Since May 2021, the weekly chart for Ethereum’s Ether ETH (1) has developed an inverse cup-and-handle pattern that suggests a likely decline against Bitcoin BTC, coupled with decreased trading volume. When the price breaks below the support level, there should be a decline toward the level that is as long as the maximum height between the peak of the cup and the support line.
The weekly chart for ETH/BTC (2) indicates that 0.03 BTC, which is below the price of September 16 by over 55%, is the next negative target. Alternatively, the ETH/BTC pair might not generate significant gains in the years to come as it has been indicating since January 2018 that a rise toward 0.5 BTC in 2023 is possible, representing a gain of about 520% from current levels.
The cup-and-handle pattern, which appeared on Dow Jones (3) during the Great Depression of the 1930s and 1940s, took about nine years to develop, and the handle took another four years before reaching its upside target in the 1950s, even though these patterns have a 61% success rate for achieving their upside targets. Similar to ETH/BTC, the pair is currently in the handling stage as it waits for a breakout move over the 0.08 BTC resistance level.
Even though it has been fluctuating lower inside the handle range, it is currently aiming for a pullback toward its lower trendline, which is at roughly 0.05 BTC and will test the upper trendline as resistance. “The flippening” refers to Ethereum’s ability to surpass Bitcoin in terms of market valuation.
Since Ethereum’s EIP-1559 upgrade (4) from August 2021 included a fee-burning feature to its protocol, it is now competing with Bitcoin as an inflation hedge. Since Ether’s supply growth is currently negative, 1.43% per year, and the token may eventually become deflationary, Ether is a popular Bitcoin substitute among institutional investors.
Ethereum could develop into an Internet 2.0 project, while many supporters suggest that Bitcoin will continue to exist as a form of digital gold. However, as of September 2022, Bitcoin has a market valuation of $372 billion compared to Ether’s $175 billion (5).