3 Reasons Ethereum Price May Drop Below $ 3,000 By The End Of 2021

Ether (ETH), Ethereum’s native token, hit an all-time high around $ 4,867 in early November, to plummet nearly 20% a month later because of the increased profit-making sentiment.

And now, as the ETH price holds $ 4,000 as a key support level, new sales risks are emerging in the form of multiple technical and fundamental indicators.

Rising wedge of ETH price

First of all, the price of ETH is in a rising wedge: Ether appears to have been breaking out of the “rising wedge”, a bearish reversal pattern that arises when the price tends to rise within a range defined by two ascending but converging trend lines.

In a nutshell, as the price of Ether approaches the apex of the wedge, it risks breaking below the lower trend line of the pattern, a movement that many technical chart analysts see it as a sign of more losses ahead. By doing so, your profit target appears at a length equal to the maximum height of the wedge when measured from the breakout point.

ETH / USD weekly price chart with rising wedge. Source: TradingView

As a result, Ether’s rising wedge bearish 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 pressures of sell-off. that have been felt in other parts of the cryptocurrency market in recent weeks.

For example, Bitcoin (BTC), the leading cryptocurrency by market capitalization, fell 30% nearly a month after setting its all-time high of $ 69,000 in early November, much more than the decline of Ether in the same period. That prompted many analysts to call Ether a “hedge” against Bitcoin’s falling price., also as the ETH / BTC pair rallied to its best levels in more than three years.

But that doesn’t take away from the fact that Ether’s recent price rally coincided with a decline in its Relative Strength Index (RSI) weekly, indicating a increasing divergence between price and momentum.

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ETH / USD weekly price chart showing the divergence between price and RSI. Source: TradingView

What’s more, the recent ETH price pullback also caused the RSI oscillator to dip below 70, a classic sell indicator.

The Federal Reserve “Dot Plot”

More bearish signals for Ether come ahead of the Federal Reserve’s two-day policy meeting that begins December 14, when The US central bank will discuss how quickly it may need to reduce its $ 120 billion-a-month asset purchase program to gain enough flexibility for a possible rise in interest rates or interest rates next year..

Just last month, the Fed announced that it would reduce its bond purchases at a rate of $ 15 billion a month, suggesting that the stimulus would finally cease in June 2022. However, a series of recent market reports showing an increasingly tight labor market and persistently rising inflationary pressures have prompted Fed officials to end tapering “maybe a few months earlier”.

20 central banks will meet next week as inflation continues to rise, and the Fed, the ECB, the Bank of Japan and the Bank of England will make final decisions by 2021, as together they are responsible for half of the global economy. . CenBanks balance sheets have risen at the same pace as all-time highs, but now there could be divergences.

Market anticipations have also tightened as a Financial Times survey of 48 economists foresees that the stimulus ends in March 2022 and the majority of those surveyed favor a rate hike in the second quarter.

The lax monetary policy period after March 2020 has been instrumental in driving the price of ETH over 3,330%. Therefore, the increasing probability of a tapering can certainly slow 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 will have our multi-year bear market.

Markets anticipate that the Fed will update its policy statement and summary economic projections (SEP, for its acronym in English) this week. In doing so, more central bank officials would adjust the “dot plot” to favor an earlier-than-expected rate hike against rising inflation.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. All investments and trading involve risk, so you should do your own research when making a decision.

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3 Reasons Ethereum Price May Drop Below $ 3,000 By The End Of 2021

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