Ether hit an all-time high (ATH) of $ 4,867 in early November, up almost 20% a month later due to increased profit-taking.

And now that the Ether price holds USD 4,000 as an important level of support, there is a greater risk of a sell-off in the form of a variety of fundamental and technical indicators.

Rising wedge of ether

First, ether appears to have broken out of a “rising wedge,” a bearish reversal pattern that occurs when price travels upward in a range defined by two rising – but converging – trend lines.

Put simply, as ether price nears the top of the wedge it risks falling below the pattern’s bottom trendline, a move many technical chartists see as a sign that a downtrend is imminent. The profit target corresponds to the maximum height of the wedge, measured from the breakout point.

Weekly ETH / USD frame chart showing a rising wedge pattern | Source: TradingView

As a result, Ether’s falling wedge target appears to be near $ 2,800, also near its 50-week exponential moving average.

Bearish divergence

The bearish outlook for ether is due to the fact that bears have been putting massive selling pressure elsewhere in the crypto market in recent weeks.

For example, Bitcoin fell 30% for almost a month after setting an ATH of $ 69,000 in early November, much higher than the drop in Ether over the same period. This has led many analysts to describe Ether as a “hedge” against the fall in Bitcoin prices – as ETH / BTC has risen to its highest level in more than three years.

However, Ether’s recent rally coincided with a decline in the weekly relative strength index (RSI), suggesting a growing divergence between price and momentum.

Weekly ETH / USD price chart with divergence between price and RSI | Source: TradingView

Additionally, the recent pullback also caused Ether’s RSI to drop below 70, a classic sell-off indicator.

Dot plot diagram of the Fed

Further unfavorable signs for Ether come ahead of the two-day monetary policy meeting of the US Federal Reserve (Fed), the 14th possible rate hikes next year.

Last month, the Fed announced that it would cut its bond purchases by 15 billion a month. The sustained rise in inflationary pressures prompted Fed officials to “cut back a few months earlier”.

20 CenBanks hold meetings next week as inflation continues to rise while final decisions are due in 2021 at the Fed, ECB, BoJ and BoE, which together account for half of the world’s economy. CenBank’s balance sheets have risen in step with the ATHs, but now there may be divergences. https://t.co/GgOLGCNbjR pic.twitter.com/mrrhwUVcet

– Holger Zschaepitz (@Schuldensuehner) December 12, 2021

“20 central banks will hold meetings next week as inflation continues to rise, with final decisions for 2021 by the Fed, ECB, BoJ, BoE. Central bank balance sheets have risen to ATH levels, but now there might be a difference. “

A Financial Times poll of 48 economists predicts the stimulus will end in March 2022, and most respondents support a rate hike in the second quarter.

The easing period after March 2020 played a key role in pushing the price of Ether up by 3,330%. Therefore, the possibility of a deepening contraction could hold up the current rally, if not the entire bull market.

The market is expecting the Fed’s Monetary Policy Update and Economic Forecast Summary (SEP) this week. At this point, many central bank officials will adjust the “dot plot” chart to favor an earlier rate hike than expected to counter rising inflation.

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Disclaimer: This article is for informational purposes only, not investment advice. Investors should research carefully before making a decision. We are not responsible for your investment decisions.

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