Home CryptoMarket Ethereum flashes a classic bullish pattern in its Bitcoin pair, hinting at 50% upside

Ethereum flashes a classic bullish pattern in its Bitcoin pair, hinting at 50% upside

by CryptoFan
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Ethereum’s native token, Ether (ETH), looks poised to record a significant price gain against arch-rival Bitcoin (BTC) heading into early 2023.

61% chance of Ether breaking out against Bitcoin

Bullish cues mostly come from a classic technical setup known as the ‘cup and handle’ pattern. It forms when price shifts slightly downwards (handle) following a U-shaped recovery (cup), but all maintain a common resistance level (neckline).

Traditional analysts perceive the cup and handle as a bullish setup according to veteran Tom Bulkowski. warn That pattern consistently hits profit targets 61% of the time. Theoretically, the profit target of the Cup and Handle pattern is measured by adding the distance between its neckline and the lowest point to the neckline level.

A widely tracked pairing, the Ether-to-Bitcoin ratio (or ETH/BTC), roughly depicts a similar setup. The pair is currently waiting for a breakout above the neckline resistance level of around 0.079 BTC, as shown in the chart below.

ETH/BTC weekly price chart featuring cups and handles.Source: Trading View

As a result, a decisive breakout move above the 0.079 BTC cup and handle neckline could push the price of Ether to 0.123 BTC, or more than 50%, by early 2023.

ETH/BTC weekly price chart featuring a cup and handle breakout setting.Source: Trading View

Is it time to be bullish on ETH?

Ether’s strong interim fundamentals compared to Bitcoin make it even more likely to experience a 50% price increase in the future.

First of all, Ether’s annual supply rate dropped significantly in October. This is partly due to a fee-burning mechanism that removes a certain amount of ETH from permanent circulation, which he calls EIP-1559, whenever an on-chain transaction occurs.

Ethereum supply rate after merger.Source: Ultra Sound Money

As previously covered by Cointelegraph, social mining project XEN Crypto primarily boosted the number of on-chain Ethereum transactions in October, increasing the number of ETH burns.

Since the EIP-1559 update went live on Ethereum in August 2021, over 2.69 million ETH (approximately $8.65 billion) has gone out of circulation. Data from EthBurned.info.

It shows that the more congested the Ethereum network, the more likely it is to enter a “deflationary” mode. As such, the depleting ETH supply could be bullish if coin demand rises at the same time.

Additionally, Ethereum’s move to a proof-of-stake consensus mechanism via “merge” acted as a sucker for Ether supply. A contract for an annual yield.

The total supply held by Ethereum PoS smart contracts reached an all-time high of 14.61 million ETH on October 31st.

Ethereum 2.0 total stake.Source: Glassnode

By contrast, Bitcoin, a proof-of-work (PoW) blockchain that requires miners to solve complex mathematical algorithms to earn rewards, faces constant selling pressure.

Related: Public Bitcoin Miner Hash Rates Soar — But Is Bitcoin Really Bearish?

In other words, Bitcoin and Ether have relatively high selling pressure.

ETH/BTC Needs to Break Range Resistance

Ether’s path to a 50% price rally against Bitcoin has one strong resistance area along the way that acts as a potential killer of joy for the bulls.

In more detail, the 0.07 BTC to 0.08 BTC range has been a strong resistance area since May 2021, as shown below. For example, the rebound that started after testing the above range as resistance in December 2021 resulted in a 45% price correction by mid-June 2022.

ETH/BTC weekly price chart.Source: Trading View

A similar pullback could see ETH test the 0.057-0.052 range as a key support target by the end of this year or early 2023.