Ether (ETH), the second largest cryptocurrency by market value, looked set for renewed price rally ahead of the Ethereum “Merge,” according to observers tracking chart patterns.
Last week, the native token of Ethereum’s blockchain broke out of a falling wedge pattern identified by two converging and descending trendlines connecting Aug. 14 and Aug. 25 highs and lows hit on Aug. 10, Aug. 20 and Aug. 28.
“The formation is solid confirmation that ETH could go up in September more than anybody thinks,” Bill Noble, chief technical analyst at cryptocurrency research company Token Metrics told CoinDesk when asked what the wedge breakout indicates.
Ether’s wedge breakout indicates the correction from the Aug. 14 high of $2,000 has ended and the uptrend from the June 13 low of $1,000 is likely to resume.
Prices doubled in the four weeks to Aug. 14 as equity markets regained poise and Ethereum developer Tim Beiko hinted at Sept. 19 as the deadline for the long-awaited Ethereum Merge – the technological upgrade that will transform the smart contract platform to a proof-of-stake network. The overhaul is likely to cause a drastic reduction in ETH supply and bring a store of value appeal to the cryptocurrency.
The Merge is slated to happen sometime around Sept. 15.
Traders often use technical analysis – a study of price patterns – to help make investment decisions.
The falling wedge begins wide at the top and contracts as prices move lower, causing the two descending trendlines to converge as the pattern matures. The converging nature of trend lines represents shallower lows, a sign of decreasing selling pressure. Therefore, a breakout is taken to mean a bullish revival.
Ether’s daily chart showing a falling wedge breakout. (TradingView)
Ether exited the falling wedge on Thursday, setting the stage for a pre-Merge rally.
“Ether has broken out of a falling wedge. A move above $1,700 would add conviction in the bullish momentum heading into the Merge,” Lewis Harland, a researcher at Decentral Park Capital, said.
Gazprom plays spoilsport
The cryptocurrency appeared on track to cross $1,700 on Friday after a supposed goldilocks U.S. nonfarm payrolls report revived hopes for slower Federal Reserve rate hikes after September.
However, the ascent stalled after Russian energy giant Gazprom scrapped a Saturday deadline to resume gas supply to Europe via the Nord Steam 1 pipeline, citing a technical fault.
The news bolstered inflation fears, zapping investor risk appetite. Since Russia invaded Ukraine in February, energy supply disruptions in Europe and other parts of the world have worsened, leading to sticky inflation. That has forced global central banks to suck out liquidity with rapid interest rate hikes and other tools.
According to Politico, Gazprom said on Saturday it would increase its shipments of gas to Europe via Ukraine. However, markets seemed skeptical that would help and remained weak at press time, with major European equity futures trading 2% lower while the dollar index topping 110.00 for the first in two decades.
Ether traded flat at around $1,565 while bitcoin was priced at $19,765, according to CoinDesk data.
