After Jumping 3 Support Levels, Can ETH Price Reach $4,000?
According to the technical setup shared by independent market analyst Wolf, Ethereum’s native token ETH seems poised to continue its current rally towards $4,000.
Classic Bullish Reversal Pattern in Action?
The chart analyst has discussion on the role of at least three support levels in boosting ETH price by almost 30% from a local bottom of $2,160. These price floors include the 21-month exponential moving average (EMA), the 0.786 Fib of the Fibonacci retracement chart drawn from the $1,716 swing low to the $4,772 swing high, and the lower boundary of an ascending triangle.
ETH/USD daily chart and 3 even support | Source: TradingView
Wolf noted that a 3-level support scenario could push ETH price to $3,330. In doing so, the confluence triggers a classic bullish reversal setup known as the inverse head and shoulders (IH&S) pattern.
Specifically, in the IH&S pattern, ETH creates 3 consecutive floors, with the middle floor (head) being lower than the other two (left and right shoulders). In the meantime, all bottoms will hang upside down below the general resistance trendline known as the neckline.
In a “perfect” scenario, a break above the IH&S neckline could propel the price to the maximum distance between the neckline and the head. This creates an opportunity to take ETH to $4,000.
ETH/USD daily chart and Set up IH&S | Source: Wolf, TradingView
But if ETH is rejected during the rally to $3,000, the price will drop towards the ascending triangle support.
The ETH bulls are not out of danger just yet
ETH’s current recovery move has yet to break out of the extended correction that began after the price hit a record high above $4,850 in November 2021. Accordingly, ETH fell 55.65% to $2,159 before recovering 30% to meet its current price.
It is possible that this rally is just a temporary respite in ETH’s overall downtrend. A deeper drop can therefore still not be ruled out. According to the “bear flag” setup shown in the chart below, the downside target is near the $2,000 level.
ETH/USD daily chart and “Bear Flag” Pattern | Source: TradingView
Several on-chain indicators are also biased towards a bearish outlook. For example, Glassnode data shows that ETH balances have increased across all exchanges since early December 2021, coinciding with ETH’s downward move.
ETH balances on all exchanges | Source: Glassnode
The escalating amount of ETH held by exchanges increases the likelihood that traders will sell it for other assets. Notably, the year-long drop in ETH in FX reserves coincided with the surge in ETH price from $730 to over $4,800.
OLDwhaling versus fish small
Another unfavorable sign for the ETH token is the apparent lack of influential buyers in the market. For example, several Glassnode metrics show a decreasing number of wallets holding between 100 and 1,000 ETH since early 2021.
Number of ETH addresses with a balance of at least 100 ETH | Source: Glassnode
ETH is also influenced by ongoing macroeconomic trends. The latest bearish move, for example, came mainly after the Federal Reserve (Fed) plans to accelerate the contraction of its $120bn-per-month COVID-19 stimulus program in March/2022, followed by at least three rate hikes.
Federal Reserve cuts have dampened investor demand for riskier assets, hurting tech stocks, gold and cryptocurrencies. As a result, there is a risk that ETH’s fundamental outlook could become extremely bearish.
However, private investors seem unimpressed by the macroeconomic developments. On February 1st, the number of ETH addresses with non-zero balances reached a new record of over 74.137 million. Last week, the total number of wallets with at least 1 ETH also peaked at almost 1.414 million.
Number of ETH addresses with a balance of at least 1 ETH | Source: Glassnode
The number of ETH addresses holding at least 10,000 ETH (whales) also improved slightly, rising from 1,157 to 1,163 during the January 2022 price correction, proving that the richest wallet holders bought the dip.
Easing will return
According to Nick, a market analyst at Ecoinometrics, the crypto market remains in the “danger zone” due to the Fed’s hawkish stance. But there is still hope that the central bank will return to quantitative easing if the stock market falls another 15-20%.
“If the market keeps falling, you might find a good opportunity to make money. While there is some risk of further downside or simply an extended period of weakness until the Fed returns to sanity, now might be a good time to start a position. So wait for the real pump to start.”
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