Ethereum hits 3-week high against Bitcoin amid Fed-led market crisis

Ethereum’s native token Ether (ETH) plunged to its worst level in almost two months against the US dollar on May 6 as the crisis in financial markets gripped the cryptocurrency sector. Nonetheless, ETH outperformed Bitcoin (BTC), with the ETH/BTC pair hitting a three-week high.

The merge effect

Lots of analysts credited The merger of Ethereum to Proof-of-Stake from Proof-of-Work is one of the main reasons behind capital rotation from Ether to Bitcoin markets, including Toast.ETH, a pseudonymous analyst who underlined Ether’s ongoing supply reduction is another reason why ETH may currently be outperforming BTC.

Interestingly, Ethereum has grown nearly 250% against Bitcoin since it began its migration to proof-of-stake in December 2020.

Eliezer Ndinga, research lead at 21 Shares, a Zug-based crypto ETP provider, pointed out that liquid staking could also play a big role in reducing selling pressure.

Liquid staking is the main cushion here, which is why Lido is TVL’s largest DeFi app — up 51% year-to-date from $11.9 billion to over $18 billion

As of this writing, Lido is TVL’s second largest app. Still an incredible ride. https://t.co/9HgBsu2PC6

— Ξli (queue!) (@elindinga) May 5, 2022

Upside prospects for ETH/BTC

Technicals suggest that ETH/BTC could continue growing in May, but risks a broader correction overall as it trades within a rising wedge pattern.

The pair rallied after testing the wedge’s lower trendline as support on April 30th and is now moving towards the upper trendline (around 0.078) as a preliminary upside target.

Related: Bitcoin’s bumpy road to becoming a risk-free asset: Analysts are investigating

However, since rising wedges are typically bearish reversal patterns, the likelihood of ETH/BTC breaking down remains higher in the long term.

As a rule of technical analysis, a breakdown of the rising wedge causes the price to crash to a level whose length is the maximum height of the pattern measured from the breakdown point, i.e. 0.064–0.069.

ETH/USD bearish scenario

Technical signals point to more downside prospects for Ether in the coming months, with a “bear flag” pattern projecting ETH’s price drop to $1,700 in Q2, down around 40% from the May 6 price.

Conversely, a bounce off the flag lower trendline could see Ether retest $4,000.

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