Not only is Ether (ETH) rallying against Bitcoin (BTC) showing signs of exhaustion, but it is also in danger of crashing below a key technical support level.
ETH x BTC chips in the second half of January
The ETH/BTC pair fell by nearly 9.25% on January 24 from a local high of 0.0779 BTC set on January 11. Since the beginning of the year, Bitcoin has slightly outperformed Ether in dollar terms, up 38% vs. 35%, respectively.
Interestingly, the decline of Ether against Bitcoin has put its price below the EMA bar range, as seen below.
The EMA bar indicator is showing many ascending exponential moving averages for the time frame on the same price chart. A drop below the range of the range increases the likelihood that the asset will see an extended downward move.
In other words, a lower breakout would increase its downside potential by more than 20% from current price levels.
On the other hand, a rise above the bar range increases the chances of an asset rally on a larger scale.
Ethereum price is capped by a major descending trend line
This week, ETH/BTC fell to the 55-week exponential moving average (wave red) — wave below — of the EMA Ribbon indicator, as shown below. Buyers took control near the 55-week EMA, which led to ether recovering just 0.35% against bitcoin to 0.0708 BTC on January 1st.
But now, the possibility of a retest of the bottom of the EMA bar is high due to the resistance of the multi-month descending trend line (black trend line in the chart below), where the sellers have been more active lately.
Therefore, the possibility of ETH/BTC breaking below the EMA band range, similar to what happened to the pair in May 2022 after the Terra crash, cannot be ruled out.
At that time, ether fell more than 25% against bitcoin to 0.0490, a level that coincided with the 200-week moving average (blue wave).
Therefore, if a similar breakout occurs in the coming weeks, the ETH/BTC pair could test the 200-week moving average near 0.0550 BTC as a major downside target, or a price drop of about 20% from current levels.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should do their own research when making a decision.