback also had the RSI oscillator fall below 70, a classic sell indicator.
Fed “dot plot”
More downside cues for Ether come ahead of the Federal Reserve two-day policy meeting starting on Dec, 14 when the U.S. central bank will discuss how quickly it may need to taper its $120 billion a month asset purchasing program to gain enough flexibility for potential rate hikes next year.
Just last month, the Fed announced that it would scale back its bond-buying at the pace of $15 billion per month, suggesting that the stimulus would eventually cease by June 2022. Nonetheless, a string of recent market reports showing a tightening jobs market and persistently mounting inflationary pressures prompted the Fed officials to end tapering “perhaps a few months sooner.”
20 CenBanks hold meetings next week as inflation keeps rising w/final decisions for 2021 due at Fed, ECB, BoJ, BoE which together responsible for half of world econ. CenBank balance sheets have risen in lockstep to ATHs, but now there could be divergence. https://t.co/GgOLGCNbjR pic.twitter.com/mrrhwUVcet
— Holger Zschaepitz (@Schuldensuehner) December 12, 2021
Market anticipations also adjusted, with a Financial Times survey of 48 economists anticipating the stimulus to end by March 2022 and most respondents favoring a rate hike in the second quarter.
The period of loose monetary policies after March 2020 has been instrumental in pushing the ETH price high by over 3,330%. Therefore, the increasing likelihood of tapering can certainly put the brakes on the current rally, if not the bull market as a whole, according to some ana.
From there I expect a very aggressive approach from the Fed because they’ll recognize we are in a bubble and something extreme needs to be done.
Then we get our multi-year bear market.
— K A L E O (@CryptoKaleo) December 10, 2021
Markets anticipate the Fed will update its policy statement and summary of economic projections (SEP) this week. In doing so, more central bank officials would adjust the “dot plot” to favor an earlier-than-anticipated rate hike against rising inflation.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
