Ethereum Technical Chart Shows Major Weakness With 45% Drop

• Based on the logarithmic regression trendline, the Ethereum (ETH) price can undergo severe correction from here.
• The Ethereum technical chart shows weakness with a head-and-shoulder pattern, suggesting downward targets of $1,100.

The world’s second-largest cryptocurrency, Ethereum (ETH), has been showing signs of weakness for a while. Last week amid the broader market crash, the ETH price dropped all the way to $1,650 and has been holding at those levels.

Analysts have turned bearish for Ethereum amid weakening on-chain indicators and technical charts. Crypto analyst Benjamin Cowen believes that Ethereum (ETH) still has a considerable drop ahead before it can make a comeback to achieve new all-time highs.

In a recent YouTube video, Cowen reiterates his belief that ETH needs to retrace to its “home,” a term he uses to refer to the asset’s fair-value logarithmic regression trendline. Cowen explains to his 786,000 subscribers that ETH has historically retraced to this trendline before embarking on bull runs.

He describes the logarithmic regression band as a tool to gauge the fair value of an asset using data that are not influenced by market bubbles. Currently, the middle range of the band is around $934, with the lower range at $644.

The analyst also highlights that in the previous cycle (in 2020), Ethereum actually dropped 33 percent below the regression band. As a result, he suggests that a favorable accumulation range for Ethereum could be between $400 and $600.

Cowen predicts that it’s quite likely that ETH will end the year with a lower value than its initial price, following a pattern similar to 2019 when it started at $1,200. At the time of writing, ETH is trading at $1,671, marking a nearly 1.75 percent jump in the past 24 hours.

Ethereum Shows Weakness On Technical Chart

In August, Ether experienced a decline of approximately 12 percent, marking the most significant drop since November of the previous year. This drop is attributed to the anticipation of prolonged higher interest rates, which has impacted the demand for risk-ON investments.

Consequently, Ether’s price movement has formed a head-and-shoulders pattern, a technical analysis pattern suggesting further downward movements and potentially pointing toward a downside target of $1,100.

Courtesy: Bloomberg

At the same time, Ether’s Bollinger bandwidth is currently among the narrowest levels based on Bloomberg’s data dating back to 2018. This bandwidth measures the gap between the upper and lower bands in a Bollinger analysis, a popular method for assessing volatility.

In technical analysis, a tight Bollinger bandwidth often indicates a higher likelihood of increased fluctuations in an asset’s value. Additionally, Ether has broken below the lower band, indicating that a surge in volatility could potentially lead to losses rather than gains.

According to Caroline Mauron, the co-founder at OrBit Markets, certain rapid traders have taken short-term positions anticipating a slight decline in Ether, influenced by macroeconomic factors. However, on the other hand, long-term players are still hopeful about the arrival of Ethereum futures ETF, likely arriving by the second week of October 2023. Additionally, on-chain data shows that Ethereum whales have been reducing their supplies.

Large #Ethereum holders with 10,000+ $ETH have been reshuffling since February. About 112 whales have adjusted their portfolios, either selling or redistributing their #ETH. pic.twitter.com/YswJ6e2JK4

— Ali (@ali_charts) August 22, 2023

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