Renowned market analyst Peter Brandt has issued a stark warning for Ethereum (ETH) investors. The cryptocurrency, which has seen significant gains in recent months, could be headed for a substantial decline, according to Brandt’s technical analysis.
The analyst’s concerns stem from the formation of a “rising wedge” pattern on Ethereum’s 240-minute chart. This technical indicator is often seen as a precursor to a bearish reversal. The price of ETH has been gradually increasing within the confines of this wedge, but Brandt believes a breakout to the downside is imminent.
To bolster his argument, Brandt pointed to the behavior of the 18-period Simple Moving Average (SMA) which is acting as resistance at the upper boundary of the wedge. Additionally, the declining Average Directional Index (ADX) suggests a weakening trend, further supporting the possibility of a downward break.
“The convergence of the price towards the upper resistance alongside the low ADX reveals that a breakdown from the wedge is likely, making this pattern an ideal setup for a short trade,” Brandt explained.
But the bearish signals don’t stop there. On the daily chart, Brandt identified a completed five-month rectangle formation. Ethereum’s price recently broke down from this pattern, and the current market activity appears to be a retest of this breakdown level. If the price fails to hold above this level, it could trigger a significant sell-off.
Based on the dimensions of the rectangle, Brandt predicts that Ethereum could plummet to as low as $1,645, a level not seen since the fourth quarter of last year. This would represent a substantial decline from current price levels.
It’s important to note that while technical analysis provides valuable insights, it’s not infallible. Brandt himself acknowledges that patterns fail more than 50% of the time. As such, he recommends implementing risk management strategies, such as setting a stop-loss order above the recent resistance level.
Despite the bearish outlook, the cryptocurrency market remains highly volatile. Factors such as regulatory developments, macroeconomic conditions, and investor sentiment can significantly impact prices. Therefore, it’s crucial for investors to conduct their own research and consider multiple perspectives before making investment decisions.
