Can Ethereum Price Hit $4,000 After Triple Support Bounce?

Ethereum’s native token Ether ( ETH ) looks set to continue its steady rebound move towards $4,000, according to a technical setup shared...


Ethereum’s native token Ether (ETH) looks set to continue its steady rebound move towards $4,000, according to a technical setup shared by independent market analyst Wolf.

Classic bullish reversal pattern in preparation?

The pseudonymous chart analyst discussed the role of at least three support levels in driving ETH price up nearly 30% from its local low of $2,160. These price floors included a 21-month exponential moving average, the 0.786 Fib level of a Fibonacci retracement chart taken from a low of $1,716 to a high of $4,772, and the lower boundary of a triangle ascending.

ETH/USD daily price chart showing the three supports. Source: Trading View

Wolf noted that the triple support scenario could push Ether price at $3,330. In doing so, the confluence would activate a classic bullish reversal pattern, called a reverse head and shoulders (IH&S).

In detail, the IH&S pattern could cause Ether to form three consecutive troughs, with the central trough (the head) deeper than the other two (the left and right shoulders). During this time, all lows will be hanging upside down below a common resistance trend line, known as the neck line.

In a “perfect” scenario, a break above the IH&S neckline can push Ether price as high as the maximum distance between the neckline and the head. This puts the price of ETH on the way to $4,000.

ETH/USD daily price chart with IH&S setup. Source: Wolf, TradingView

But if ETH is rejected on the approach to $3,000, it would signify a pullback towards the ascending triangle support.

ETH bulls are not out of the woods

Like Cointelegraph covered earlier this week, Ether’s continued price rebound is part of a broader correction that began after ETH hit its all-time high above $4,850 in November 2021. In doing so, the Ethereum token fell 55.65% to $2,159 before rebounding 30% to its current price levels.

The retracement could appear as a temporary respite in Ether’s overall downtrend. As a result, its price could drop further, in a “bearish flag” pattern shown in the chart below, with a downside target near $2,000.

ETH/USD daily price chart with “bearish flag” pattern. Source: Trading View

Several on-chain indicators are consistent with the bearish outlook. For example, data from Glassnode shows that the Ethereum balance on all exchanges has been increasing since early December 2021, coinciding with the decline in ETH prices.

Ethereum balance on all crypto exchanges. Source: Glassnode

An increasing number of ETH held by exchanges increases the likelihood that traders will sell it for other assets. Notably, a year-long decline in the number of ETH in stock exchanges had coincided with Ether’s price rallying from $730 to over $4,800.

Ethereum whales vs. fish

Other negative clues for the Ethereum token come from a clear absence of influential buyers on the market. For example, some of Glassnode’s metrics show that the number of Ether wallets that hold more than 100 ETH and less than 1,000 ETH has steadily declined since the start of 2021.

Number of Ethereum addresses with a balance of at least 100 ETH. Source: Glassnode

Ether is also not immune to ongoing macroeconomic trends. For example, its recent price decline came mostly in the wake of the Federal Reserve plans to accelerate the withdrawal of its $120 billion-a-month COVID-19 stimulus package by March 2022, followed by at least three rate hikes.

The US central bank’s cutback plans have dented investors’ appetite for riskier assets, hurting tech stocks, gold and cryptocurrencies. As a result, the fundamental outlook for Ethereum is likely to turn extremely bearish.

Related: Altcoins rack up 30% gains as Bitcoin price chases $39,000

Nevertheless, retail investors seem indifferent to macroeconomic developments. On Tuesday, the number of ETH addresses with a non-zero balance hit a new high of over 74.137 million. Last week, the total number of wallets with at least 1 ETH also peaked at nearly 1.414 million.

Number of Ethereum addresses with balance of at least 1 ETH. Source: Glassnode

Ethereum addresses with a balance of at least 10,000 ETH – the real whales – also show a slight improvement. In detail, their number fell from 1,157 to 1,163 during the January 2022 price correction, showing that the wealthiest wallet holders had been buy the dip.

The easing will return

According to Nick, a market analyst with Ecoinometrics, the cryptocurrency market is still in a “danger zone” due to the Fed’s hawkish turn. But it remains to be hoped that the central bank would revert to quantitative easing if the stock market fell another 15-20%.

“It’s when there is blood in the streets that you can find good opportunities to make money”, Nick written in the last scanto add;

“Even if there is additional downside risk or just an extended period of weak price action until the Fed comes to its senses, now is probably a good time to build a position and wait for the real pump begin.”

The views and opinions expressed herein 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.