Ethereum’s token Ether (ETH) could be entering a “bull trap” zone after rebounding back above the $1,000 mark from 18-month lows of $885.
Ether price paints a “rising wedge”
The first among these indicators is a “rising wedge,” a classic bearish reversal setup that forms after the price trends upward inside a range defined by two ascending but converging trendlines. The wedge setup gains further confirmation if the trading volume drops alongside the rising prices.
Theoretically, a rising wedge resolves after the price breaks below its lower trendline and eyes a run-down toward the level at length equal to the maximum height between the wedge’s upper and lower trendline
Ether has been forming a rising wedge since mid-June, as shown in the chart below.
ETH/USD four-hour price chart featuring ‘rising wedge’ setup. Source: TradingView
Hence, its interim bias appears to the downside, with a decisive breakdown below the lower trendline risking a decline toward the $870-$950, depending on where the breakdown begins.
That means a 15%-25% decline from today’s ETH price.
$70M exits Ethereum funds
Ethereum’s bearish case is supported by evidence of significant outflows from investment funds.
Notably, Ether-related investment products witnessed outflows worth $70 million in the week ending June 17, according to data fetched by CoinShares.
Notably, this was the eleventh-straight week of capital withdrawals, bringing the year-to-date outflow total to $458.6 million.
Flow of Asset. Source: CoinShares
In contrast, Solana (SOL), one of Ethereum’s top rivals in the smart contracts ecosystem, attracted $109 million in 2022 for its related funds. While Bitcoin (BTC) saw $480 million flow into its investment products.
CoinShares cited investors’ worries over Ethereum’s “Merge” to proof-of-stake as the primary reason behind its funds’ poor performance this year.
Ethereum options strike price: $1K
ETH options’ open interest on Deribit shows over $1 billion in notional for Ether, awaiting expiry on June 24. Interestingly, these Ether options are major puts around the current price levels, with a concentration around the $1,000 strike, according to data from Coinglass.
Ether options open interest by strike price. Source: Coinglass
The June 24 expiration could potentially influence Ether’s price action, primarily because it trades only 10% above the preferred strike price of $1,000. Additionally, a move toward $1,000 could trigger the rising wedge setup.
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Eileen Wilson –Technology and Energy
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