The Ethereum native token Ether (ETH), is on track for a mini-bull run above $3,000 primarily because of a bullish reversal pattern in its shorter-timeframe chart and a massive spike in ETH outflows to Coinbase.
Falling wedge for ETH Price
Since late March 2022, ETH’s price has been in a declining wedge pattern. This raises its chances of a breakout in May.
Falling wedges are when the price trend lowers within a range defined with two descending or contracting trendlines.
These wedges are a rule in technical analysis. They resolve when the price breaks out from their range to the upside. The length of these wedges is equal to the distance between the pattern’s upper and lower trendlines, measured starting at the breakout point.
Daily price chart for ETH/USD with falling wedge setup Source: TradingView
The maximum height of a falling wedge is approximately $395. Suppose ETH’s closing price is above $2,850. If there is an increase in trading volume, it will likely rise by $395 (towards $3,150).
Coinbase ETH outflows hit all-time high
Bullish on-chain data coincides with the interim upside outlook for Ether markets.
CryptoQuant data shows that the highest number of ETH left Coinbase, the second largest crypto exchange, was May 3.
$ETH Coinbase Outflow hits an all-time-high Live Chart https://t.co/PiITw2ZFf3 pic.twitter.com/tlFQndUhvQ
— May 4, 2022, CryptoQuant.com (@cryptoquant_com).
Moreover, according to Glassnode’s On-chain metrics, the ETH balance of all crypto exchanges fell to their lowest level since August 2018 on May 3.
Ethereum balance on exchanges. Source: Glassnode
Both indicators indicate a rise in traders preferring to trade Ethereum tokens for other assets over holding them.
These changes coincide with an upturn in the upside sentiment for small Ether traders. This is reflected in an increase in addresses with minimum balances of 0.1, 1 and 10 Ethereum.
Ethereum number of addresses with balances >= 0.1 Ethereum, 1 Ethereum, and 10 Ethereum Glassnode
As Ether prices trend lower, Ethereum balances move higher across retail addresses. This indicates that traders are buying ETH at lows. This further supports the bullish reversal of falling wedge.
Bearish long-term prospects
However, Ether’s chances of crossing the $3,000 level has not lifted it from its long-term bearish pattern.
Cointelegraph reported earlier that ETH is at risk of breaking below its ascending triangular range in Q2/2022. Its downside target could be anywhere from $1,820 to around $2,670 depending on its breakout point.
Daily price chart for ETH/USD featuring an ‘ascending triangular’ design. Source: TradingView
Other downside cues are from macro fronts. Ethereum, like Bitcoin (BTC), still holds its positive correlation to U.S stocks. This is a sign that Ethereum would tail traditional markets downwards due to a common factor: A hawkish Federal Reserve.
Correlation coefficient for ETH/USD, S&P500 Source: TradingView
On May 4, the U.S. central banking will issue a policy statement at 2 p.m. EST. Then, at 2:30 p.m. EST, Powell will hold a press conference. Officials indicated that they would raise benchmark rates by 0.5%, and approve plans for the liquidation of their $9 trillion asset portfolio.
Related: Smart money is buying ETH even though traders are warning of a drop in $2.4K
Bloomberg reports that researchers from Morgan Stanley and Strategas Research Partners expect that the U.S. benchmark index S&P 500 will fall another 15-16% through 2022. ETH faces similar negative prospects due to its positive correlation.
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