El token nativo Ether (ETH) of Ethereum has plummeted by more than 20% after setting its all-time high at around $ 4,867 on November 10, 2021. Nonetheless, The sharp price pullback does not mean that ETH cannot chase a new record in the next few months, as several widely tracked technical, macroeconomic and on-chain indicators suggest.
One of these indicators predicts that the price of Ether will hit $ 5,000 in the first quarter of 2022, while others seem poised to support the bullish bias.
ETH price paints a descending wedge
Ether’s recent price correction is painting a potential classic bullish reversal pattern known as a “falling wedge.”
Specifically, descending wedges start wide at the top but contract as price falls. As a result, the price action forms a conical shape that tends to decline as the highs and lows of the reaction converge. Traders become aware of a bullish bias only after the price decisively breaks above the resistance of the wedge.
As a result, Expectations remain high that ETH price will break through its falling wedge resistance in the coming sessions. Doing so would increase as much as the maximum distance between the upper and lower trend line of the wedge when measured from the breakout point.
— Kong Trading (@KongBTC) January 4, 2022
That roughly puts the price target for Ether at $ 5,000.
ETH deposits to exchanges fall
Traders generally move their tokens to exchanges when they intend to sell / exchange them for fiat money, stablecoins, or other cryptocurrencies.
In general, a higher number of transactions made on cryptocurrency trading platforms reflects a high selling sentiment in the market. Conversely, if token transactions plummet, they show strong market holding sentiment.
Data collected by blockchain analytics service Glassnode shows that the number of Ether on-chain deposits on exchanges fell to its 23-month low on January 3.
Additionally, another Glassnode metric that tracks the number of Ether addresses sending ETH to exchanges also reported declines over the past 30 days, the same period in which the ETH / USD pair’s rate fell nearly 11%.
Meanwhile, the total Ether balance across all exchanges has been in a downtrend since August 2020, suggesting that ETH investors are in it for the long term, as its price rose from almost $ 400 to just over $ 3,800 in the same period.
Is cheap money here to stay?
Ether’s fall of over $ 1,000 from November 2021 to date came primarily on the back of the aggressive swing by the Federal Reserve.
The US central bank decided to accelerate the rollback of its $ 120 billion a month asset purchase program, followed by three rate hikes in 2022 from near zero levels, to stop rising inflation. Its loose monetary policy was one of the main catalysts behind similar price rallies in Ethereum, Bitcoin (BTC) and other cryptocurrency markets.
But the Fed’s efforts to control inflation from its current level of 6.8% with three spike rises may not affect Bitcoin and Ethereum prices in the long run. For example, Antoni Trenchev, managing partner at crypto lender Nexo, believes cheap money is here to stay.
“The number one influencer for Bitcoin and cryptocurrencies in 2022 is central bank policy,” he told Bloomberg.
“Cheap money is here to stay which has huge implications for crypto. The Fed doesn’t have the stomach or backbone to withstand a 10%-20% collapse in the stock market, along with an adverse reaction in the bond market.”
Hungarian-born billionaire Thomas Peterffy also said investors should allocate at least 2-3% net of their portfolio to cryptocurrencies like BTC and ETH in case fiat money “goes to hell.”
Additionally, Bridgewater Associates founder Ray Dalio revealed that he has held BTC and ETH in his portfolio against the risks of cash devaluation brought on by higher inflation.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Each investment and commercial movement involves a risk, you must do your own research when making a decision.
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3 Reasons Ethereum May Hit $ 5,000 In Q1 2022