After reaching a record high of roughly $4,867 on Nov. 10, 2021, Ethereum’s native cryptocurrency Ether (ETH) has plummeted by more than 20%. However, ETH’s recent price drop does not rule out the possibility of a new all-time high in the coming months. Some indicators predict that Ether’s price will hit $5,000 in the first quarter of 2022, while others appear to be supporting the positive trend.
The price of Ethereum is shown as a falling wedge
Ether’s recent price decline is forming a potential “falling wedge” pattern, which is a traditional bullish reversal pattern.
In more depth, falling wedges start out broad at the top but narrow as the price falls. As a result, the price action forms a conical shape that trends lower as the reaction highs and reaction lows converge. Only once the price convincingly breaks above the wedge’s barrier can a trader recognize a positive bias.
As a consequence, the likelihood of the ETH price breaking above its falling wedge resistance in the future sessions remains strong. When measured from the breakout point, it would climb by as much as the greatest distance between the wedge’s upper and lower trendlines. That roughly puts the price target for Ether at $5,000.
Deposits of ETH to exchanges are decreasing
When traders want to sell or trade their tokens for cash, stablecoins, or other cryptocurrencies, they usually shift them to exchanges.
A larger volume of transactions to crypto trading platforms, in general, indicates a strong selling mood in the market. If the token transactions, on the other hand, fall, it indicates a strong market holding sentiment.
The amount of on-chain Ether deposits to exchanges fell to a 23-month low on Jan. 3, according to data collected by blockchain analytics provider Glassnode.
Another Glassnode measure, which counts the number of Ether addresses transferring ETH to exchanges, has also seen reductions in the previous 30 days, coinciding with the ETH/USD rate falling about 11%.
Meanwhile, since August 2020, the total Ether balance across all exchanges has been in a downward trend. This indicates that ETH investors are in it for the long haul, as the price has risen from almost $400 to just over $3,800 in that time.
Is cheap money here to stay?
Ether’s $1,000+ drop from November 2021 to now is mostly due to the Federal Reserve’s hawkish shift.
To combat increasing inflation, the US central bank chose to hasten the unwinding of its $120 billion per month asset purchase program, followed by three rate rises in 2022 from near-zero levels. Its liberal monetary policy was one of the main drivers of price increases in Ethereum, Bitcoin (BTC), and other crypto markets.
However, the Fed’s three rate rises to reduce inflation from its current 6.8% level may have little influence on Bitcoin and Ethereum values in the long run.
Antoni Trenchev, managing partner of crypto lender Nexo, for example, feels that low-cost money is here to stay. “Central bank policy will be the No. 1 influencing factor for Bitcoin and cryptocurrencies in 2022,” he told Bloomberg.
DISCLAIMER: The point of view in this article is just prediction, not financial advice!