Ethereum is showing a classic bullish pattern in its Bitcoin pair, suggesting 50% upside
Ethereum’s native token, Ether (ETH), looks set to log a major price rally against its top rival, Bitcoin (BTC), in the days leading up to early 2023.
Ether has a 61% chance of breaking out versus Bitcoin
The bullish signals primarily come from a classic technical setup called the “cup-and-handle” pattern. It forms when price undergoes a U-shaped recovery (cup) followed by a small downward shift (handle) – all while maintaining a common resistance level (neckline).
Traditional analysts view the cup-and-handle as a bullish setup, with veteran Tom Bulkowski noting that the pattern meets its profit target 61% of the time. Theoretically, a cup-and-handle pattern’s profit measure is measured by adding the distance between the neck and the lowest point of the neckline.
The Ether-to-Bitcoin ratio (or ETH/BTC), a much-tracked pairing, has halfway painted a similar setup. The pair is now waiting for a breakout above the neck resistance level of around 0.079 BTC, as illustrated in the chart below.
As a result, a decisive breakout move above the cup-and-handle neck of 0.079 BTC could push the Ethereum price towards 0.123 BTC, or over 50%, in early 2023.
Time to get bullish on ETH?
Ether’s strong temporary fundamentals compared to Bitcoin improve the possibility of undergoing a further 50% price rally in the future.
First, Ether’s annual supply rate dropped drastically in October, in part due to a fee-burning 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 mainly responsible for increasing the number of Ethereum transactions on the chain in October, leading to a higher number of ETH burns, as Cointelegraph discussed here.
Over 2.69 million ETH tokens (~$8.65 billion) have gone out of circulation since the EIP-1559 update was published on Ethereum in August 2021, according to data from EthBurned.info.
It shows that the more congested the Ethereum network becomes, the higher the Ether’s probability of entering a “deflation mode”. So a depleting ETH supply could prove bullish, given the token’s demand is increasing at the same time.
In addition, Ethereum’s move to a proof-of-stake consensus mechanism via “the Merge” has acted as an Ether supply sucker, given that each staker – individual or pool – is required to lock away 32 ETH in a PoS smart contract to earn annual crops.
The total Ether supply held by Ethereum’s PoS smart socket reached an all-time high of 14.61 million ETH on October 31st.
In contrast, Bitcoin, a proof-of-work (PoW) blockchain that requires miners to solve complex mathematical algorithms to earn BTC rewards, faces sustained selling pressure.
Related: Public Bitcoin Miners’ Hash Rate Booms — But Is It Actually Bearish For BTC Price?
In other words, relatively higher selling pressure for Bitcoin versus Ether.
ETH/BTC needs to break the range resistance
Ether’s path to a 50% price increase versus Bitcoin has one strong resistance area in the middle, acting as a potential joy killer for bulls.
In detail, the 0.07BTC to 0.08 BTC area has acted 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 by mid-June 2022.
A similar pullback could see ETH test the 0.057 to 0.052 range as its primary support target by the end of this year or early 2023.
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