Three Reasons That May Cause Ethereum (ETH) Price to Drop!

According to a critical technical indicator compiled by analysts, Ethereum price may have formed a ‘local bottom’ at $4,000. In addition to this appearance in technical indicators, a global investment bank ETHhas published an estimate that will reach a value of $ 8,000 by the end of 2021.

The state of Ethereum is being watched very closely as it is often directly linked to altcoin markets. ETH was included in the crypto market following the fall of Bitcoin and made a minor correction. However, ETH, which managed to recover this decline, seems to be preparing to rise again.

Ethereum price accelerating for big exit

Analysts, who commented on the future of ETH after hitting an all-time high on November 10, think that the price of Ethereum will nearly double towards the end of 2021. Global investment bank Goldman Sachs has released a forecast that ETH will reach $8,000 by the end of the year.

Goldman Sachs’ prediction for Ethereum price is based on the historical correlation of ETH with inflation. The bank stated that digital assets are traded in line with inflation breakouts. The inflation breakout is the difference between the yield of a nominal bond from 2019 and the yield of an inflation-linked bond of the same maturity.

Goldman Sachs added that cryptocurrencies closely monitor inflation markets, potentially reflecting their cyclical nature as a “network-based asset.”

As the Ethereum network transitioned from a proof-of-work (PoW) consensus mechanism to a proof-of-stake (PoS) token, the supply of the token has been steadily reduced, with the cumulative amount of ETH burning reaching almost 1 million.

So far, 947,000 ETH has been burned since the London hardfork, with an approximate value of $4 billion. An Ethereum upgrade, EIP-1559, went into effect earlier this year and brings with it a “fee-burning” mechanism that limits the growth of circulating ETH.

According to Edward Moya, senior market analyst at Oanda trading platform, the minting rate of ETH has been reduced, which will make ETH more scarce and trigger bullish momentum for Ethereum price.

A closer look at the technical data shows that Ethereum price managed to recover after the November 18 decline, but it continues to face a critical resistance barrier at the 78.6% Fibonacci retracement level at $4,191.

The overall outlook for Ethereum price remains bullish as the “cup and handle pattern” on the daily chart remains valid, as confirmed by a slice above the “neckline” on October 20. ETH has managed to find support above the critical neckline of the chart pattern sitting at $3,935.

The Momentum Reversal Indicator (MRI) on the daily time frame shows that the psychological level of $4,000 could be a swing low for Ethereum price as it shows a local bottom signal on November 20 that indicates ETH is ready to rise.

The bullish technical pattern shows a 59% climb from the neckline to $6,363. As long as Ethereum price manages to stay above $3,935, the optimistic target remains on the radar.

If Ethereum price manages to climb above the 78.6% Fibonacci retracement level, which coincides with the 50-day Simple Moving Average (SMA) at $4,191, then the next hurdle for ETH is at the 21-day SMA at $4,478. An additional hurdle will emerge at the all-time high at $4,867 before the token continues higher.

However, if an uptick in sell orders occurs, Ethereum price could slide as low as $3,935 to test the reliability of the support level before dropping to the MRI support line at $3,850.

Disclaimer: What is written here is not investment advice. Cryptocurrency investments are high-risk investments. Every investment decision is under the individual’s own responsibility. Finally, Koinfinans and the author of this content cannot be held responsible for personal investment decisions.

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