No Santa Claus Rally for Ethereum! Analysts Predict a 50% Crash

It has been no Santa Claus rally for Ethereum due to the token's historical holiday performances

It's no Santa Claus rally for Ethereum cryptocurrency. As we approach the end of the year and the Christmas holiday, it's a good time to reflect on the Ethereum token's historical performance during the holiday season and forecast how it will perform in 2022.

According to historical statistics, Ethereum had had a constant year-on-year (YoY) rise during the previous three Christmases, reaching US$4,093 on December 25, 2021. Based on several technical analysis (TA) indicators, Ethereum's Christmas positive trend will not continue the Santa Claus rally in 2022, with the asset expected to trade around US$915 on December 25, according to CoinCodex.com. Ethereum price is now at US$1,255, implying a 23% drop if the forecasts come true. Only time will tell how closely Ethereum and Bitcoin will adhere to the holiday season predictions. Ethereum crash might soon be a reality for investors.

Notably, Christmas 2020 saw a 400% gain from 2019, with the first cryptocurrency changing hands for US$125 on December 25, 2019, followed by another jump on the yearly chart on December 25, 2021, when Bitcoin traded 543% higher than US 626 the previous year.

However, market shocks such as Russia's invasion of Ukraine and the widely publicized collapse of the Terra (LUNA) ecosystem, as well as inflation and the recent crash of FTX, once one of the world's largest crypto exchanges, have significantly altered the landscape, making it unlikely that this year will be a merry Christmas in terms of year-on-year growth.

Indeed, the price of Ethereum has plunged 69% since last Christmas, and it is currently trading at US$1,255, with little sign that this trend will reverse by Christmas 2022. With a total market cap of US$153.6 billion, the current ETH price is 0.84% down on the day but up 3.88% over the past seven days.

Observing the ETH technical analysis, it is evident that it is leaning to the sell side, with the summary on the 1-day gauge indicating 'sell' at 10 vs 'buy' at 7 and 'neutral' at 9.

Moving averages (MA) are in the sell zone with 8, according to a thorough examination of these indicators. Meanwhile, oscillators are at 8 indicating a 'neutral' attitude. According to a bottom fractal observed by independent market researcher Wolf, Ethereum's native cryptocurrency, Ether, is poised for a significant bullish reversal after falling 25% from its November high of US$1,675.

Wolf contrasts Ethereum's multi-month downturn from May 2018 to March 2020 with a comparable but shorter correction after July 2022. According to the researcher, if the trend continues, the price of Ether will have bottomed out in November 2022.

Wolf takes inspiration from the March 2020 Ethereum price fall, which was precipitated by the COVID-19 pandemic – a black swan event. Similarly, the bankruptcy of cryptocurrency exchange FTX in November 2022 pulled down the price of ETH. Furthermore, Cold Blood Shiller, an independent market analyst, observes an "obvious breakthrough point" on Ethereum's daily chart, namely its Awesome Oscillator (AO) and Relative Strength Index (RSI) (RSI). Both indications look to have lately turned bullish.

Nonetheless, Ether is already down 75% from its peak in November 2021, with the market experiencing many bull traps since then.

Aditya Siddhartha Roy, a market analyst, observes the possibility of a similar bull trap forming in the current micro rally, which he believes risks exhaustion at a multi-month descending resistance trendline.

A substantial pullback from the declining trendline would bring Ether toward $700, which Roy describes as a "potential bottom."

However, following the March 2020 drop, ETH/USD rallied strongly, aided by the Federal Reserve's rate cuts, which pumped more money into the economy, some of which went into the crypto market.

Similarly, Ether's slight comeback post-FTX "black swan" in November 2022 aligns with increased anticipation of the Fed halting its rate rises. As a result, Ether is likely to repeat the March 2020 fractal to new monthly highs.

Roy's analysis is consistent with Ethereum's symmetrical triangle setup, which is best visible on the longer-term chart shown below, with a technical downside target of US$675. In other words, the ETH/USD pair is still vulnerable to a 50% drop in early 2023.