How high will Ethereum (ETH) go?

Bull markets in cryptocurrencies generally benefit altcoins subsequently. In May, Ethereum (ETH) performed by more than 15%, and by almost 65% since the start of the year. This strong comeback of Ethereum comes after the SEC approved the creation of ETFs on the second largest cryptocurrency in the world. If the correlation between bitcoin and ethreum remains high, the cyclicality of the ethereum price seems to act with just as much precision in the structure of this bull market. Decryption of indicators and dynamics of the Ethereum price.

Soon an ETF to boost the market?

As with bitcoin (BTC), the United States market authority has accepted the creation of ETFs on Ethereum. Thus, this decision will allow large global managers to expand the offer of cryptocurrencies to their clientele. However, it remains for the SEC to accept its marketing…

“ The move follows the successful introduction of Bitcoin ETFs in January, which quickly attracted $13.3 billion in net inflows, setting performance records for ETFs upon launch. The arrival of ETFs on Ethereum could see similar success, attracting a new influx of capital to the second largest cryptocurrency. »

Crypto: Ethereum ETFs approved by the SEC! – Cointribune

This same announcement for bitcoin had particularly favored the rise in the price to historic highs. The arrival of an ETF on Ethereum thus leaves open the potential for a return to the November 2021 highs at $4,868. In May 2024, ETH represents nearly 17.7% of the market capitalization. This market share is still well behind bitcoin with a dominance close to 53%.

The authorization of ETFs on Ethereum could thus stimulate a catch-up effect compared to bitcoin. Additionally, these ETFs could also be used to create ETFs representing a basket of cryptocurrencies in the future.

A look at fractals: the rise persists

A major indicator to measure the viability of the trend on ETH is to use fractals. Indeed, the Hurst coefficient (read more) makes it possible to measure the degree of persistence of a trend from one time scale to another. In addition, the Hurst coefficient is ideally bounded between 0 and 1. With Ethereum, a Hurst coefficient close to 1 indicates significant upside potential, and therefore good symmetry with major dips. Conversely, a Hurst coefficient close to 0 will indicate that the trend is anti-persistent and is likely to turn downward.

Graphically, we see that ETH had acquired significant upside potential in mid-2022, and reconfirmed in early 2023. The subsequent bull market, consistent with theory, was accompanied by a decrease in the Hurst coefficient, signaling the loss of bullish potential. In March 2024, the Hurst coefficient was below 30%, reflecting downside risk, or at least the absence of upside potential. Nevertheless, Ethereum’s recent rebound seems to reaffirm renewed bullish potential, which limits the downside risks observed in spring 2024.

Despite everything, this approach encourages us to be more cautious about the nature of the bull market compared to 2023. Indeed, it is clear that the bull market has clearly exhausted much of its overall potential.

The cycles that act on ETH

In several papers, we had the opportunity to highlight a cycle close to 3.6 years on Ethereum. Furthermore, this dominant cycle corresponds to the same dominant cycle as that of bitcoin (BTC). The temporality of this cycle thus allows us to judge, and compare, the different bullish or bearish markets. For example, the bull market observed in bitcoin since 2023 is highly symmetrical to previous bull markets.

“ Indeed, we know that two cycles of 4 months and 22 months synchronized in February 2018. We are now looking for the period necessary to obtain the next constructive interference. By carrying out the PPCM(4.22), we get 44 months (3.6 years), which strongly correlates with the cyclicality of stocks and Bitcoin (Cyclicity of bitcoin (BTC) – Cointribune). »

Technical indicators: Constructive interference and destructive interference – Cointribune

Thus, a little more than 3.6 years separate the major peak of 2018 from that of 2021 on Ethereum. Likewise, 3.6 years separate the major low at the start of 2019 with that of mid-2022, etc. Here we see a clear cyclical dynamic, mainly fueled by the correlation of ethereum with bitcoin. From this perspective, which certainly remains theoretical, we could expect an Ethereum peak around mid-2025. Finally, we will mention the good symmetry observed so far between the current bull market and the previous bull market.

ETH remains correlated to bitcoin

In our previous paper, we highlighted the importance of the correlation between ethereum and bitcoin. The major dips and lows in the cryptocurrency market are in fact linked to the relationship that exists between the two main cryptocurrencies.

“ We notice in our case that a high correlation coefficient between bitcoin and ethereum is conducive to translating major lows on bitcoin. Conversely, a weak correlation coefficient (prominent trough in the coefficient) is likely to reflect a sudden weakening of market strength, and major peaks. A major explanation would be that, during bull markets, the dependence of altcoins on bitcoin reduces. »

Bitcoin (BTC) is decorrelated from other assets – Cointribune

Graphically, we clearly verify that the major dips on ETH are linked by a very high correlation with bitcoin. In contrast, before major bull markets on ETH, we notice that the BTC/ETH correlation is minimal. In March 2024, the 6-month correlation between bitcoin and ethereum reached a low of around 70%. By symmetry, this effectively announced the probable arrival of an intense bull market on ETH. However, the study of the correlation between the two assets does not allow us to effectively judge the probable highs on Ethereum.

Despite everything, we see that the correlation between the two assets remains high overall. It is mostly above 80%, which is significant.

Around $6,000?

The Technical Analysis of the Ethereum price can provide us with additional information. Indeed, we note that the consolidation of March / April 2024 does not call into question the upward trend initiated since 2023. On the contrary, the bullish breakout observed recently allows us to set a first objective (almost reached) towards the recent highs around $4,000.

Then, as we have pointed out, it would be consistent due to the correlation with bitcoin to reach all-time highs at $4,800. Continuing this theoretical bullish movement, the next extended target of the consolidation pattern (flag, log scale) would be close to $6,000. This level does not seem graphically and statistically impossible. Conversely, continued difficulty in breaking recent highs, or a lasting drop below $3,000, would signal a probable exit from the uptrend.

We also recalled the good temporality of this dynamic, similar to that of bitcoin. Despite everything, we see that a bullish continuation would take place with less basis than the increase in 2023 and early 2024. This necessarily encourages greater attention to be paid to market strength indicators.

In conclusion

The authorization of ETFs on Ethereum seems to have triggered a break in consolidation since March. The bullish trend on Ethereum continues as follows:

• With an extension of demand for ETFs and the rebound in the price of bitcoin.
• A weakening of the bullish force with regard to fractals. Despite everything, the upward potential seems to be maintained in April/May given the price rebound.
• In addition, the temporality and cyclicality of the market still seems relevant. Until now, there remains a certain symmetry between the current bull market and the previous one. The upward dynamic is therefore accompanied by structural market cycles.
• The correlation with bitcoin is maintained despite a decorrelation in March 2024. This signal tells us that the bull market on ETH is likely to continue in line with bitcoin.
• Finally, the Technical Analysis clearly shows continuation potential. The objective towards previous highs, then towards all-time highs, would therefore be likely in a bull market. If bullish strength continues, there are some stretch targets near $6,000, and beyond by extension.