The native Ethereum token, Ether (ETH), is poised for a mini-bull trend above $3,000 mainly due to a classic bullish reversal pattern on its shorter period chart and a large spike in ETH outflows from Coinbase.
ETH price forming falling wedge
ETH price has been forming a falling wedge pattern since the end of March 2022, which increases its chances of experiencing a breakout move in May.
Falling wedges appear when the price is trending lower within a range defined by two contracting descending trend lines.
As a rule of technical analysis, These wedges resolve after price breaks out of its upside range and rises to a level of length equal to the maximum distance between the pattern’s upper and lower trend lines when measured from the breakout point.
The maximum height of the falling wedge is around $395. Suppose the price of ETH closes above $2,850, the potential breakout point, accompanied by an increase in trading volume, its probability of rising by another $395 (towards $3,150) will be higher.
Coinbase ETH outflows hit an all-time high
The interim bullish outlook on the Ether market coincides with the bullish on-chain data.
Notably, the amount of ETH leaving Coinbase, the second-largest cryptocurrency exchange by volume, reached its highest level on May 3, data from CryptoQuant shows.
$ETH Coinbase Outflow hits an all-time-high
Live Chart https://t.co/PiITw2ZFf3 pic.twitter.com/tlFQndUhvQ
— CryptoQuant.com (@cryptoquant_com) May 4, 2022
Simultaneously, the ETH balance across all crypto exchanges fell on May 3 to its lowest level since August 2018, according to one of Glassnode’s on-chain metrics.
Both indicators imply an increase in the preference of traders to hold Ethereum tokens instead of exchanging them for other assets.
They also coincide with a recent recovery in bullish sentiment from small Ether traders, i.e. an increase in the number of addresses that have a minimum balance of 0.1 ETH, 1 ETH and 10 ETH.
Ethereum balances are rising in retail directions as the price of Ether is trending lower, indicating that traders have been buying ETH at local lows. That further supports the falling wedge bullish reversal setup.
Long-term bearish outlook
However, the probability of Ether crossing the $3,000 level has not broken it out of its current long-term bearish setup.
As Cointelegraph previously covered, ETH is at risk of breaking below its ascending triangle range in Q2 2022 with its downside target between $1,820 and around $2,670 depending on the breakout point.
Additional negative signals are coming from macro fronts, with Ethereum, as its main rival Bitcoin (BTC), still maintaining its positive correlation with US equities in a sign that traditional markets will continue to fall due to a common factor. : an aggressive Federal Reserve.
The US central bank will release a policy statement on May 4 at 2pm EST, followed by Chairman Jerome Powell’s press conference at 2:30pm EST. Officials have signaled they would raise benchmark rates by 0.5% and approve plans to liquidate its $9 trillion asset portfolio.
Researchers at Strategas Research Partners and Morgan Stanley anticipate the US benchmark, the S&P 500, to drop another 15-16% in 2022, Bloomberg reports. As a result of their constant positive correlation, ETH is also facing similar negative prospects this year.
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 do your own research when making a decision.
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