Ethereum’s native token Ether (ETH) looks set to post a big price rally against its main rival Bitcoin (BTC) in the days leading up to early 2023.
Ether has a 61% chance of breaking out against Bitcoin
Bullish signals mainly arise from a classic technical setup called a “cup and handle” pattern. It forms when price experiences a U-shaped rally (cup) followed by a slight downward slide (handle), all while holding a common resistance level (neckline).
Traditional analysts perceive the cup and handle as a bullish setup, with veteran Tom Bulkowski noting that the pattern hits its profit target 61% of all time. Theoretically, the profit target of a cup and handle pattern is measured by adding the distance between its neckline and the lowest point at the neckline level.
The Ether-to-Bitcoin (or ETH/BTC) ratio, a widely tracked pairing, has half-painted a similar setup. The pair is now awaiting a break above its neckline resistance level around 0.079 BTC, as illustrated in the chart below.
As a result, a decisive breakout move above the 0.079 BTC handle and cup neckline could push the price of Ethereum towards 0.123 BTC, or more than 50%, in early 2023.
Time to get bullish on ETH?
Ether’s strong intermediate fundamentals compared to Bitcoin further enhance its chance of experiencing a 50% price rally in the future.
For starters, Ether’s annual supply rate fell sharply in October, in part due to a fee reduction mechanism called EIP-1559 that removes a certain amount of ETH from permanent circulation every time an on-chain transaction occurs.
XEN Crypto, a social mining project, was primarily responsible for increasing the number of Ethereum transactions on-chain in October, leading to more ETH burning, as Cointelegraph covered here.
More than 2.69 million ETH tokens (~$8.65 billion) have stopped circulating since the EIP-1559 upgrade on Ethereum went live in August 2021, according to data from EthBurned.info.
It shows that the more the Ethereum network is clogged, the higher the probability that Ether will enter a “deflationary” mode. Therefore, a depleted ETH supply can be optimistic, given that the demand for the token increases simultaneously.
Additionally, Ethereum’s transition to a proof-of-stake consensus mechanism through “the Merger” has acted as a sucker for Ether supply, as each participant (individual or group) must hold 32 ETH in a smart contract of PoS to earn annual returns.
The total supply of Ether held by Ethereum’s PoS smart contact reached an all-time high of 14.61 million ETH on Oct. 31.
By contrast, Bitcoin, a proof-of-work (PoW) blockchain that requires miners to solve complex mathematical algorithms to earn BTC rewards, faces persistent selling pressure.
In other words, comparatively higher selling pressure for Bitcoin versus Ether.
ETH/BTC needs to break range resistance
Ether’s path to a 50% price rally against Bitcoin has a strong midway resistance area, acting as a potential joy killer for bulls.
In detail, the 0.07 BTC to 0.08 BTC range has served as a strong resistance area since May 2021, as shown below. For example, the December 2021 pullback that started after testing said range as resistance resulted in a 45% price correction in mid-June 2022.
A similar pullback could see ETH test the 0.057-0.052 range as its main support target by the end of this year or early 2023.
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