3 reasons why Ethereum reached $5,000 in the first quarter

Ethereum’s native token Ether (Ethereum) Own Plummeted by more than 20% After hitting a record high of around US$4,867 on November 10, 2021. Nevertheless, the sharp price correction does not mean that ETH cannot reach new highs in the next few months, because several widely-watched technical, macroeconomic and -chain indicators suggest.

One of these indicators assumes The price of Ether reaches $5,000 In the first quarter of 2022, while others look ready to support the bullish bias.

ETH price draws a falling wedge

The recent price adjustment of Ether is depicting a potential classic bullish reversal pattern called a “declining wedge.”

In detail, the declining wedge widens from the top, but shrinks as prices fall. Therefore, the price movement forms a cone shape and tends to decrease as the reaction high and the reaction low meet. Traders will realize the bullish bias only after the price decisively breaks through the wedge resistance level.

Therefore, people still expect ETH price will break through its falling wedge resistance In the next meeting. In doing so, it will rise to the maximum distance between the upper and lower trend lines of the wedge when measuring from the breakout point.

This roughly sets the target price of ETH at $5,000.

ETH deposits on exchanges dropped

When traders intend to sell/trade them for fiat currencies, stablecoins or other cryptocurrencies, they usually transfer their tokens to exchanges.

Generally speaking, the increase in the number of transactions on crypto trading platforms reflects the high selling sentiment in the market. On the contrary, if the token trading volume plummets, it indicates that the market holds strong holding sentiment.

The data collected by the blockchain analysis service Glassnode shows that Deposit Ether on the exchange It fell to a 23-month low on January 3.

ETH exchange deposit amount. Source: Glassnode

In addition, another Glassnode metric that tracks the number of ETH addresses sent to the exchange also reported a decline in the past 30 days, during which the ETH/USD exchange rate dropped by nearly 11%.

The number of Ethereum addresses sent to the exchange. Source: Glassnode

At the same time, since August 2020, the total ETH balance of all exchanges has been in a downward trend, which shows that ETH investors are trying to long haul Because its price rose from nearly US$400 to a little over US$3,800 during the same period.

The Ethereum balance of the exchange. Source: Glassnode

Cheap money to stay here?

From November 2021 to the present, Ether has plummeted by more than US$1,000, which mainly occurred after the Fed’s tough attitude.

U.S. Central Bank Decided Speed ​​up the removal of the $120 billion monthly asset purchase plan, and then raise interest rates from close to zero three times in 2022 to curb the rise in inflation. Its loose monetary policy is Ethereum, Bitcoin (Bitcoin) And other cryptocurrency markets.

ETH/USD and BTC/USD weekly price chart. Source: TradingView

But the Fed’s efforts to tame Inflation from the current level of 6.8% In the long run, the three interest rate hikes may not affect the prices of Bitcoin and Ethereum. For example, Antoni Trenchev, managing partner of cryptocurrency lender Nexo, believes that cheap money will continue to exist.

“The number one factor influencing Bitcoin and cryptocurrency in 2022 is central bank policy,” he told Bloomberg. He added:

“Cheap money will continue to exist, which has a huge impact on cryptocurrencies. The Fed has no courage to withstand the 10%-20% crash of the stock market and the adverse reaction of the bond market.”

Hungarian-born billionaire Thomas Peter Fei Also said Investors should allocate at least 2-3% of their net investment portfolio to cryptocurrencies such as BTC and ETH to prevent fiat currencies from “going to hell”.

related: More billionaires are turning to cryptocurrencies due to fears of statutory inflation

In addition, the co-founder of Bridgewater Ray Dario It was revealed that he has been holding BTC and ETH in his investment portfolio to deal with the risk of cash depreciation caused by rising inflation.

The views and opinions expressed here only represent the views of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading action involves risk, and you should conduct your own research when making a decision.