Ethereum eyes rally against Bitcoin, with ETH price showing hidden bullish divergence

Since Sept. 3, Ethereum’s native token Ether (ETH) has been falling against its top crypto rival Bitcoin (BTC).

After reaching 0.07955 BTC in September, Ether lost almost 25% of its value in comparison to Bitcoin. The top altcoin fell, leaving behind a trail that saw lower highs and lower bottoms. This formed an ascending channel.

Later, ETH/BTC shattered the channel to the upside Saturday, raising expectations about a strong, extended recovery trend. However, traders used the channel’s resistance trendline support as support after a selloff Sunday and ongoing session.

Charts of ETH prices suggest bullish divergence

This sentiment suggested that Ether could reenter the declining range, as shown in the chart below.

Daily price chart for ETH/BTC showing bullish divergence Source: TradingView

ETH/BTC’s daily commodities channel index (CCI), formed higher highs, which showed divergence from the pair’s current downtrend. CCI, a momentum oscillator, measures the instrument’s deviations from its statistical mean in order to spot potential reversals.

“A hidden divergence can always be an indicator for a potential trend reversal,” said Stefan Krecher, a Germany-based strategist. He also stated that ETH/BTC could rebound in the coming sessions as long as the pair’s daily relat strength index (RSI), remains “not too overbought.”

Krecher predicted Ether would reach its monthly pivot point at 0.071586 BTC. This is almost 8% below the current levels. The upside target coincided also with the 0.0618 Fib line (0.071505 BTC), of the Fibonacci regression graph shown in the chart.

Reentering the descending channel range could lead to sending ETH/BTC back to the range support trendline at 0.058238 BTC.

The dollar is the price of Ether

As Ether maintained $4,000 as support, while rebounding above 2.6% Monday, the bullish ETH/BTC price outlook was evident. Bitcoin’s price fell almost 3.5% Monday after it established a similar strong floor at $60,000.

ETH/BTC looked less weaker as Bitcoin rallied against the US dollar more than Ether. However, the prospects for the Ethereum token looked bullish as previously reported by Cointelegraph using the ascending triangle setup below.

Daily price chart for ETH/USD featuring ascending triangle setup. Source: TradingView

Ether broke from the pattern in the daily timeframe, but there was little trading volume. This indicates weakness in the price trend.

As support for bullish confirmation, the cryptocurrency is now testing the upper trendline of the triangle. If the rebound follows suit, the price could see new record highs of $4,384, with the target for the triangle setup at $6,500.

Supply crunch for ETH

The supply of Ether tokens is also declining since the London hard fork by the Ethereum network. The Ethereum Improvement Proposal 1559 was the one that went live. It started burning ETH it had previously paid to miners.

WatchTheBurn data shows that Ethereum has depleted almost $2.25 Billion worth of Ether tokens in the time since the London hard fork was launched.

Related: Altcoins rise despite Bitcoin’s fall to $60,000

The Ethereum 2.0 deposit contract attracted over 8 million ETH and was able to remove them from circulation for at most a year.

Total value of Eth2 smart contracts. Source: CryptoQuant

Additionally, regulator funds have seen an increase in Ether holdings, from 2.43 million Ethereum in November 2020 to 4.08 millions ETH today. This is a sign of increasing institutional demand.

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