Compared to Bitcoin: Has Ethereum Finally Hit Bottom?

Ethereum’s daily chart relative to Bitcoin is forming a rising wedge pattern, increasing the likelihood of a new year breakout.

Ethereum’s native token Ether

Ethereum

$2,343

Well-positioned relative to Bitcoin

Bitcoin

$43,669

Based on favorable ETH/BTC technicals and bullish divergences in the coming weeks.

ETH/BTC close to falling wedge breakout

One of the main reasons behind the potential rise in ETH/BTC is its prevalent falling wedge pattern.

The falling wedge is a classic bullish reversal pattern that forms when the price creates lower highs and higher lows through two converging trendlines. It is resolved when the price breaks out of the upper trendline and rises to a level equal to the maximum distance between the upper and lower trendlines.

ETH/BTC is trending similarly as of December 22, with a breakout above the upper trendline expected. Depending on the breakout point, the pair could rise to the 0.056-0.059 BTC area before the new year, a 6-13% gain from current price levels.

However, veteran trader Peter Brandt disagrees, arguing that the aforementioned falling wedge pattern could be a descending triangle, a bearish indicator. A descending triangle is considered a bearish continuation pattern within a downtrend, which ETH/BTC has been in for the past 15 months.

Therefore, Brandt believes that a break below the lower trendline of the falling wedge could push the ETH/BTC pair to 0.044 BTC, an 8.5% drop from current price levels.

Bullish divergence on the weekly chart

However, longer time frame charts suggest a rebound could occur in the new year and the first quarter of 2024.

For example, on the weekly chart, Ethereum’s price is forming lower highs while its relative strength index (RSI) is forming higher lows, which indicates a bullish divergence. This divergence suggests that downside momentum is fading and the uptrend may be about to reverse.

More importantly, the price is also approaching a confluence of support consisting of a multi-year ascending trendline and the 0.048-0.052 BTC area.

Related: Does Bitcoin’s Declining Dominance Suggest Altcoin Season Is Coming?

This confluence limits ETH/BTC’s downside prospects in the coming weeks, allowing it to rally towards the 200-week EMA (blue wave) near 0.057 BTC before the New Year — which is also the falling wedge target mentioned above.

Conversely, the bears will try to sink the price below the support confluence. This will likely drop the price to 0.036 BTC, a historically important resistance level between August 2018 and September 2020.