Ethereum’s native token, Ether (ETH), has fallen nearly 20% in the past three weeks, hitting monthly lows near $2,900 on April 19. bearish pattern.
Ethereum price ‘bear flag’ setting activated
Called a “bearish flag”, the bearish continuation signal appears when the price consolidates to the upside within an ascending parallel channel after a strong move lower (called the flagpole). It is resolved after the price breaks out of the channel to fall further.
ETH price turned down after testing the upper trend line of its bear flag on Apr 4 and is now eyeing an extended drop towards its lower trend line near $2,700. If the pattern plays out as predicted, price could drop further, targeting a length equal to the height of the flagpole, as shown in the chart below.
As a result, Ether’s bearish flag setup risks a potential retest of $2,000 in Q2.
ETH price: macro factors
Ethereum’s correlation with Bitcoin and areas of traditional markets have also increased its downside risks in recent months.
For example, the correlation coefficient between Ether and the Nasdaq 100 was 0.95 on April 19. A coefficient of 1 means that the two assets move in perfect tandem.
The price of ether is down nearly 19% since the start of 2022. Meanwhile, Bitcoin, stocks and other riskier markets have also fallen this year as investors weigh the Fed’s willingness to aggressively raise rates and reduce its balance by $9 billion.
Longer term bullish factors
More or less, ETH’s drop is mostly due to sentiments that there would be less cash available to buy riskier assets.
Related: Here’s How Ether Options Traders Could Prepare For Proof-of-Stake Migration
Nonetheless, speculators remain hopeful for a long-term uptrend due to its long-awaited protocol update called “Fusion,” which is likely to be released after June.
“ETH is still experiencing selling pressure from people who wanted to make a quick buck from the merger.” noted DoopleCash, an independent market analyst, adds:
“At some point we will find the balance, I’m not interested in predicting this bottom, I just want to accumulate as much as I can before I get there.”
Additionally, the months leading up to the technical update coincided with a downward trend for Ether on exchanges, the number of non-zero ETH addresses increasing, and more ETH flowing into the official Merge smart contract.
With supply growth of -2.8% one year after the merger, #ethereal you will see about 3.3 million ETH burned per year.
By the end of the decade, the total supply of ETH will fall below 100 million.
Or put another way, we will burn the equivalent of ALL ETH currently on exchanges! pic.twitter.com/zqr54TGCzC— Lark Davis (@TheCryptoLark) April 6, 2022
Kennan Mell, an analyst at Seeking Alpha, argues that Ethereum’s style of running shadow forks before the Merge launch increases the chance that the upgrade will be successful at launch. This should influence more investors, especially those who are waiting on the sidelines, to accumulate Ether for the long term.
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