federal reserve

Bitcoin price surges to $21.8K, but analysts warn that the move could be a fakeout

Traders rejoice after BTC price spikes 7% to $21,800, but analysts say the macro downtrend is likely to prevail for the foreseeable future.

Hope springs eternal for many crypto investors after the market saw positive price movement on July 7, alongside gains in the traditional market.

*Daily cryptocurrency market performance. Source:* *Coin360*

The green day in the markets comes amid a backdrop of increasing jobless claims in the United States, which is a possible signal that “the pressure on wages may have now peaked,” according to Harris Financial Group Managing Partner Jamie Cox. According to Cox, a continuation of this trend could result in financial conditions that are “tight enough to allow the Fed to throttle back on the scale of rate increases.”

Data from Cointelegraph Markets Pro and TradingView shows that after trading near $20,400 for a majority of the day on July 7, the price of Bitcoin (BTC) spiked nearly 7% in the afternoon hours to hit a daily high of $21,860.

*BTC/USDT 1-day chart. Source: TradingView*

As the crypto faithful attempt to navigate the choppy waters of the crypto winter in search of a market bottom, here’s what several analysts are predicting could be next for Bitcoin.

The trend remains negative

Twitter user “Roman” posted the following chart noting that “Many are becoming euphoric and bullish as we have repeated similar candle patterns for the last 8 months.”

In Roman’s view, this is just the latest in a series of fakeouts that will trick a lot of traders into believing the bottom is in while in reality, the trend remains negative.

Roman said:

“Volume decreasing in a range is consolidation for continuation of trend. Not to mention thousands of inflows to exchanges before each top.”

A recovery above $23,000 would be bullish

Another trader who holds the view that the trend remains decidedly negative is pseudonymous Twitter user Gilberto, who provided the following chart noting that Bitcoin’s price recently broke out of a pennant formation.

Gilberto said:

“Bullish above $23K, for now daily trend is still downwards.”

As for what the potential price path for Bitcoin could look like if it continues along the downward trend, market analyst Crypto Tony posted the following chart which outlines a “worst-case scenario” that could see BTC bottom near $12,000.

Crypto Tony said:

“I do not think we see the start of the next impulse until later next year and a new bull run peak until 2024 – 2025. I am already positioned at $22-24K and will add if we drop to $17 – 15K.”

Traders watch the 200-week moving average

When it comes to metrics that have been reliably used to help determine market bottoms, the 200-week moving average (MA) is one of the most popular and widely cited indicators that traders use to identify good buying opportunities.

With Bitcoin now back below its 200-week MA for only the fourth time in its history, speculation has begun to mount about how long it will take to recover back above this line and what the appetite for trading will be like once it reaches there.

In response to this possible scenario, independent market analyst Michaël van de Poppe posted the following tweet outlining what he thinks might occur once the 200-week MA is recovered.

There’s probably an insane amount of liquidity above the 200-Week MA.

If #Bitcoin breaks that level, I’m assuming we’ll probably be getting a run of $2-5K upwards in just a few days to $28-30K.

And then the sentiment will flip too.

— Michaël van de Poppe (@CryptoMichNL) July 7, 2022

The overall cryptocurrency market cap now stands at $957 billion and Bitcoin’s dominance rate is 43.1%.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.

Key Bitcoin chart ‘will confirm bottom is in’ by July 15, says trader

It’s all about two moving averages crossing over as proof that BTC price action is done with the dip.

Bitcoin (BTC) is due to give a definitive signal that a macro bottom is in this month, one analyst has concluded.

In a Twitter thread on July 6, popular commentator Wolf eyed key moving average data as proof that BTC price action will not be going lower.

Key chart crossover eyed as end to bear market losses

Amid repeated calls for BTC/USD to revisit levels not seen since Q4 2020, one simple historical trend is now saying that the pair has already seen its latest macro lows.

Analyzing the 3-day chart, Wolf argued that the 100-day moving average (MA) crossing the 200MA will act as a price floor signal — just like in previous bear markets.

“Negative 3d MA100 will cross positive 3d MA200 by half July, that would confirm that bottom is in,” he wrote.

Specifically, the crossover of the two MAs is due on or by July 15 — in just a week’s time — after which future trajectory should be confirmed. Should Bitcoin avoid major downside in the meantime, $17,600 will thus remain as the latest long-term BTC price bottom.

Negative 3d MA100 will cross positive 3d MA200 by half July, that would confirm that bottom is in. pic.twitter.com/WgPMUkWIoy

— Wolf (@IamCryptoWolf) July 7, 2022

Despite historical precedent, such an outcome is nonetheless far from certain. Prior to the July 15 deadline, crypto markets will have to weather an ongoing macro economic storm, which has so far proved deadly for risk assets across the board.

July 13 will be of particular interest to market participants, this date marking the release of Consumer Price Index (CPI) data from the United States for the month of June.

As Cointelegraph recently reported, inflation is already at 40-year highs, and CPI readouts have shown a consistent uptrend throughout 2022.

The faster inflation is shown to be accelerating, the more likely a reaction from the Federal Reserve, with monetary tightening having a direct negative impact on risk asset performance.

Moving averages stack up as resistance

BTC/USD meanwhile circled $20,500 at the time of writing on July 7, approaching wapproaching weekly highs.

In a thread of his own on July 6, analyst Keith Alan flagged various other daily, weekly and monthly MAs as zones of interest should Bitcoin manage to sustain upwards momentum.

“Continued rejections at the 21 DMA would indicate there isn’t enough bullish sentiment to push higher, which brings downside targets into focus,” he explained.

He noted, however, that should a resistance/support flip (R/S) occur, the 50-month MA would come into play, followed by the essential 200-week MA which has formed a key focus in prior bear markets.

1/8 Yesterday #Bitcoin retested the 21-Day Moving Average. After reclaiming it briefly, price fell back down, marking another failed attempt. Price remains in range of another retest. Here’s a on why this level warrants some attention. #NFA pic.twitter.com/gfbWBXtTRk

— Keith Alan (@KAProductions) July 6, 2022

As of July 7, the 21-day MA, 50-month MA and 200-week MA stood at $20,300, $21,570 and $22,560 respectively, data from Cointelegraph Markets Pro and TradingView showed.

Crypto owners banned from working on US Government crypto policies

A new legal advisory notice from the US Office of Government Ethics prohibits any employee who owns cryptocurrency from working on Federal crypto regulation.

US government officials who privately own cryptocurrencies are now banned from working on regulations and policies that could affect the value of digital assets.

A new advisory notice released by the US Office of Government Ethics (OGE) on Tuesday stated that the de minimis exemption — which allows for the owners of securities who hold an amount below a certain threshold to work on policy related to that security — is universally inapplicable when it comes to cryptocurrencies and stablecoins.

“As a result, an employee who holds any amount of a cryptocurrency or stablecoin may not participate in a particular matter if the employee knows that particular matter could have a direct and predictable effect on the value of their cryptocurrency or stablecoins.”

The notice provided an example scenario whereby an employee who owns a mere $100 of a certain stablecoin, is asked to work on stablecoin regulation — the employee in question cannot participate in work concerning regulation “until and unless they divest their interests in [that] stablecoin.”

The notice specified that this ruling still applies even if the cryptocurrency or stablecoin in question were to ever “constitute [a security] for purposes of the federal or state securities laws.”

The new ruling applies universally to all federal government employees including The White House, The Federal Reserve and The Department of the Treasury.

The term “de minimis” comes from a longer Latin phrase, meaning: “the law does not concern itself with trifles.”

The only exemption from the OGE’s crackdown on crypto ownership is that policy makers are allowed to hold up to $50,000 in mutual funds that invest broadly in companies that would benefit from crypto and blockchain technology. The reasoning for this exemption is because they “are considered diversified funds.”

Despite the seemingly harsh rules concerning employee investment in the crypto sector, the United States continues to move forward in integrating the cryptocurrency industry, with the US president Joe Biden announcing a “whole-of-government” approach to regulation concerning the digital asset sector.

According to Raymond Shu, the co-founder and CEO of Cabital, recent legislative proposals could make the U.S. one the only Western countries to fully regulate and accept stablecoins and other digital assets as official parts of the financial system.

Fed conference hears stablecoins may boost USD as global reserve currency

The underlying tech of a central bank digital currency wasn’t enough to convince some panelists at a Fed conference that it could change the international currency system.

A note published by the United States Federal Reserve at a recently held conference found a majority of exports believe a U.S. dollar central bank digital currency (CBDC) would not drastically change the global currency ecosystem.

Panelists at the conference also agreed that CBDC development outside of the U.S. doesn’t threaten the status of the dollar, but the development of cryptocurrencies could alter the role of the dollar globally, with some saying stablecoins could even boost the U.S. dollar’s role as the global dominant reserve currency.

The assessments came from expert panelists at a June 16 and 17 conference hosted by the Federal Reserve on the “International Roles of the U.S. dollar” collated into a note and published by The Fed on Tuesday. The conference was used to gain insight from policymakers, researchers and market experts to understand “potential factors that may alter the dominance of the U.S. dollar in the future,” including new technologies and payment systems.

A discussion on a panel addressing digital assets and if CBDCs would provide advantages for the dollar had panelists agree that the underpinning technology alone wouldn’t “lead to drastic changes in the global currency ecosystem”.

Speakers on the panel included digital currency initiative director at MIT Neha Narula, head of research at the Bank of International Settlements Hyun Song Shin, chief investment strategist at asset management firm Bridgewater Rebecca Patterson and HSBC bank’s head of FX research Paul Mackel.

The panelists agreed that factors such as market and political stability, along with market depth, are more crucial for dominant reserve currencies like the U.S. dollar than the development of a Fed-issued digital dollar.

The development of CBDCs by other countries was also generally agreed by the panel to have a tendency to focus more heavily on that country’s own domestic retail market and, therefore, was considered “not a threat to the U.S. dollar’s international status.”

The Federal Reserve noted the amount and scope of CBDCs for making cross-border payments are “still quite limited,” suggesting that these systems don’t yet pose a threat to the dollar, which accounts for a majority of international financial transactions, according to an October 2021 note.

Focusing on cryptocurrencies, panelists said further development of digital assets could change the international role of the dollar, but adoption by institutional investors was throttled by a lacking regulatory framework, leaving the current crypto market to be dominated by speculative retail investors.

Another panel including Fed financial research adviser Asani Sarkar and finance professor Jiakai Chen concluded that part of the demand for crypto, especially Bitcoin (BTC), was driven by a desire to evade domestic capital controls, citing BTC prices in China trading at a premium in comparison to other countries.

Despite this, the Fed says panelists didn’t see crypto as a threat to the global role of the dollar in the short term. Some even suggested in the “medium run” that crypto could reinforce the dollar’s role if “new sets of services structured around these assets are linked to the dollar,” a likely reference to stablecoins, cryptocurrencies pegged to the value of a fiat currency (usually USD).

The advice by panelists may help put a new spin on things for members of the Federal Reserve.

Previously, the Federal Reserve Board of governors said in June that stablecoins not sufficiently backed by liquid assets and proper regulatory standards “create risks to investors and potentially to the financial system” likely referencing the collapse of TerraUSD Classic (USTC).

The comment by the Board came before Federal Reserve chair Jerome Powell stated a CBDC could “potentially help maintain the dollar’s international standing.”

Ethereum sell-off resumes with ETH price risking another 25% decline in June

Ether price is forming a bear pennant pattern whose profit target comes to be near $850.

Ethereum’s native token Ether (ETH) slumped on June 16, suggesting that its relief rally, coinciding with the Federal Reserve announcing it will hike the benchmark rate by 0.75%, is at risk.

Ether bulls trapped?

Ether’s price slipped by 9.2% to around $1,120 per token a day after it rebounded by 23% after dropping to almost $1,000, its worst level since January 2021.

The ETH/USD pair’s upside move, followed by a sharp correction, appeared in tandem with U.S. stocks, confirming that it traded like a risk-asset.

*ETH/USD and Nasdaq daily correlation coefficient. Source: TradingView*

The decline means that Ether has shed 77% of its value since November 2021 and is now trading below its “realized price” of $1,740, data from Glassnode shows.

*Ethereum realized price (USD). Source: Glassnode*

In addition, a higher interest rate environment adds more selling pressure, with investors leaving high-risk trades and seeking safety in traditional hedging assets, such as cash.

Investors’ faith in cryptocurrencies has also eroded following the collapse of Terra (originally LUNA, now LUNC), a $40 billion algorithmic stablecoin project, and lending platform Celsius Network’s decision to halt withdrawals.

Atop that, Three Arrow Capital, a crypto hedge fund that oversaw nearly $10 billion in May 2022, reportedly faces insolvency risks. Fears about systemic risks have further limited the crypto market’s recovery bias, hurting Ether.

ALERT: 3AC $250 Million $ETH Position Will Be Liquidated at ≈1000

— Market Meditations (@MrktMeditations) June 15, 2022

From a technical perspective, Ether’s recent gains look like a bear market rally, which could be due to investors covering their short trades.

In detail, investors close their short positions by buying the underlying asset back on the market—typically at a price less than the one at the time of borrowing—and returning them to the lender. That prompts the asset to rally between large downside moves, but it does not signify a bullish reversal.

These minor rallies could be a bull trap for investors that mistakenly see the rebound as a sign of bottoming out.

On the other hand, experienced bears utilize the pump to open new short positions at the local price top, knowing that nothing has fundamentally changed about the market.

ETH “bear pennant” hints at more losses ahead

Ether’s “bear pennant ” on shorter-timeframe charts also supports a bull trap scenario.

Bear pennants are bearish continuation patterns that form as the price consolidates inside a triangle-shaped structure after a strong downside move.

As a rule of technical analysis, traders measure a bear pennant’s profit target by subtracting the breakdow point from the height of the previous decline (called “flagpole”), as shown below.

*ETH/USD four-hour price chart featuring “bear pennant.” Source: TradingView*

This puts the next bear target for ETH price at $850, down almost 25% from June 16’s price.

Bitcoin price climbs to $22.5K after Fed 75 basis point hike aims to cap runaway inflation

BTC and altcoins generated nominal gains after the Federal Reserve raised the benchmark interest rate by 0.75%, the largest hike in 28 years.

Global financial markets were squarely focused on the U.S. Federal Reserve and its decision to raise interest rates by 75 basis points on June 15, the largest increase in 28 years as the central bank fights to tamp down the highest inflation rates in over four decades.

Data from Cointelegraph Markets Pro and TradingView shows that Bitcoin (BTC) and the wider cryptocurrency market fell under pressure in the early trading hours on June 15 as rumors of the possible collapse of Three Arrows Capital (3AC) spread across the ecosystem, which is still grappling with the ongoing Celsius debacle.

Following the announcement from Federal Reserve Chair Jerome Powell that there would be a 75 basis point hike, the price of Bitcoin briefly spiked to $22,520 before pulling back to $21,500.

*BTC/USDT 4-hour chart. Source: TradingView*

The altcoin market likewise saw a brief price pump as the dire predictions of a possible 100 basis point hike failed to materialize and the market got largely what it expected from June 15 Federal Open Market Committee (FOMC) meeting.

Traditional markets responded positively to the announcement with the S&P 500, Dow and NASDAQ all trading in the green for the day, but traders would be wise to see how markets behave at the daily close and tomorrow’s opening bell.

Analysts digest the rate hike and its possible impact on crypto prices

Shortly after Powell announced the 75 basis point hike, projections on when the Fed would start to cut rates started rolling in with the dominant consensus being that they would begin in 2024.

BREAKING: The biggest rate increase since 1994 from the FED.

However, expectations from FED policymakers are that they’ll be starting to cut rates in 2024.

— Michaël van de Poppe (@CryptoMichNL) June 15, 2022

The main reason for the rise in interest rates has been soaring inflation, which came in at a year-over-year increase of 8.6% according to the latest Consumer Price Index (CPI) print, which was higher than the analysts had predicted.

Some analysts have begun to speculate that the reason for the highest rate hike in 28 years is part of an effort by the Federal Reserve to try and get ahead of the curve and establish enough leg room to be able to pause hikes in the future if economic conditions continue to worsen.

They seem to be coming around to what I thought they would do in January (even before Ukraine). Frontload hikes which gives them cover to hit the pause button later while things may still be a bit too hot. I would expect to hear hawkish rhetoric today (gotta hike anyway).

— The Long View ✪ (@HayekAndKeynes) June 15, 2022

Overall, the rate hike, which was largely expected, appears to have been priced into the crypto market because prices remained relatively flat following the announcement and currently, more crypto-specific developments are dominating the headlines in the sector.

The overall cryptocurrency market cap now stands at $931 billion and Bitcoin’s dominance rate is 44.5%.

Bitcoin bounces 8% from lows amid warning BTC price bottom ‘shouldn’t be like that’

Hodlers catch their breath as markets digest the prospect of higher Fed rate hikes, but traders refuse to believe that Bitcoin is done dropping.

Bitcoin (BTC) spared hodlers the pain of losing $20,000 on June 15 after BTC/USD came dangerously close to last cycle’s high.

*BTC/USD 1-hour candle chart (Bitstamp). Source: TradingView*

Bitcoin “bottom” fools nobody

Data from Cointelegraph Markets Pro and TradingView showed BTC/USD surging higher after reaching $20,079 on Bitstamp.

In a pause from its sell-off, the pair followed United States equities higher on the Wall Street open, hitting $21,700. The S&P 500 gained 1.4% after the opening bell, while the Nasdaq Composite Index managed 1.6%.

The renewed market strength, commentators said, was thanks to the majority already pricing in outsized key rate hikes by the Federal Reserve, due to be confirmed on the day.

Nonetheless, it was crypto taking the worst hit in the inflationary environment, Bloomberg chief commodity strategist Mike McGlone noted. In a tweet, he contrasted Bitcoin and altcoin performance with skyrocketing commodities, notably WTI crude oil, futures of which now traded at almost double their 200-week moving average.

“Unprecedented Crude Spike vs. Bottoms in Bitcoin, Bonds, Gold — Crude oil futures’ historically extreme stretch above its 200-week mean is ample fuel for inflation to spike, consumer sentiment to plunge, Federal Reserve rate hikes to accelerate and an enduring hangover,” he argued.

*WTI crude oil futures 1-week candle chart with 200-day moving average. Source: TradingView*

Despite suppressed price action, many were unconvinced that Bitcoin could meanwhile sustain even the low $20,000 zone much longer.

“We have yet to see capitulation in the Crypto markets,” popular trader Crypto Tony told Twitter followers.

“It is close, but doesn’t feel like it yet. Every bounce is filled with optimism and it shouldn’t be like that.”

Fellow trader and analyst Rekt Capital agreed, saying that the sell-off had not been accompanied by suitable volume.

“Strong market-wide selling is going on for BTC,” he wrote on the day.

“Undoubtedly, Seller Exhaustion lies ahead. Watch for high sellside volume bars. These tend to signal bottoming out after constant selling & precede an entire trend reversal over time.”

As Cointelegraph reported, Bitcoin’s own 200-week moving average lay at $22,400, Rekt Capital warning that the level could now form a price magnet for weeks or even months.

Losses still do not equal “capitulation” — data

Data meanwhile showed the extent to which panic selling had been taking place in the short term.

Weekly realized losses reached 2.6% of Bitcoin’s realized cap, the highest ever, according to figures from on-chain analytics firm Glassnode illustrated by CryptoVizArt.

The cumulative weekly realized loss currently is = 2.6% of the #BTC realized cap. The comparable historical events where this ratio >2.5% are illustrated by . pic.twitter.com/jbl3aD5WmJ

— CryptoVizArt.btc ∞/21M – LOST #BTC (@CryptoVizArt) June 15, 2022

Bitcoin’s net unrealized profit/loss (NUPL) metric, covering coins not physically sold, also demonstrated a significant proportion of the hodled supply being underwater — the most, in fact, since March 2020.

According to its accompanying scale, the metric has turning red after falling below zero, i.e., the historical “capitulation” zone.

*Bitcoin NUPL vs. BTC/USD chart. Source: TradingView*

Ethereum crashed by 94% in 2018 — Will history repeat with ETH price bottoming at $375?

ETH’s latest plunge could bring more pain despite expectations that $1,200 should hold.

Ethereum’s native token Ether (ETH) is showing signs of bottoming out as ETH price bounced off a key support zone. Notably, ETH price is now holding above the key support level of the 200-week simple moving average (SMA) near $1,196.

The 200-week SMA support seems purely psychological, partly due to its ability to serve as bottom levels in the previous Bitcoin bear markets.

Independent market analyst “Bluntz” argues that the curvy level would also serve as a strong price floor for Ether where accumulation is likely.

He notes:

“BTC has bottomed 4x at the 200wma dating back to 2014. [Probably] safe to assume it’s a pretty strong level. Sure we can wick below it, but there [are] also six days left in the week.”

*ETH/USD weekly price chart. Source: TradingView*

Currently, ETH/USD is almost 75% below its record high, seven months after hitting around $4,950.

This massive correction has made the Ethereum token an “oversold” asset, per its below-30 relative strength (RSI) readings, another technical indicator showing that ETH is a “buy.”

The last time Ether turned oversold was in November 2018, which preceded the end of a 12-month long bear cycle that saw ETH losing 94% of its value.

Unfortunately, the same bearish exhaustion cannot be promised in 2022 as Ether continues facing some serious macro headwinds.

ETH’s technical bull signals are not enough

Ether’s attempt to find a concrete bottom appears against the backdrop of a selling frenzy happening across the crypto and traditional financial markets.

At the core of its 75% price correction is a hawkish Federal Reserve with its possibility of raising interest rates by 175 basis points by September’s end, according to interest rate swaps linked to FOMC policy outcome dates.

*Change in Fed’s interest-rate targets. Source: Bloomberg/CME*

In other words, riskier assets would suffer as lending costs rise. This could hurt Ether’s recovery prospects despite it holding above a so-called “strong” support level.

1-2 months as the Ethereum merge would be implemented between August and October. And traders will front-run it. It won’t matter much if the Fed gets more aggressive, but if it doesn’t, then that’s your catalyst.

— Alex Krüger (@krugermacro) June 2, 2022

Ether price targets

ETH’s price has been testing the 0.786 Fib line (near $1,057) as its interim support. This price level serves is a part of the Fibonacci retracement graph, drawn from the $1,323-swing high to the $82-swing low, as shown in the chart below.

*ETH/USD weekly price chart featuring Fibonacci support/resistance levels. Source: TradingView*

A 2018-like 94% price decline would risk bringing ETH to the 0.236 Fib line near $375, down 70% from June 1’s price.

Conversely, if Ether indeed bottoms out near its 200-week SMA, its path of least resistance appears to be toward $2,000. An extended upside retracement above $2,000 would have the Ethereum token test $3,500 as its next bull target.

Ethereum price enters ‘oversold’ zone for the first time since November 2018

Ether’s price rebounded by nearly 400% after its RSI turned oversold the last time. Will this time be different?

Ethereum’s native token Ether (ETH) entered its “oversold” territory this June 12, for the first time since November 2018, according to its weekly relative strength index (RSI).

This is the last time $ETH went oversold on the weekly (hasn’t confirmed here yet).

I had no followers, but macro bottom ticked it.

Note, you can push way lower on weekly rsi, not trying to catch a bottom. https://t.co/kLCynTKTcS

— The Wolf Of All Streets (@scottmelker) June 12, 2022

ETH eyes oversold bounce

Traditional analysts consider an asset to be excessively sold after its RSI reading fall below 30. Furthermore, they also see the drop as an opportunity to “buy the dip,” believing an oversold signal would lead to a trend reversal.

Ether’s previous oversold reading appeared in the week ending on Nov. 12, 2018, which preceded a roughly 400% price rally, as shown below.

*ETH/USD weekly price chart featuring oversold RSI. Source: TradingView*

While past performances are not indicators of future trends, the latest RSI’s move below 30 raises the possibility of Ether undergoing a similar—if not an equally sharp—upside retracement in the future.

Suppose ETH logs an oversold bounce. Then, the ETH/USD pair’s immediate challenge would be to reclaim its 200-week exponential moving average (200-week EMA; the blue wave) near $1,620 as its support.

If it does, bulls could eye an extended upside move towards the 50-week EMA (the red wave) above $2,700, up almost 100% from today’s price.

If not, Ether could resume its downtrend, with $1,120 serving as the next target, a level coinciding with the token’s 0.782 Fib line, as shown in the chart below.

*ETH/USD weekly price chart featuring Fibonacci support and resistance levels. Source: TradingView*

Macro headwinds and a $650 Ether price target

The RSI-based bullish outlook appears against a flurry of bearish headwinds, ranging from persistently higher inflation to a classic technical indicator with a downward bias.

In detail, Ether’s price decline by more than 20% in the last six days, with most losses coming after June 10, when the U.S. Labour Department reported that the inflation reached 8.6% in May, the highest since December 1981.

The higher consumer price index (CPI) strengthened fears among investors that it would force the Federal Reserve to hike interest rates more aggressively while slashing its $9 trillion balance sheet. That dampened appetite for riskier assets, hurting stocks, Bitcoin (BTC) and ETH.

*ETH/USD versus SPX and BTC/USD daily price chart. Source: TradingView*

Independent analyst Vince Prince fears the latest ETH decline could extend until the price reaches $650. At the core of his downside target is a massive “head and shoulders” — a classic bearish reversal pattern with an 85% success rate in meeting its profit target, according to Samurai Trading Academy.

The massive head-and-shoulder formation forecasted earlier for #Ethereum has now been completely confirmed…

… $ETH is now headed towards the $650 USDT area!!! pic.twitter.com/R2KaqiorEd

— Vince Prince (@Vince_Prince_) June 12, 2022

Meanwhile, Glassnode’s lead on-chain analyst, known by the pseudonym “Checkmate,” highlighted a potential DeFi disaster that could crash Ether’s price further into 2022.

The analyst noted that the ratio between Ethereum’s and the top three stablecoins’ market capitalization grew to 80% on June 11.

Ratio is now at 80%

Market Cap of:#Ethereum = $181.58B
Top 3 Stablecoins = $144.28B
TVL in DeFi = $101.67B$ETH at $1215 makes for equal Ethereum and Top 3 stablecoin market caps.

The principle risk here is levered $ETH collateral in DeFi loans getting liquidated in a cascade https://t.co/26u0vXnMMY pic.twitter.com/q555clRaap

— _Checkɱate ⚡ (@_Checkmatey_) June 12, 2022

Since “most people borrow stablecoins” by providing ETH as collateral, the potential of the Ethereum network becoming less valuable than the top dollar-pegged tokens would make the debt’s value higher than the collateral itself.

Checkmate noted:

“There is nuance as not all stablecoins are borrowed, and also not all are ON ethereum. But nevertheless, the risk of liquidations [is] a hell of a lot higher than it was three months ago.”

Ethereum price enters ‘oversold’ zone for the first time since November 2018

Ether’s price rebounded by nearly 400% after its RSI turned oversold the last time. Will this time be different?

Ethereum’s native token Ether (ETH) entered its “oversold” territory this June 12, for the first time since November 2018, according to its weekly relative strength index (RSI).

This is the last time $ETH went oversold on the weekly (hasn’t confirmed here yet).

I had no followers, but macro bottom ticked it.

Note, you can push way lower on weekly rsi, not trying to catch a bottom. https://t.co/kLCynTKTcS

— The Wolf Of All Streets (@scottmelker) June 12, 2022

ETH eyes oversold bounce

Traditional analysts consider an asset to be excessively sold after its RSI reading fall below 30. Furthermore, they also see the drop as an opportunity to buy the dip, believing an oversold signal would lead to a trend reversal.

Ether’s previous oversold reading appeared in the week ending on Nov. 12, 2018, which preceded a roughly 400% price rally, as shown below.

Suppose ETH logs an oversold bounce . Then, the ETH/USD pair’s immediate challenge would be to reclaim its 200-week exponential moving average (200-week EMA; the blue wave) near $1,620 as its support.

If it does, bulls could eye an extended upside move toward the 50-week EMA (the red wave) above $2,700, up almost 100% from the price of June 12.

If not, Ether could resume its downtrend, with $1,120 serving as the next target, a level coinciding with the token’s 0.782 Fib line, as shown in the chart below.

Macro headwinds and a $650 Ether price target

The RSI-based bullish outlook appears against a flurry of bearish headwinds, ranging from persistently higher inflation to a classic technical indicator with a downward bias.

In detail, Ether’s price declined by more than 20% in the last six days, with most losses coming after June 10, when the United States Labor Department reported that the inflation reached 8.6% in May, the highest since December 1981.

Independent analyst Vince Prince fears the latest ETH decline could extend until the price reaches $650. At the core of his downside target is a massive head and shoulders — a classic bearish reversal pattern with an 85% success rate in meeting its profit target, according to Samurai Trading Academy.

The massive head-and-shoulder formation forecasted earlier for #Ethereum has now been completely confirmed…

… $ETH is now headed towards the $650 USDT area!!! pic.twitter.com/R2KaqiorEd

— Vince Prince (@Vince_Prince_) June 12, 2022

Meanwhile, Glassnode’s lead on-chain analyst, known by the pseudonym Checkmate, highlighted a potential decentralized finance (DeFi) disaster that could crash Ether’s price further into 2022.

The analyst noted that the ratio between Ethereum’s and the top three stablecoins’ market capitalization grew to 80% on June 11.

Ratio is now at 80%

Market Cap of:#Ethereum = $181.58B
Top 3 Stablecoins = $144.28B
TVL in DeFi = $101.67B$ETH at $1215 makes for equal Ethereum and Top 3 stablecoin market caps.

The principle risk here is levered $ETH collateral in DeFi loans getting liquidated in a cascade https://t.co/26u0vXnMMY pic.twitter.com/q555clRaap

— _Checkɱate ⚡ (@_Checkmatey_) June 12, 2022

Checkmate noted:

“There is nuance as not all stablecoins are borrowed, and also not all are ON ethereum. But nevertheless, the risk of liquidations [is] a hell of a lot higher than it was three months ago.”