Ethereum Risks 25% Crash as ETH Price Forms Classic Bearish Technical Pattern

Ethereum’s native token Ether (ETH) looks poised for a breakout move in May as it forms a convincing “bearish pennant” structure.

¿Precio de ETH a USD 1,500?

The price of ETH has been consolidating since May 11 within a range defined by two converging trend lines. Its sideways movement coincides with a drop in trading volumes, highlighting the possibility that the ETH/USD pair is painting a bearish pennant.

Bearish pennants are bearish continuation patterns, meaning that they resolve after price breaks below the lower trendline of the structure and then falls as low as the height of the previous move lower (called the downtrend). flag).

Two-hour price chart of the ETH/USD pair. Source: TradingView

As a result of this technical rule, Ether is at risk of closing below its pole structure, followed by further moves lower.

The height of the ETH flagpole is around $650. Therefore, If the price breaks out of the pennant apex near $2,030, then the structure’s downside target will be below $1,500, more than 25% below current price.

Sale and withdrawal

Curiously, the bearish pennant profit target falls in the zone that preceded a 250% price rally in the February-November 2021 session. Also, the target is around Ether’s 200-week exponential moving average (EMA 200-day; the blue wave), currently near $1,600.

At best, the demand zone could prompt Ether traders to hoard the tokens in anticipation of a sharp pullback to the upside.

Suppose it happens, then ETH’s interim price profit target would likely be the multi-month downtrend line that has served as resistance in a “falling channel” pattern, as shown in the chart below.

Weekly price chart of the ETH/USD pair. Source: TradingView

ETH has already bounced after testing the demand zone (and the lower trend line of the descending channel) as support. This could lead the ETH/USD pair to reach the upper trend line of the channel near $3,000, about 50% above the current price, in June.

Extended Breakout Scenario

The worst case scenario could be ETH breaking below the demand zone, driven by macro risks and their impact on the cryptocurrency market so far in 2022.

In particular, Ether is down more than 50% so far this quarter as investors reduce their exposure to riskier assets including Bitcoin (BTC) and tech stocks in a higher interest rate environment.

As Cointelegraph has reported, anticipations of additional stock market sell-off could weigh on cryptocurrencies, thus hurting Ether, Bitcoin, Cardano (ADA), and others in aggregate.

Ethereum’s correlation coefficient with the tech-heavy Nasdaq 100 is 0.90. Source: TradingView

SeekingAlpha Financial Blogger BOOX Research Remains Long-Term Bullish on Bitcoin, Ethereum and the cryptocurrency market in general, but believes that the recovery could take several years. Excerpts from his note:

“Although some of the corrections from above may have simply shaken ‘hot money,’ there remains a risk that a deteriorating macro environment opens the door to even deeper losses.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should do your own research when making a decision.

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