Several factors such as rising interest rates, massive sell-off of Ethereum by miners, and the exit of smart money from investment funds due to concerns about concentration have put a lot of pressure on the price of Ethereum since the Marj. However, fundamental and technical analysis of the market shows that in the worst case scenario, the value of Ethereum may decrease by 45% against the dollar.
To Report Cointelegraph, Ethereum’s value has dropped significantly against the US dollar and Bitcoin since the merger. From the day Ethereum was transferred to proof of stock until September 22 (31 September), the value of the trading pair Ethereum/USD (ETH/USD) has decreased by more than 20% and Ethereum/Bitcoin (ETH/BTC) by about 17%.
Why is the pressure on Ethereum bulls decreasing?
Several factors have played a role in the formation of Ethereum’s downward trend in this period. First, the decrease in the price of Ethereum against the dollar, similar to the decrease in the value of other digital currencies, was caused by the increase of 0.75 percentage points in the inflation rate by the Federal Reserve.
Second, Ethereum faced many problems due to excessive concentration after the merger.
Currently, 5 entities produce 60% of the blocks. The largest stake belongs to Lido Dao, an Ethereum staking protocol that has deposited 4.19 million Ethereums into the network, which is equal to more than 30% of the total Ethereums staked in the blockchain’s proof-of-stake contracts.
Third, institutional investors, or smart money, pulled their funds out of Ethereum investment funds in the days leading up to and after the merger.
According to Coinshares weekly report, Ethereum investment funds saw the withdrawal of $15.4 million from their coffers in the week ending September 16 (September 25). In contrast, bitcoin investment funds attracted $17.4 million in the same week, signaling the smart money’s exit from Ethereum after the merger.
Finally, proof-of-work miners selling $40 million worth of Ethereum in the days leading up to the merge update put heavy selling pressure on Ethereum.
As you can see in the diagram below; Referring to the behavior of the Ethereum/Bitcoin pair in past major market events, independent market analyst Tuur Demeester noted that Ethereum could continue to depreciate against Bitcoin in the coming days.
This chart shows the performance of Ethereum traders in increasing its price against Bitcoin in narratives related to adoption. Events such as the increased enthusiasm for NFTs and DeFi applications in 2021 or the Initial Coin Offering (ICO) boom in 2017.
All these price increases disappeared after the excitement subsided. Demeester sees Ethereum’s shift to proof-of-stake as a bubble that drove up the price of the Ethereum/Bitcoin pair in 2022 and expects the pair to experience a sharp correction in the coming weeks.
I expect the value of the Ethereum/Bitcoin pair to fall sharply. Right now, Ethereum is like a ticking time bomb.
Ethereum/Bitcoin technical analysis points to a 10% decline
Examining these fundamental analyzes along with the technical analysis of the Ethereum/Bitcoin pair also shows a similar downward trend.
As you can see in the three-day chart; The Ethereum/Bitcoin price dropped by about 25% after reaching 0.085 Bitcoin. This range coincides with the pair’s long-term resistance level of 0.081 BTC. Now, the pair is eyeing a further decline towards its multi-month trendline support level.
The support range of the trend line will be equal to 0.06 Bitcoin; The range that has served as the price return zone in 2022. In other words, another 10% drop (to a price of 0.06 BTC) is ahead.
The possibility of a 45% decrease in the price of Ethereum against the dollar
The price of Ethereum against the dollar can decrease by 45%. Because it seems that an ascending triangle pattern has formed in the downtrend.
As a rule, the formation of the descending triangle pattern is confirmed after the price breaks below its lower trend line, and then the price decreases to the maximum height of this triangle. Therefore, the target price of Ethereum will be close to $700 by the end of this year, which is about 45% lower than its current price.
On the other hand, a price pullback from the lower trend line of the triangle can cause the price to rise above the upper trend line; Which means the price will rise to $1,775 or a 35% increase from the current price level.