Ethereum risks ‘double-bust’ drop despite ETH price rebounding 30% in two weeks
It took Ethereum’s native token Ether (ETH) only two months to recover from a brutal selloff at the beginning of 2022.
ETH price breaks out but risks remain
ETH price reached near $3,350 on March 28 after rallying by over 30% in just two weeks, and by more than 50% when measured from its year-to-date low of around $2,160, established Jan. 24.
In doing so, the ETH/USD pair may have also “busted” what earlier appeared to be a bearish continuation setup, called the “symmetrical triangle.”
“Busted patterns (when the breakout is in one direction only to see price reverse and breakout in the opposite direction) often result in strong moves,” writes Tom Bulkowski, a veteran market analyst. This raises hopes that Ether can rally to the triangle pattern’s target near $4,000 in the coming days.
ETH fakeout risks
However, the market analyst also notes that symmetrical triangles have a tendency to “double-bust,” wherein the final breakout direction comes out to be the same as the original one.
A double-bust scenario means Ether’s uptrend could exhaust soon, leading to a reversal toward the symmetrical triangle’s top. The downside outlook appears as ETH retests its support-turned-resistance range that served as a selloff area for traders in the January-February session, as shown in the chart below.
As a result, another selloff near the range could the trigger double-bust risks, prompting Ether’s price to drop toward the symmetrical triangle’s downside target near $1,800, set after measuring widest distance between the triangle’s upper and lower trendline and adding it to the breakout point.
Interestingly, the $1,800-level was instrumental in capping Ethereum’s downside attempts during the selloff witnessed in May-July 2021.
Conversely, the double-bust setup will be invalidated if the price decisively rises above the resistance range. PostXBT, an independent market analyst, further noted that flipping levels around $3,350 back to support could raise ETH’s possibilities to hit $4,000.
$ETH 1W
Decent pump but ETH still at weekly resistance. A little cautious and would like to see a bit more here.
Flip ~$3,350 and then we can discuss the possibilities of $4k again. pic.twitter.com/zNWqVMRtsg
— Posty (@PostyXBT) March 28, 2022
Ethereum’s upside catalysts
The beginning of Ether’s 30% rebound rally coincided with the Ethereum Beacon Chain’s merge with the Kiln testnet, signaling that its blockchain would completely move to a proof-of-stake network by summer 2022.
Speculators have waited for Ethereum’s move to ETH 2.0 for a long time, since the upgrade promises to deliver cheaper and more efficient transactions.
In theory, it would happen by giving network participants carrot-and-stick incentives to collaborate, wherein they would be required to lock up, or “stake,” 32 ETH for 18 months to become validators. In return, they would receive annual yields in the same token.
As a result, many analysts predict Ether price will rise as supply decreases, particularly if demand stays the same or continues to rise.
On the left you see the promised dilution of the Premine. On the right what was fulfilled. Ether supply will decrease after PoS. Think very carefully what this unfulfilled promise and the disguised whales of the Ethereum presale mean for Ethers future, its Proof of Stake & Web3.. pic.twitter.com/kaMgrs23hq
— stefan huber.justice (@Leerzeit) March 25, 2022
Related: ETH price hits $3K as major crypto fund adds over $110M Ethereum to Lido’s staking pool
Simultaneously, Ether still faces downside risks due to its strong correlation with the U.S. stock market and Bitcoin (BTC). As reported earlier, BTC’s correlation with stocks is being closely watched this week as BTC/USD challenges key areas of resistance.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
