Ethereum (ETH) Likely To Decline In A Head & Shoulders Formation

Ethereum (ETH) is expected to decline in the next few days as soon as the price falls below the 38.2% fib retracement level. This is a bearish development for ETH/USD but we still think that most investors would not know how bearish it is till the head and shoulders formation on this daily chart for ETH/USD comes to fruition. A fall below the 38.2% would pull it towards the 61.8% fib retracement level. Even if the price rises from there, it will be sandwiched between the 38.2% and the 61.8% fib levels. That is when we expect the right shoulder of the H&S formation to come to completion and that is when we can expect a sharp decline in the price as it breaks below the trend line support that it has held since December, 2018.

There are only two possibilities at this point. Either you are bullish on ETH/USD and you expect it to fall towards the trend line support and start rallying towards the previous all-time high from there or you are bearish on ETH/USD and you expect it to break the trend line support and fall towards the December, 2018 lows and eventually a lot lower. Other than the fact that ETH/USD has already topped out on most large time frames, we have other reasons to believe a decline is in the offing. A lot of ICO projects built on Ethereum (ETH) are going to come under fire when Tether (USDT) or Bitfinex takes the market down. Tether is like a ticking time bomb and it could be one of the biggest catalysts that might give the SEC and other reasons to come guns blazing against some blockchain projects. We have already seen that even the most reputed of ICO projects have been busy dumping coins on their investors.

The daily chart for ETH/BTC shares an even gloomier outlook. If we look at this chart, it is easy to see that the price has been in a strong downtrend since last month. This downtrend is unlikely to be over soon especially as the price is just preparing to fall further. What is likely to happen though is for the price to break below this historical horizontal support. This is because descending triangles have a very high probability of breaking to the downside.

If we see ETH/BTC break this descending triangle to the downside, all hell is going to break lose and the altcoin market is going to be completely obliterated. We have already seen Bitcoin dominance rise recently. It remains above 61% and it still has plenty of room to go up further. We expect this will happen when the market starts to fall. Altcoins usually fall a lot harder than Bitcoin (BTC) during crashes. When that happens, we will see Ethereum (ETH) lose most of its gains against Bitcoin (BTC) and when the market starts to recover, Ethereum (ETH) may not be the second largest coin by market cap.