Ether price analysis 3 Jan: will $4,000 hurdle be crossed?

Ether may turn bearish below $3,500

Ether coin may turn bearish below $3,500                                 
Ether may turn bearish below $3,500. Pic: Shutterstock
                                

Ether dropped about 20% in December to end the year at $3,677.17. Data from on-chain analytics firm Glassnode shows that Ethereum addresses holding more than 1,000 ETH plunged to 6,292 on 27 December, its lowest level since April 2017. Retail investors seem to be absorbing the supply from the whales as the number of wallets holding at least 0.01 ETH surged from 10.66 million to 20.31 million in 2021. 

Arcane Research said in a report that ether’s outperformance over bitcoin was the “widest seen since 2015 when Ethereum was launched”. For 2022, the report projects ether to continue to outperform bitcoin but does not “see the market cap of ETH surpassing that of BTC”.

The Ethereum network is expected to complete the Merge in 2022, which is the change from the environmentally unfriendly Proof of Work (PoW) consensus mechanism to the eco-friendly Proof of Stake (PoS) consensus mechanism. According to the Ethereum Foundation, this shift could reduce the Ethereum network’s energy usage by 99.95% from current levels.

The combination of the EIP 1559 and the PoS mechanism could bring down the circulating supply from 118 million ETH currently to between 27.3 and 49.5 million ETH, according to an Ethereum research report.

Could the ETH 2.0 upgrade act as a bullish catalyst for ether? Could ether go up in 2022? Read the ETH price analysis to find out.

Ether price technical analysis: weekly chart

Ether Weekly Chart
Ether Weekly Chart. Source: Currency.com

ETH’s price turned down and broke below the 20-week exponential moving average (EMA) last week. This suggests that bears are selling on rallies. A minor positive is that the bulls bought the dip below the 20-week EMA, as seen from the long tail on the candlestick.

The ETH/USD pair finished the week at $3,829.68, with a loss of 5.8% over the previous week’s close.

Although bulls have managed to defend the 20-week EMA in the past few weeks, they have failed to sustain the rebound. If bears sink and sustain the price below the 20-week EMA, the selling could intensify and the pair could decline to the 50-week simple moving average (SMA).

Contrary to this assumption, if the price rebounds off current level, the bulls will make one more attempt to start an up-move toward $4,493.73.

Ether price technical analysis: daily chart

Ether Daily Chart
Ether Daily Chart. Source: Currency.com

ETH’s price broke and closed below the immediate support at $3,641.36 on 29 December, but the bears could not build on the move. This suggests that bulls are defending the zone between $3,641.36 and $3,500.94.

Both moving averages are sloping down and the relative strength index (RSI) is in negative territory, indicating that bears have the upper hand.

If the price turns down from the 20-day EMA, the bears could make one more attempt to pull the pair below the support zone. If they manage to do that, the pair could start a deeper correction to $3,250 and then to $2,800.

Conversely, if bulls drive the price above the moving averages, it will suggest that the correction may be over. The upside momentum could pick up on a breakout and close above $4,200.

Ether: buy or sell this week?

Ether’s price analysis shows that bulls continue to defend the support zone between $3,641.36 and $3,500.94, while bears are defending the overhead resistance at $4,177. This could keep the pair range-bound for a few days, until either the support or the resistance gives way.

The views and opinions expressed in the article are those of the author and do not constitute trading advice. Trading and investing involve substantial risks and you should do your own research or contact your financial adviser before arriving at a decision.

Ethereum to US Dollar
Daily change
3208
Low: 3087.97
High: 3208

Futher Reading: Ether And Ethereum - What Is The Difference

Further Reading: Ether Explained Simply

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