Ethereum’s native token Ether (ETH) fell to its worst levels in nearly two months against the US dollar on May 6 as the slump in financial markets spread across the cryptocurrency sector. However, ETH fared better than Bitcoin (BTC) as the ETH/BTC pair hit a three-week high.
Merge’s impact
many analysts attributed to the integration of Ethereum’s proof-of-stake protocol from proof-of-work as one of the key reasons behind capital turnover from ether to bitcoin markets, including Toast.ETH, a pseudonymous analyst who emphasized the continued reduction in the supply of ether as another reason why ETH may currently be outperforming BTC.
Curiously, Ethereum has grown almost 250% against Bitcoin since the start of its migration to proof-of-stake in December 2020.
Eliezer Ndinga, research lead at 21 Shares, a Zug-based cryptocurrency ETP provider, noted that “liquid staking” could also play a significant role in reducing selling pressure.
Liquid staking is the main cushion here, hence why Lido is the largest DeFi app by TVL — up 51% YTD from $11.9B to over $18B
As of writing, Lido is the second largest app by TVL actually. Still an incredible ride. https://t.co/9HgBsu2PC6
— Ξli (hiring!) (@elidinga) May 5, 2022
Liquid staking is the main cushion here, making Lido TVL’s largest DeFi app – up 51% YTD from $11.9bn to over $18bn.
As of this writing, Lido is the second largest TVL app actually. It’s still an amazing ride.
Bullish outlook for the ETH/BTC pair
Technical data indicates that the ETH/BTC pair could grow further in May, but risks a broader correction overall as it trends within a rising wedge pattern.
The pair has bounced back after testing the lower trend line of the wedge as support on Apr 30 and is now heading towards the upper trend line (around 0.078) as its interim upside target.
But since rising wedges are usually bearish reversal patterns, the probability of the ETH/BTC pair breaking down remains high in the long run.
As a rule of technical analysis, rising wedge breakouts end with the price falling to a level of length equal to the maximum height of the pattern when measured from the breakout point, i.e. 0.064–0.069.
Bearish scenario for the ETH/USD pair
Technical signals suggest further downside prospects for Ether in the coming months, with a “bear flag” pattern projecting ETH price falling towards $1,700 in Q2, approximately 40% less than the price of May 6.
Conversely, a bounce off the lower flag trend line could see Ether retest the $4,000 level.
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