Decentral Block Post

The Ethereum Merge came and went, leaving investors to ponder what the next trending development in the market could look like. In a Cointelegraph Twitter Space with Capriole founder Charles Edwards, the analyst mentioned that excitement over the Ethereum Merge and its bullish price action had somewhat been holding up hope across the market. Now that the event has come and gone, the crypto market has been selling off, with Bitcoin’s (BTC) price trading below $20,000 and Ether’s (ETH) under $1,500. 

Eventually, new narratives and market trends will emerge, and if the fundamentals are right, traders will rotate funds as these new leaders emerge.

Let’s take a look at a few potential trends.

Where will the former ETH miners go?

The Ethereum network successfully shifted to a proof-of-stake (PoS) model, meaning miners are out of pocket but still possibly in possession of their GPUs and ASICs mining infrastructure. It’s possible that some miners might elect to mine on a different chain instead of selling their gear.

While they haven’t settled on any particular chain just yet, Ravencoin, Flux, Ethereum Classic and Ergo seem to be the frontrunners. Leading into the Merge, each network saw its hash rate rise to new all-time highs, as shown below.

Presently, there seems to be a general assumption that when the U.S. dollar value increases against other global major currencies, as measured by the DXY index, the impact on Bitcoin (BTC) is negative.

Traders and influencers have been issuing alerts about this inverse correlation, and how the eventual reversal of the movement would likely push Bitcoin price higher.

Analyst @CryptoBullGems recently reviewed how the DXY index looks overbought after its relative strength index (RSI) passed 78 and could be the start of a retrace for the dollar index.

Moreover, technical analyst @1coin2sydes presents a bearish double top formation on the DXY chart, while simultaneously Bitcoin forms a double bottom, a bullish indicator.

Correlation changes over time, despite the general inverse trend

The periods of inverse movements between Bitcoin and the DXY index have never exceeded 36 days. The correlation metric ranges from a negative 1, meaning select markets move in opposite directions, to a positive 1, which reflects a perfect and symmetrical movement. A disparity or a lack of relationship between the two assets would be represented by 0.

Ethereum's native token Ether (ETH) has been forming an inverse-cup-and-handle pattern since May 2021 on the weekly chart, which hints at a potential decline against Bitcoin (BTC). 

An inverse cup-and-handle is a bearish reversal pattern, accompanied by lower trading volume. It typically resolves after the price breaks below its support level, followed by a fall toward the level at a length equal to the maximum height between the cup's peak and the support line.

Applying the theoretical definition on ETH/BTC's weekly chart presents 0.03 BTC as its next downside target, down around 55% from Sept. 16's price.

Can ETH/BTC pull a Dow Jones?

Alternatively, the ETH/BTC pair could nevertheless deliver some large gains in the years to come.

On the weekly log chart, the ETH/BTC pair is painting a potential cup-and-handle since January 2018. In other words, a rally toward 0.5 BTC in 2023 is on the table, up more than 520% from current price levels.

Ethereum's native token Ether (ETH) has been forming an inverse-cup-and-handle pattern since May 2021 on the weekly chart, which hints at a potential decline against Bitcoin (BTC). 

An inverse cup-and-handle is a bearish reversal pattern, accompanied by lower trading volume. It typically resolves after the price breaks below its support level, followed by a fall toward the level at a length equal to the maximum height between the cup's peak and the support line.

Applying the theoretical definition on ETH/BTC's weekly chart presents 0.03 BTC as its next downside target, down around 55% from Sept. 16's price.

Can ETH/BTC pull a Dow Jones?

Alternatively, the ETH/BTC pair could nevertheless deliver some large gains in the years to come.

On the weekly log chart, the ETH/BTC pair is painting a potential cup-and-handle since January 2018. In other words, a rally toward 0.5 BTC in 2023 is on the table, up more than 520% from current price levels.

The World Bank has warned of a possible global recession in 2023. In a press release on Sept. 15, the bank said that the current pace of rate hikes and policy decisions is unlikely to be enough to bring inflation down to pre-pandemic levels.

Ray Dalio, the billionaire founder of Bridgewater Associates said in a blog post on Sept. 13 that if rates were to rise to about 4.5% in the United States, it would “produce about a 20 percent negative impact on equity prices.”

The negative outlook for the equity markets does not bode well for the cryptocurrency markets as both have been closely correlated in 2022.

The macroeconomic developments seem to be worrying cryptocurrency investors who sent 236,000 Bitcoin (BTC) to major cryptocurrency exchanges on Sept. 14, according to Glassnode data. The inflow was the highest since March 2020.

Let’s study the charts of the S&P 500 index, the U.S. dollar index (DXY) and the major cryptocurrencies to determine the key levels that could signal the start of a trending move.

Bitcoin (BTC) exchanges have seen huge volumes this month as price declines lead to renewed interest in trading.

Data from sources including on-chain analytics firm Glassnode shows exchange inflows hitting their highest since March 2020.

"The scent of volatility is in the air"

On Sept. 14, over 236,000 BTC made its way to the 1 major exchanges tracked by Glassnode.

This was the largest single-day spike since the chaos that surrounded Bitcoin’s dip to just $3,600 in March 2020.

The sell-offs in May 2021 and May and June this year failed to match the tally, suggesting that more of the Bitcoin investor base is currently aiming to reduce exposure.