Ethereum flashes a classic bullish pattern in its Bitcoin pair, hinting at 50% upside
2022.10.31 17:03
Ethereum’s native token, Ether (ETH), looks poised to log a major price rally versus its top rival, Bitcoin (BTC), in the days leading toward early 2023.
Ether has a 61% chance of breaking out versus Bitcoin
The bullish cues emerge primarily from a classic technical setup dubbed a “cup-and-handle” pattern. It forms when the price undergoes a U-shaped recovery (cup) followed by a slight downward shift (handle) — all while maintaining a common resistance level (neckline).
Traditional analysts perceive the cup and handle as a bullish setup, with veteran Tom Bulkowski noting that the pattern meets its profit target 61% of all time. Theoretically, a cup-and-handle pattern’s profit target is measured by adding the distance between its neckline and lowest point to the neckline level.
The Ether-to-Bitcoin ratio (or ETH/BTC), a widely tracked pairing, has halfway painted a similar setup. The pair now awaits a breakout above its neckline resistance level of around 0.079 BTC, as illustrated in the chart below.
ETH/BTC weekly price chart featuring a cup and handle. Source: TradingView
As a result, a decisive breakout move above the cup-and-handle neckline of 0.079 BTC could push Ether’s price toward 0.123 BTC, or over 50%, by early 2023.
ETH/BTC weekly price chart featuring cup-and-handle breakout setup. Source: TradingView
Time to turn bullish on ETH?
Ether’s strong interim fundamentals compared with Bitcoin further improve its possibility of undergoing a 50% price rally in the future.
For starters, Ether’s annual supply rate fell drastically in October, partly due to a fee-burning mechanism called EIP-1559 that removes a certain amount of ETH from permanent circulation whenever an on-chain transaction occurs.
Ethereum supply rate post-Merge. Source: Ultra Sound Money
XEN Crypto, a social mining project, was mainly responsible for raising the number of on-chain Ethereum transactions in October, leading to a higher number of ETH burns, as Cointelegraph previously covered.
Over 2.69 million ETH (approximately $8.65 billion) has gone out of circulation since the EIP-1559 update went live on Ethereum in August 2021, according to data from EthBurned.info.
It shows that the more clogged the Ethereum network becomes, the higher Ether’s probability of entering a “deflationary” mode gets. So, a depleting ETH supply may prove bullish, if the coin’s demand rises simultaneously.
In addition, Ethereum’s transition to a proof-of-stake consensus mechanism via “the Merge” has acted as an Ether-supply sucker, given that each staker — whether an individual or a pool — is required to lock away 32 ETH in a smart contract to earn annual yields.
The total supply held by Ethereum’s PoS smart contract reached an all-time high of 14.61 million ETH on Oct. 31.
Ethereum 2.0 total value staked. Source: Glassnode
In contrast, Bitcoin, a proof-of-work (PoW) blockchain that requires miners to solve complex mathematical algorithms to earn rewards, faces persistent selling pressure.
Related: Public Bitcoin miners’ hash rate is booming — But is it actually bearish for BTC price?
In other words, there is a comparatively higher selling pressure for Bitcoin versus Ether.
ETH/BTC needs to break the range resistance
Ether’s road to a 50% price rally versus Bitcoin has one strong resistance area midway, acting as a potential joy killer for bulls.
In detail, the 0.07 BTC–0.08 BTC range has served as a strong resistance area since May 2021, as shown below. For instance, the December 2021 pullback that started after testing the said range as resistance resulted in a 45% price correction by mid-June 2022.
ETH/BTC weekly price chart. Source: TradingView
A similar pullback could have ETH test the 0.057–0.052 range as its primary support target by the end of this year or early 2023.
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.
