Ether Faces ‘Bull Trap’ Risk After 25% Price Rally

Written by C, Fiona

Last updated: 2022-06-29

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ETH prices face headwinds from bearish technicals and strong outflows form Ethereum investment.

Ethereum’s token, Ether (ETH), may be entering a “bull trap” zone after rallying back to the $1,000 mark from an 18-month low of $885.

Ether Price Depicts A “Rising Wedge”

The first among these indicators is a “rising wedge,” a classic bearish reversal setup that forms after the price trends upward inside a range defined by two ascending but converging trendlines. The wedge setup gains further confirmation if the trading volume drops alongside the rising prices.

Theoretically, a rising wedge resolves after the price breaks below its lower trendline and eyes a run-down toward the level at length equal to the maximum height between the wedge’s upper and lower trendline.

Hence, its interim bias appears to the downside, with a decisive breakdown below the lower trendline risking a decline toward the $870–$950, depending on where the breakdown begins.

That means a 15%–25% decline from June 13’s ETH price.

$70 Million Exits Ether Funds

Ethereum’s bearish case is supported by evidence of significant outflows from investment funds.

Notably, Ether-related investment products witnessed outflows worth $70 million in the week ending June 17, according to data fetched by CoinShares.

Notably, this was the eleventh-straight week of capital withdrawals, bringing the year-to-date outflow total to $458.6 million.

In contrast, Solana (SOL), one of Ethereum’s top rivals in the smart contracts ecosystem, attracted $109 million in 2022 for its related funds. While Bitcoin (BTC) saw $480 million flow into its investment products.

CoinShares cited investors’ worries over Ethereum’s “Merge” to proof-of-stake as the primary reason behind its funds’ poor performance this year.

Ether Options Exercise Price: $1,000

ETH options’ open interest on Deribit shows more than $1 billion in notional for Ether, pending expiration on June 24. Interestingly, according to data from Coinglass, these Ether options are major puts around the current price levels, concentrated around the $1,000 strike.

The June 24 expiration could potentially affect Ether’s price action, mainly because it is trading at just 10% above the $1,000 preferred strike price. In addition, a move to $1,000 could trigger a rising wedge setup.