An assortment of technical, macroeconomic, and on-chain indicators points to a price rise in the Ethereum market for this quarter.
Price Analysis
After reaching its record high of $4,867 on November 10, 2021, Ethereum’s native token Ether has fallen by more than 20%. ETH’s sharp price decline does not mean that it cannot set a new record in the coming months, as many technical, macroeconomic, and on-chain indicators suggest.
These indicators project Ether’s price to reach $5,000 in the first quarter 2022, while others see support for the bullish bias.
Wedge falling for ETH price painting
The recent price correction by Ether is pointing to a classic bullish reversal pattern, the “falling wedge”.
The falling wedges are essentially a wide-ranging pattern that begins at the top and contracts as the price falls. The result is that the price action takes on a conical shape, with the reaction highs and lows becoming more convergent. Only when the price breaks through the resistance of the wedge, traders can recognize a bullish bias.
Therefore, there are high expectations that the ETH price will break through its falling wedge resistance during the next sessions. It would then rise to the maximum distance between the upper and lower trendlines of the wedge, measured from the breakout point.
Literally unchanged…$ETH is going to $5k pic.twitter.com/11mAQiJxJS
— Kong Trading (@KongBTC), January 4, 2022
This puts Ether’s price target at approximately $5,000
ETH deposits to exchanges drop
Traders typically move their tokens to exchanges when they intend to sell/trade them for either fiat, stablecoins or other cryptocurrencies.
Generally, a higher number of transactions made to crypto trading platforms reflects a high selling sentiment in the market. Conversely, if the token transactions plunge, they show a strong holding sentiment in the market.
Data collected by blockchain analytics service Glassnode show that the number of on-chain Ether deposits to exchanges dropped to its 23-month low on Jan. 3.
Additionally, another Glassnode metric that tracks the number of Ether addresses sending ETH to exchanges also reported declines over the last 30 days, the same period that saw the ETH/USD rate dropping nearly 11%.
Meanwhile, the total Ether balance across all the exchanges has been in a downtrend since Aug. 2020, suggesting that ETH investors are in it for the long haul as its price rose from nearly $400 to a little over $3,800 in the same period.
Cheap money here to stay?
Ether’s $1,000-plus plunge from Nov. 2021 to date came majorly in the wake of the Federal Reserve’s hawkish turn.
The U.S. central bank decided to accelerate the unwinding of its $120 billion a month asset purchase program, followed by three rate hikes in 2022 from its near-zero levels, to stem rising inflation. Its loose monetary policy was one of the primary catalysts behind similar price rallies across Ethereum, Bitcoin (BTC) and other crypto markets.
But the Fed’s efforts to tame inflation from its current 6.8% level with three rate hikes may not impact Bitcoin and Ethereum prices in the long run. For example, Antoni Trenchev, managing partner of crypto lender Nexo believes that cheap money is here to stay.
“The No. 1 influencing factor for Bitcoin and cryptocurrencies in 2022 is central bank policy,” he told Bloomberg. He added:
“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 that investors should allocate at least 2%–3% of their net portfolio to cryptocurrencies like BTC and ETH in case the fiat money “goes to hell.”
Additionally, Bridgewater Associates founder Ray Dalio revealed that he has been holding BTC and ETH in his portfolio against the risks of cash devaluation led 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. Every investment and trading move involves risk, you should conduct your own research when making a decision.
