Analysts still expect Ethereum to maintain its long-term bullish bias as bets are placed on its long-awaited technical upgrade this year.
Ethereum’s native token (ETH) has fallen nearly 20% over the past three weeks, hitting a one-month low of nearly $2,900 on April 19. , according to the classic bearish pattern.
Ethereum price bear flag setting activated
A bearish continuation signal, dubbed a “bear flag”, appears when the price consolidates up within an ascending parallel channel after a sharp down move (called a flagpole). It is resolved after the price breaks the channel to continue the fall.
ETH price fell after testing the upper trend line of its bearish flag on April 4 and is now seeing an extended pullback to the lower trend line around $2,700. If the pattern develops as expected, the price could fall even further, reaching a length equal to the height of the flagpole, as shown in the chart below.
Daily ETH/USD price chart with Bear Flag setting. Source: Trading View
As a result, setting an Ethereum bear flag risks potentially retesting $2,000 in the second quarter.
ETH price: macro factors
Ethereum’s correlation with Bitcoin and traditional market areas has also increased downside risks in recent months.
For example, on April 19, the correlation coefficient between Ethereum and the Nasdaq 100 was 0.95. A factor of 1 means that the two assets move in perfect unison.
ETH/USD and Nasdaq 100 correlation coefficient on the daily chart. Source: Trading View
The price of Ether has fallen by almost 19% since the beginning of 2022. Meanwhile, bitcoin, equities and other riskier markets have also fallen this year as investors assess the Federal Reserve’s willingness to aggressively raise rates and cut its balance sheet by $9 trillion.
Long term bullish factors
More or less, the decline in ETH is primarily due to the belief that less money will be available to buy riskier assets.
Related: Here’s How Ether Options Traders Can Prepare for the Proof-of-Stake Migration
However, speculators are hoping for long-term upside potential thanks to a highly anticipated protocol update called The Merge, which is expected to be released after June.
“ETH is still under pressure from people who want to cash in quickly on the merger,” said DoopleCash, an independent market analyst, adding:
“In the end we will find a balance. I’m not interested in predicting that bottom, I just want to accumulate as much as possible before we get there.”
In addition, the months leading up to the technical update coincided with a downward trend in Ether held on exchanges, the number of non-zero ETH destinations increased, and more ETH flowed into the official merger smart contract.
Kennan Mell, an analyst at Seeking Alpha, argues that the style of launching shadow forks of Ethereum before the merge launch increases the likelihood that the upgrade will be successful at launch. This should attract more investors, especially those waiting on the sidelines to accumulate Ether in the long run.
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