Ethereum’s native cryptocurrency, Ether (ETH), has experienced a significant increase of over 20% against Bitcoin (BTC) since February 12th. This surge is primarily due to the anticipation surrounding the potential approval of a spot Ether exchange-traded fund (ETF) in the United States by May of this year.
However, the widely-tracked ETH/BTC pair has reached a historical turning point that could increase the risks of a correction in the coming days. Let’s delve into these bearish setups in detail.
The four-hour ETH/BTC chart below illustrates Ether hovering around its 1.00 Fibonacci retracement level at 0.06044 BTC. Additionally, its relative strength index (RSI) reading has entered “overbought” territory after crossing above 70, indicating a potential correction scenario.
The combination of these two technical indicators is strikingly similar to the fractal observed in January 2024, which preceded an 11.65% drop in ETH/BTC rates. Specifically, an overbought RSI coupled with a historical resistance level increases the likelihood of investor fatigue. This could result in a decline in Ethereum’s value relative to Bitcoin, beginning with a drop towards the 0.786 Fib line at 0.058 BTC.
Furthermore, the presence of a rising wedge pattern, pending bearish confirmation, has the potential to further depress the ETH/BTC exchange rate. This pattern suggests a shift from upward to downward momentum, targeting a decrease of 10.85% to a level of 0.053 BTC from its current position by March.
On the weekly timeframe chart, Ether shows signs of a bearish reversal as it struggles to close above its multiyear descending trendline resistance. Interestingly, this trendline coincides with ETH/BTC’s 50-week exponential moving average (50-week EMA). This resistance confluence may limit Ether’s upside attempts in the coming weeks, making the cryptocurrency more susceptible to a pullback towards 0.051 BTC. This level has previously witnessed sharp rebounds in the June 2022 and October 2023-January 2024 sessions.
Additionally, there is a significant divergence observed in the Ether and Bitcoin portfolios of major investors, commonly referred to as “whales.” In February, the number of entities holding 1,000-100,000 ETH has significantly decreased, according to Glassnode data. Conversely, the number of Bitcoin entities holding over 1,000 BTC has increased, attributed to the surge in capital influx into recently introduced ETFs. This suggests a heightened interest in Bitcoin over Ether among institutional investors, further strengthening the bearish case for ETH/BTC along with the technical factors.
It is important to note that this article does not provide investment advice or recommendations. Every investment and trading decision carries risks, and readers should conduct their own research before making any decisions.