Ethereum faces a 25 percent crash as ETH price forms a classic bearish technical pattern

Ethereum’s native token Ether (ETH) appears poised to undergo a collapse move in May as it forms a compelling “bear pennant” structure.

ETH price to $1,500?

ETH price has been consolidating within a range defined by two converging trend lines since May 11th. Its sideways movement coincides with a drop in trading volume, emphasizing the possibility of ETH/USD painting a bear pennant.

Bear pennants are bearish continuation patterns, ie they resolve after price breaks below the structure’s lower trendline and then fall down by the height of the previous move (referred to as the flagpole).

Two-hour ETH/USD price chart. Source: TradingView

As a result of this technical rule, Ether risks closing below its pennant structure followed by further moves lower.

The height of the ETH flagpole is around 650 dollars. Therefore, if the price collapses at the pennant apex at $2,030, the bearish target of the structure will be below $1,500, down over 25% from today’s price.

sell-off, pullback

Interestingly, the bear pennant’s profit target falls within the range that preceded a 250% price rally in the February-November 2021 session. Also, the target is around the 200-week exponential moving average of Ether (200-day EMA; the blue wave), currently near $1,600.

Ideally, the demand zone could prompt ether traders to accumulate the tokens in anticipation of a sharp bullish retracement.

Assuming it happens, ETH’s interim price gain target would likely be the multi-month down sloping trendline that has served as resistance in a “declining channel” pattern, as illustrated in the chart below.

ETH/USD weekly price chart. Source: TradingView

ETH has already recovered after testing the demand zone (and the lower trendline of the falling channel) as support. This could push ETH/USD to hit the channel’s upper trendline near $3,000 by June, some 50% above today’s price.

Extended failure scenario

The worst-case scenario could be ETH breaking below the demand zone, led by macro risks and their impact on the crypto market so far in 2022.

Related: $1.9 Trillion Erasure in Crypto Risks Spilling Over to Stocks and Bonds – Stablecoin Tether in Focus

Notably, ether is down over 50% quarter-to-date as investors reduce exposure to riskier assets, including bitcoin (BTC) and tech stocks, in an environment of higher interest rates.

As Cointelegraph reported, anticipation of further stock market sell-offs could weigh on cryptos, hurting Ether, Bitcoin, Cardano (ADA), and others alike.

Ethereum’s correlation coefficient with the tech-heavy Nasdaq 100 is 0.90. Source: TradingView

BOOX Research, a financial blogger at SeekingAlpha, remains long-term bullish on Bitcoin, Ethereum and the broader crypto market, but believes a recovery could take several years. Excerpts from his note:

“While some of the corrections from above may have simply shrugged off the ‘hot money,’ there is still a risk that a deteriorating macro environment will open the door to even deeper losses.”

The views and opinions expressed herein are solely those of the author and do not necessarily reflect the views of Every investment and trading move involves risk, you should do your own research when making a decision.