Ethereum price relief rally fades and 18% decline is likely
Ethereum price has risen in the past two consecutive days as investors rush to buy the dips. ETH, the network’s native token, is trading at $3,342, which is about 13.50% above the lowest level this week. This rebound has pushed its total market capitalization to $400 billion, according to CoinGecko.
Ethereum, Bitcoin, and other altcoins have bounced back after the remarkable dip that happened earlier this week. The dip pushed the Bitcoin price below the important resistance at $40,000 for the first time in a few months.
Therefore, because of the close correlation between Bitcoin and Ethereum, this rebound is because of the BTC price action. Historically, Bitcoin tends to stage a relief rally when it drops below a key support level. We saw the same price action when it moved below $50,000 and $60,000.
Meanwhile, Ethereum price rebound also coincides with the jump of global stocks. On Wednesday, the Dow Jones, Nasdaq 100, and S&P 500 rose by about 0.30% each. This performance happened shortly after the American statistics agency published the latest inflation data.
According to the Bureau of Labor Statistics (BLS), the US inflation jumped to 7% in December while the core CPI rose to about 5.4%. These figures were substantially higher than the Federal Reserve target of 2.0%.
At the same time, additional data published last week revealed that the American unemployment rate declined to a pandemic-era low of 3.9%. Therefore, there is a possibility that the Federal Reserve will embrace a more hawkish tone in its bid to slow inflation.
Historically, risky assets like Ethereum and high-growth tech stocks tend to underperform in a hawkish environment.
Still, Ethereum has a catalyst that could push it higher this year. The developers are accelerating the roll-out of ETH 2.0, which will transition it from a proof-of-work to a proof-of-stake. There is a likelihood that ETH price will rise ahead of this launch.
Ethereum price prediction
The daily chart shows that the Ethereum price has been in a deep sell-off in the past few months. The coin has managed to decline by about 32% below the highest level in 2021. It managed to drop below the lower side of the descending channel.
In the past two days, the coin has been bouncing back. As a result, it has retested the lower side of this channel. This means that the coin has formed a break and retest pattern, which is usually a bearish sign.
Therefore, there is a likelihood that the ETH price will resume the bearish trend as bears target the key support level at $2737, which is about 18% below the current level.