The price of Ethereum’s native token, Ether (ETH), shows growing conflict among traders over the direction of the market for March. This uncertainty has caused the ETH price to consolidate within a narrow sideways range between $1,600 and $1,700 since February 15.
Correction of 25% of the price of ETH on the table in March
The uncertainty stems from the fact that the long-awaited Shanghai Ethereum upgrade will be implemented in March.
Several analysts predict that the Shanghai token unlock feature, which will allow participants to withdraw their tokens from Ethereum’s proof-of-stake smart contract, will trigger a short-term crash.
The Ethereum PoS smart contract has attracted more than $17.4 million ETH (~$28.35 billion at current prices) since its introduction in December 2020, according to Etherscan.
Furthermore, Ether is finding it difficult to break above the technical resistance range. The Ethereum token has attempted to turn the $1,650-1,700 zone as support multiple times since August 2022, as the red bar on the chart below shows.
Interestingly, each failed breakout attempt has resulted in a sharp pullback towards a common support line – a multi-month uptrend line (the black line on the chart).
Therefore, if history is any indication, ETH’s next correction could see its price near $1,250, 25% below current levels. Conversely, a break above $1,650-1,700 positions ETH in the $1,925-2,000 range (purple) as its next bullish target.
Future ETH drops will be limited
From an on-chain perspective, an Ether price crash seems less likely.
In particular, there has been a massive decline in ETH supply on exchanges since September, from around 30% to 11%. In theory, this reduces immediate selling pressure as capital moves towards margins.
“The trend for cryptocurrencies, especially since September, has been towards self-custody,” Santiment noted, adding:
“This trend picked up after the FTX crash. In any case, with BTC and ETH at 5-year lows, future declines will be limited.”
Furthermore, data analysis firm CryptoQuant has come to a similar conclusion about potential future Ether price declines, mainly in the wake of the Shanghai hard fork.
CryptoQuant notes that 60% of the ETH supply locked in the PoS contract – some 10.3 million ETH – is currently at a loss. Meanwhile, Lido DAO, the largest Ethereum faith staking service provider, owns 30% of all ETH locked in PoS with an average loss of $1,000, or 24%.
“Typically, selling pressure arises when participants have extreme profits, which is not the case for currently staked ETH,” CryptoQuant wrote:
“In addition, the most profitable staked ETH was locked in less than a year ago and have not seen significant profit-taking events in the past.”
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