Ethereum’s value against Bitcoin reached its 2022 high less than 2 weeks before the merger. At the same time, the growth of the price of Ethereum could shake the position of Bitcoin in the market if the bullish retracement pattern on the “Ethereum/Bitcoin” chart is broken.
Ethereum is forming a bullish retracement pattern
To Report Cointelegraph, the bullish signs of a change in the Ethereum price trend are the result of the formation of a classic inverted head and shoulder technical pattern. This pattern is formed after the price falls below the support level 3 times, called the neck line. The costal floor of the middle depression or head is greater than the two side depressions or shoulders.
The trend change in the inverse head and shoulder pattern is confirmed after the break of the neckline and the upward movement of the price, which is accompanied by an increase in trading volume.
The trend change in the reverse head and shoulder pattern is confirmed after breaking the neckline and upward movement of the price, which is also accompanied by an increase in trading volume. As a rule in technical analysis, price growth in this pattern will be equal to the distance between the lowest point of the head and the neckline.
As you can see in the chart below, Ethereum has formed a similar pattern to date and is now ready to break the neckline and move above it.
If the price of Ethereum decisively crosses the neckline, the next price target of this token in 2022 will be around 0.136 Bitcoin, which is nearly 60% higher than its current price level. (With Bitcoin at $21,000 at the time of writing, Ethereum’s target price would be around $2,850.)
The price of ETH/BTC pair increases on the eve of consolidation
The inverse head and shoulders pattern could be broken before Ethereum switches from Proof of Work (PoW) to Proof of Stake (PoS). While Ethereum proponents tout the merger as a less energy-intensive alternative to proof-of-stake, this update could reduce the annual issuance rate of new Ethereum to the market by 4.2%.
Additionally, the surge in demand for Ethereum since the announcement of the merger on July 14 (July 23) has boosted the value of the ETH/BTC pair by more than 55%. The reason for this increase in demand is the possible hard fork of Ethereum proof-of-work tokens after the transition to proof-of-stake.
Matt Hougan, chief investment officer at Bitwise Asset Management, believes that Ethereum’s switch to a low-energy protocol could increase its appeal to institutional investors. This surge in interest, in turn, could (probably) ensure that Ethereum’s market capitalization surpasses that of Bitcoin.
“It’s entirely possible that Ethereum will replace Bitcoin somewhere in the future,” Hogan told Forbes.
In my opinion, (Ethereum) is looking to become a bigger addressable market.
Currently, the market value of Ethereum is 208 billion dollars, and it is in second place after the market of 401 billion dollars of Bitcoin.
Ethereum sale with merger news
On the other side of the coin, Ethereum is near a resistance zone with a long history of price fatigue against Bitcoin, notes analyst Riteable. In addition, the current bullish trend of the ETH/BTC pair is accompanied by a decrease in trading volume and relative strength index (RSI).
In other words, creating a bearish divergence that could mean an increase in ETH/BTC price may be nearing exhaustion leading to a post-consolidation price correction.