Ethereum’s native cryptocurrency, ether (ETH), is forming a cup and handle inversion pattern from May 2021 on the weekly chart, suggesting a possible decline against bitcoin (BTC).
An inverted cup and handle pattern is a bearish reversal pattern, accompanied by lower trading volume. It usually resolves after the price breaks below its support level, and then falls to the level for a length equal to the maximum height between the top of the cut and the support line.
Applying the theoretical definition to the weekly chart of the ETH/BTC pair presents 0.03 BTC as the next target below, down about 55% from the September 16 price.
Can the pair ETH/BTC follow the example of the Dow Jones?
Alternatively, the ETH/BTC pair could see some significant gains in the coming years.
On the weekly logarithmic chart, the ETH/BTC pair is painting a potential cup-and-handle pattern from January 2018. In other words, a rally to 0.5 BTC in 2023 is on the cards, up over 520% from current price levels . .
Unlike its inverse counterpart mentioned above, the cup and handle arrangement is a flip-up arrangement, with the targets positioned at levels equal to their maximum height, measured from their separate point.
Veteran analyst Tom Bulkowski notes that these setups have a 61% success rate in achieving their upside goals.
For example, the cup-and-handle pattern on the Dow Jones chart during the Great Depression of the 1930s and 1940s, where it took nine years to develop and the handle another four years, reached its bullish target in the 1950s, ie as shown in the chart below.
In theory, the ETH/BTC pair could be in the handling phase of a similar cut and handle pattern, as seen in the purple shaded descending area in the chart below.
The pair is waiting to move out above the 0.08 BTC pattern resistance level. So far, it has been fluctuating lower inside the handling range, given a pullback towards its lower trendline at around 0.05 BTC after testing the upper line as resistance this week.
Are we headed for a flip?
Ether’s potential to surpass bitcoin in terms of market capitalization is often referred to as “the flip.”
Ether is competing with bitcoin to become the so-called “inflation hedge,” according to Joshua Lim, head of derivatives at Genesis Trading. Lim cited Ethereum’s EIP-1559 update, dated August 2021, which introduced a fee burning mechanism into its protocol.
Also Read: Academic Research Says ETH Is ‘Better’ Store of Value Than Bitcoin
According to Ultrasound.Money, Ether supply growth is now minus 1.43% per year. In other words, cryptocurrency may become “deflated” over time. Lim says this makes ether an attractive alternative to bitcoin for institutional investors.
12/ Can BTC still remain king? only time will tell if the post-Merger ETH story is strong enough to overthrow the status quo
in the meantime, expect BTC to continue trading as a funding asset and hedging instrument of choice for the entire asset class
— Joshua Lim (@joshua_j_lim) August 29, 2022
12/ Can BTC remain king in the future? Only time will tell if the story for ETH after the Merge Upgrade is strong enough to overturn the status quo In the meantime, expect BTC to continue trading as a funding asset and an option hedging instrument for the entire asset class.- Joshua Lim (@joshua_j_lim) August 29, 2022
But many are against the flippening story, including Rahul Singh, co-founder of the platform Defi FINtokens. He told Cointelegraph that bitcoin would continue as “digital gold” and Ethereum would become an “Internet 2.0” project.
B’coz#Bitcoin in Digital Gold
&#Ethereum it is Internet 2.0
There is a lot of difference between Digital Asset Values, &
—AskToRahulSingh©️ (@AskToRahulSingh) July 13, 2022
There is no way. #Bitcoin is digital gold and #Ethereum is Internet 2.0. Therefore, there is a lot of difference between the values of digital assets, and the values of digital software. — AskToRahulSingh©️ (@AskToRahulSingh) July 13, 2022
As of September 2022, ether’s market capitalization is $175 billion, compared to $372 billion for bitcoin.
The views and opinions expressed herein are solely those of the author and do not necessarily reflect those of Cointelegraph.com. All investment and business transactions involve risk. You should do your own research before making a decision.