Ethereum Makes Seventh Milestone 50% Drawdown
Ethereum is riding ahead of the crypto market’s most recent uptrend. At the time of writing, ETH, BTC and larger cryptocurrencies are showing signs of recovery with potential for near-term continuation if they manage to break above their resistance level.
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At the time of writing, Ethereum (ETH) is trading at $2,788 with gains of 6.5% in the last 24 hours.
ETH with small gains in the 4 hour chart. Source: ETHUSD trading display
Data from Arcane Research indicates that Ethereum has seen its seventh 50% withdrawal since its inception. The second cryptocurrency by market cap fell to an annual low of $2,200, representing a 55% drop from its high of $4,812.
During the crypto market’s most recent downtrend, ETH lost more than $280 billion in total market cap, representing the largest drop on this metric since launch. Taking the price of ETH as a proxy, it is possible to conclude that the altcoin market as a whole has suffered deeply over the past two months.
In that sense, Arcane Research determined that this bearish price action towards its annual lows was one of the slowest Ethereum actions in its history. It took the price of ETH about 75 days to reach $2,200, compared to an average of 38 days.
Conversely, Ethereum has always had a higher average in terms of recovery. It takes the price of ETH an average of 165 days to return to previous highs, according to conclusions from Arcane Research. The company added the following regarding the cryptocurrency’s recovery periods, and its worst period yet, the crypto winter of 2018:
Ethereum and the wider crypto ecosystem look very different from 2016-2018. But if history is any indication, and if we exclude another ice age like 2018, we might see prices back in the $4,000 range as early as July 2022.
Source: Arcane Research
Don’t fight the FED, could Ethereum struggle to see ATHs?
The developments in the monetary policy of the US Federal Reserve (FED) will most likely be an obstacle for Ethereum and the rest of the crypto market. While the short-terms may seem bullish, BTC and ETH are highly correlated with the traditional market.
Trading firm QCP Capital recently Posted 4 upcoming events from US institutions that look poised to bring some short-term volatility into ETH and the crypto market. On February 8, the US Congress will hold a hearing on Stablecoins, two days later the government is expected to release new Consumer Price Index (CPI) figures.
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This statistic has acted as a headwind for cryptocurrencies since the fourth quarter of 2021. Used to measure inflation in the US, the higher the CPI, the more likely it is for the FED to accelerate its shift in monetary policy. The FED’s FOMC will release the minutes in mid-February and the same entity could announce a hike in interest rates on March 17.
US upcoming major events. Source: QCP Capital
In the long run, Ethereum is registering bullish fundamentals as it gets closer to The Merge, the merger between its execution layer (ETH 1.0) and its consensus layer (ETH 2.0). The event could propel ETH into uncharted territory, at least on its BTC trading pair. QCP Capital said:
ETHBTC, which holds its triangular support very well. Due to the difference in beta, a higher ETHBTC is generally a bullish signal and vice versa. We still believe a powerful wave will break 5 old highs in ETH. That may happen with the full implementation of ETH 2.0.