ETH price is threatening to drop to $2,000 due to the bear flag setup
Ethereum’s native token ETH will extend this year’s 30% drop to its lowest price since July 2021 when the technical indicator analyzed below emerges.
ETH chart forming a bearish pattern
ETH price fell to a 6-month low of $2,159 on January 24, 2022, only to recover strongly to as high as $2,724 a few days later. However, this process has created a “bear flag” chart pattern that suggests a drop to $2,000 or 17% from current levels.
Bear flags appear when the price consolidates higher after strong bearish momentum but eventually moves lower after breaking out of the upside range. In doing so, the price tends to fall by the length of the previous fall, known as the “flagpole”.
Daily ETH/USD price chart and bear flag setup | Source: TradingView
In the case of ETH, the flagpole height is over $850. Therefore, if the price moves towards the bearish target, a drop to $2,000 is likely. Earlier this year, another bear flag pattern led to a similar drop, as illustrated in the chart above.
Interest rates will rise in the near future
The scenario of ETH hitting $2,000 in the coming months is all the more likely due to Bitcoin and its sensitivity to macroeconomic trends.
Notably, the correlation between ETH and Bitcoin was 0.92 over the past 30 days, according to data from CryptoWatch. In other words, ETH was closely tracking BTC price action with 92% accuracy as of January 2022.
Bitcoin correlation with altcoins in the last 30 days | Source: CryptoWatch
The main reason behind the bearish outlook mentioned above is the Federal Reserve’s policy of dovish monetary policy. Specifically, in early March, the US Federal Reserve decided to fully withdraw its monthly $120 billion COVID-19 stimulus program and raised its benchmark interest rate from near zero. gold and bitcoin.
Paul Krugman, a Nobel Prize-winning economist and longtime crypto skeptic, believes that Bitcoin price will plummet in 2022 due to “worrying signals from the global credit crunch” during the 2008 economic crisis.
“If you ask me, regulators made the same mistake they made with the subprime mortgage crisis: they failed to protect the public from financial products that nobody understood, and many vulnerable affected families may have to pay a price.”
The first $2,000 for the ETH price?
While ETH looks bearish in Bitcoin’s shadow, many analysts are predicting that Ethereum’s token will continue to rise through the end of 2022 thanks to the burgeoning DeFi and NFT sectors.
Mike McGlone, Senior Commodity Strategist at Bloomberg Intelligence, predicts that ETH will hit $5,000 in 2022 despite the Fed’s dovish policy. The veteran analyst calls the central bank’s rate hike plan a “win-win scenario” for Bitcoin and ETH against four decades of high US inflation.
However, McGlone predicts that ETH will reach the first $2,000 before continuing higher.
“The leading force to stave off the central bank cut is the fall in stock markets, impacting cryptocurrencies. End-2021 price support levels of around $30,000 for Bitcoin and $2,000 for ETH look solid.”
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