Ethereum’s native token, Ether (ETH), hit an all-time high of around $ 4,867 in early November, only to drop nearly 20% a month later due to increased profit-taking sentiment.
And now, as the ETH price has $ 4,000 as a key support level, risks of more sell-offs are emerging in the form of multiple technical and fundamental indicators.
ETH price upward wedge
First, Ether appears to have broken out of the “rising wedge”, a bearish reversal pattern that arises when the price is trending higher within a range defined by two ascending but converging trend lines.
Simply put, as the price of Ether approaches the high point of the wedge, it risks breaking below the lower trend line of the pattern, a move that many technical chartists see as a sign of further losses. in the future. By doing so, your profit target appears at a length equal to the maximum height of the wedge when measured from the breakout point.
As a result, Ether’s rising wedge downside target turns out to be near $ 2,800, also close to its 50-week exponential moving average (50-week EMA).
Bearish divergence
The bearish outlook on the Ether market appears despite its ability to withstand the sell-off pressures felt elsewhere in the cryptocurrency market in recent weeks.
For example, Bitcoin (BTC), the leading crypto by market cap, fell 30% nearly a month after setting its record high of $ 69,000 in early November, much higher than Ether’s decline in the same period. That led many analysts to call Ether a “hedge” against Bitcoin’s price drop, also as ETH / BTC rallied to its best levels in more than three years.
But it doesn’t take away from the fact that Ether’s recent price rally has coincided with a decline in its weekly relative strength index (RSI), indicating a growing divergence between price and momentum.
Furthermore, the recent ETH price pullback also caused the RSI oscillator to dip below 70, a classic sell indicator.
Fed “Dot Plot”
More negative signals for Ether come ahead of the Federal Reserve’s two-day policy meeting that begins Dec. 14, when the US central bank will discuss how quickly it may need to reduce its asset purchase program from $ 120 billion a month to get enough flexibility for the potential rate. hikes next year.
Just last month, the Fed announced that it would cut bond purchases at a rate of $ 15 billion per month, suggesting that the stimulus would finally cease in June 2022. Nonetheless, a number of recent market reports show a tighter labor market and persistent rise in inflationary pressures prompted Fed officials to end the downsizing “maybe a few months earlier.”
20 CenBanks will hold meetings next week as inflation continues to rise with final decisions for 2021 due to the Fed, the ECB, the BoJ and the BoE, which together are responsible for half of the global economy. CenBank balance sheets have risen at the same rate as ATHs, but now there could be divergence. https://t.co/GgOLGCNbjR pic.twitter.com/mrrhwUVcet
– Holger Zschaepitz (@Schuldensuehner) December 12, 2021
Market anticipations also tightened, with a Financial Times survey of 48 economists anticipating that the stimulus would end in March 2022, with the majority of respondents favoring a rate hike in the second quarter.
The lax monetary policy period after March 2020 has been instrumental in pushing the ETH price up by more than 3,330%. So the increasing likelihood of it downsizing can certainly slow down the current rally, if not the bull market as a whole, according to some analysts.
From there, I expect a very aggressive approach from the Fed because they will recognize that we are in a bubble and that something extreme needs to be done.
Then we have our multi-year bear market.
– KALEO (@CryptoKaleo) December 10, 2021
Markets anticipate that the Fed will update its policy statement and summary economic projections (SEP) this week. In doing so, more central bank officials would adjust the “dot plot” to favor an earlier rate hike in the face of rising inflation.
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