Ethereum price faces a mountain of risks; 50% drop likely

Ethereum price has been under pressure in the past few weeks even as the hopes of a spot Ethereum ETF approval rose. The ETH token has remained in a bear market as it crashed by over 24% from its highest level this year. 

Spot Ethereum ETF approval likely

The main catalyst for ETH price will be the upcoming spot Ethereum ETFs by the Securities and Exchange Commission (SEC). Most analysts expect that the agency will implement this approval as soon as this month since issuers have made their final edits.

Spot Ethereum ETFs could lead to more inflows as we saw with Bitcoin earlier this year. Bitcoin has already had over $15 billion in net inflows, mostly from institutional investors. Besides, Ether is the second-biggest cryptocurrency in the world.

However, as I warned recently, investing in Ethereum is a better approach than ETFs for two reasons. First, these investors will pay a fee in the range of 0.25%. 

Second, they will have to forego Ethereum’s staking rewards, which stand at about 3%. This is a big yield considering that the popular SCHD ETF yields less than 4% today. 

Ethereum price double-top

The first main risk is that Ethereum has formed a double-top chart pattern on the daily chart. As shown above, the ETH token has found it difficult to move above the crucial resistance point at $3,958 this year. 

In technical analysis, a double or triple-top pattern is one of the most popular reversal indicators. Now, the coin is trading near this pattern’s neckline at $2,833. If the double-top pattern works well, the ETH price could crash to $1,540, which is about 50% below the current level.

Ethereum price double-top

ETH bearish divergence pattern

Second, as shown above, Ether has formed a bearish divergence pattern, which is another red flag. This pattern is usually formed when oscillators like the Relative Strength Index (RSI) and the MACD form a series of lower highs and lower lows. 

The MACD indicator has continued falling and moved below the neutral point at zero. Also, the RSI started falling in May this year. In most cases, an asset makes a bearish breakout as the patterns mature. 

At the same time, ETH price has formed a small rising wedge chart pattern that is shown in green. It has also dropped below the 200-day moving average. 

Therefore, technically, the most likely scenario is where the coin makes a big breakdown in the coming weeks.

Bitcoin miner capitulation

The other bearish sign for Ethereum is that Bitcoin is not doing well as it has struggled to move above the resistance point at $60,000. 

Data shows that Bitcoin is suffering from several factors. First, there are signs that miners are capitulating and selling some of their Bitcoins. In most cases, this miner capitulation leads to more downside by increasing the number of coins in exchanges.

Second, the German government and Mt.Gox wallets have continued dumping their tokens in the past few weeks. All this has sent shockwaves in the industry since Bitcoin is a highly illiquid asset. As such, many people are afraid of buying when all this supply is increasing. 

Therefore, analysts believe that Bitcoin could remain under pressure in the near term. If this happens, it means that Ethereum and other cryptocurrencies could do worse, since historically, there is a close correlation. 

Ethereum is also facing other challenges like the increased competition from other chains like Solana, Tron, and Toncoin. Tron has become a big player in stablecoin payments while Solana has become a favorite chain for meme coin creators. Toncoin is commanding a big market share in the tap-to-earn industry, as the likes of Hamster Kombat and TapSwap thrive.

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