Ethereum’s native token, Ether (ETH), looks poised to log a major price rally versus its top rival, Bitcoin (BTC), in the days leading toward early 2023.
Ether has a 61% chance of breaking out versus Bitcoin
The bullish cues emerge primarily from a classic technical setup dubbed a “cup-and-handle” pattern. It forms when the price undergoes a U-shaped recovery (cup) followed by a slight downward shift (handle) — all while maintaining a common resistance level (neckline).
Traditional analysts perceive the cup and handle as a bullish setup, with veteran Tom Bulkowski noting that the pattern meets its profit target 61% of all time. Theoretically, a cup-and-handle pattern’s profit target is measured by adding the distance between its neckline and lowest point to the neckline level.
The Ether-to-Bitcoin ratio (or ETH/BTC), a widely tracked pairing, has halfway painted a similar setup. The pair now awaits a breakout above its neckline resistance level of around 0.079 BTC, as illustrated in the chart below.
As a result, a decisive breakout move above the cup-and-handle neckline of 0.079 BTC could push Ether’s price toward 0.123 BTC, or over 50%, by early 2023.
Time to turn bullish on ETH?
Ether’s strong interim fundamentals compared with Bitcoin further improve its possibility of undergoing a 50% price rally in the future.
For starters, Ether’s annual supply rate fell drastically in October, partly due to a fee-burning mechanism called EIP-1559 that removes a certain amount of ETH from permanent circulation whenever an on-chain transaction occurs.
XEN Crypto, a social mining project, was mainly responsible for raising the number of on-chain Ethereum transactions in October, leading to a higher number of ETH burns.
Over 2.69 million ETH (approximately $8.65 billion) has gone out of circulation since the EIP-1559 update went live on Ethereum in August 2021, according to data from EthBurned.info.
It shows that the more clogged the Ethereum network becomes, the higher Ether’s probability of entering a “deflationary” mode gets. So, a depleting ETH supply may prove bullish, if the coin’s demand rises simultaneously.
In addition, Ethereum’s transition to a proof-of-stake consensus mechanism via “the Merge” has acted as an Ether-supply sucker, given that each staker — whether an individual or a pool — is required to lock away 32 ETH in a smart contract to earn annual yields.
The total supply held by Ethereum’s PoS smart contract reached an all-time high of 14.61 million ETH on Oct. 31.
In contrast, Bitcoin, a proof-of-work (PoW) blockchain that requires miners to solve complex mathematical algorithms to earn rewards, faces persistent selling pressure.
In other words, there is a comparatively higher selling pressure for Bitcoin versus Ether.
ETH/BTC needs to break the range resistance
Ether’s road to a 50% price rally versus Bitcoin has one strong resistance area midway, acting as a potential joy killer for bulls.
In detail, the 0.07 BTC–0.08 BTC range has served as a strong resistance area since May 2021, as shown below. For instance, the December 2021 pullback that started after testing the said range as resistance resulted in a 45% price correction by mid-June 2022.
A similar pullback could have ETH test the 0.057–0.052 range as its primary support target by the end of this year or early 2023.