Ethereum (ETH) May Drop Below $3K, But Not for Long

Ethereum (ETH) May Drop Below $3K, But Not for Long

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Ethereum broke up the $4K resistance level, which is becoming a support level. However, according to technical analysis, a bearish reversal is possible.

ETH hit its all-time high in early November above $4,800 but dropped more than 20% over the month. Meanwhile, some analysts state that this is one and a half times less than the drop in bitcoin, which also updated its all-time high of about $69K in early November. Experts even suggest that Ethereum has been used by players for a month to hedge against bitcoin, which has lost 30% of its price.

Several factors contributed to the drop in ETH, despite the fact that the leading altcoin supply on exchanges was the minimum for three years. The trigger was a lawsuit filed by the non-profit organization Empower Oversight against the SEC, which states that in 2018 SEC employees spoke out in favor of Ethereum. The SEC agreed that ETH is not a security. This pushed the leading altcoin upward.

Moreover, William Hinman, the director of corporate finance at the SEC, backed ETH due to his own interest, the lawsuit claims. According to the non-profit organization, Hinman did business with the law firm Simpson Thacher, received large sums of money from it, and after leaving the SEC became an employee of that company. Simpson Thacher is a member of the Enterprise Ethereum Alliance, which advocates for the use of Ethereum in the enterprise segment.

But that’s not all that is pressuring on ETH right now. The main thing is the threat of a rolling back of the quantitative easing program. On the eve of the Fed meeting, the Financial Times conducted a survey of 48 leading US economists. Most of them approved a rate hike in the second quarter of 2022. As expected, the Fed confirmed its intention to accelerate the QE program cancellation. This will strengthen the dollar and may lead to a drop in the cryptocurrency market. However, the announced measures turned out to be softer than expected. Therefore, most large-cap altcoins show small gains or go flat, just like ETH.

In a situation of uncertainty, technical analysis can help. The ETH chart gives a disappointing forecast. According to analysts, a rising wedge pattern is clearly visible on it, which often ends in a bearish reversal. According to analysts’ prognosis, as a result of losses, the price of ETH may return to the level of $2800. But the drop will be short-lived, analysts remind that 2022 will be the year of the full-scale transition to ETH 2.0.