Ethereum’s native token Ether (ETH) has been forming an inverted-cup-and-handle pattern on the weekly chart since May 2021, indicating a potential downside break against Bitcoin (BTC).

ETH/BTC weekly price chart featuring an inverted cup-and-handle breakdown setup. Source: TradingView
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The inverse cup-and-handle is a bearish reversal pattern characterized by low trading volume. This is usually resolved by a price break below its support level, followed by a decline towards a level of length equal to the maximum height between the top of the cup and the support line.

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Applying the theoretical definition to the weekly chart of ETH/BTC presents 0.03 BTC as its next downside target, which is about 55% lower than the September 16 price.

Can ETH/BTC Pull the Dow Jones?

Alternatively, the ETH/BTC pair could still deliver some big gains in the coming years.

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On the weekly log chart, the ETH/BTC pair is painting a potential cup-and-handle since January 2018. In other words, a rally towards 0.5 BTC in 2023 is on the table, which is over 520% ​​off current price levels.

Unlike the converse pattern mentioned above, cups-and-handles are bullish reversal patterns, with targets above them located at a level equal to their maximum height when measured from their breakout point.

Veterans Analyst Tom Bulkowski notes that these patterns have a 61% success rate of meeting their above targets.

For example, the cup-and-handle pattern that formed on the Dow Jones charts during the Great Depression of the 1930s and 1940s—in which the cup took nine years to develop and another four years—reached its upside target in the 1950s. . as shown below.

Dow Jones Industrial Average cup-and-handle pattern. Source: StockCharts.com

Potentially, ETH/BTC could now be in the handle phase of a similar cup-and-handle pattern, as shown through the shaded purple descending channel area in the chart below.

ETH/BTC weekly price chart with a cup-and-handle breakout setup. Source: TradingView

The pair is waiting for a breakout move above the resistance level of the pattern at 0.08 BTC. For now, it is trading lower inside the handle range, eyeing a pullback towards its lower trendline at around 0.05 BTC this week after testing the upper one as resistance.

Flipping or Flopping?

Ethereum’s ability to overtake bitcoin by market capitalization has been commonly dubbed as “flipping”.

According to Joshua Lim, Head of Derivatives at Genesis Trading, Ethereum is competing with Bitcoin to become a so-called “inflation hedge”. Lim cited Ethereum’s EIP-1559 update from August 2021, which introduced a fee-burning mechanism into its protocol.

Academic research claims ETH is a ‘better’ store of value to bitcoin

according for ultrasound. Money, Ether supply growth is now minus 1.43% a year. In other words, the token may become “deflationary” over time. Lim argues that this makes ether an attractive alternative to bitcoin among institutional investors.

But many argue against the flipping narrative, including Rahul Singh, co-founder of DeFi platform FinTokens. He told Cryptooshala that Bitcoin would continue to exist as a “digital gold”, while Ethereum would become an “Internet 2.0” project.

As of September 2022, Ether has a market cap of $175 billion, compared to bitcoin’s $372 billion.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cryptooshala.com. Every investment and trading move involves risk, so you should do your own research when making a decision.