Why traders claim that Ethereum will see a ‘rinse’ pullback after breaking its two-year peak

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Traders claim that ETH price could fall back briefly after climbing to a new all-time high above $1,470, amid the strength of Ethereum.

Several traders suspect that the price of Ether (ETH) could pull back after it hit a new all-time high on January 25, receiving almost 100% in January. Ether has outperformed Bitcoin (BTC) so far this year, powered by the rising number of users on Ethereum.

Mainly due to the increasing demand for DeFi, the Ethereum network has seen a spike in consumer engagement and transaction volume.

ETH/USDT 15-minute price chart (Binance). Source: TradingView.com

This has also contributed to a major rise in the visibility of the word “Ethereum” on Google Trends, smashing its previous peak since January 2018.

Google searches for “Ethereum.” Source: Google Trends

Ether pulls back against Bitcoin as BTC begins to rally

In the past week, Ether’s price has shown some inverse association with Bitcoin. The ETH/BTC pair broke out against Bitcoin, touching the highest levels since September 2019.

But sometimes, as the price of Bitcoin increased, ETH pulled down, and vice versa. As Bitcoin rallied, altcoins still traded badly, indicating that revenues flow into and out of Bitcoin on the basis of investor sentiment.

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If the market is more optimistic and draws high-risk bets, then altcoins appear to surge while bitcoin solidifies.

Thus, yet again, while the demand is centered on Bitcoin, altcoins, and Ether usually consolidate, while BTC sees explosive upside moves.

On Jan. 25, Bitcoin broke out of its four-day range, rising by more than 7% on the day. During the same time, the ETH/BTC pair decreased by approximately 4.9 percent.

Loma, a cryptocurrency trader, said that the price action of ETH suggests a pullback is likely to flush late buyers. He said:

“Something about this $ETH PA tells me we’re going to rinse some ATH breakout longs over the next few days.”

The trader expected a decline when ETH approached $1,470, and ETH values have since plummeted by more than 5%.

Record options expiry coming

A aspect that could impact Ether’s near-term market pattern is the expiry of the record options.

About $400 million in options is due to expire on January 29. Considering so many traders are expected to change their positions before the expiry date, ETH could see a substantial rise in volatility.

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The expiry may be in favour of ETH or may exert pressure on it to sell. If the price of ETH declines dramatically in the coming days and drives it to the max pain price at $800, it might amplify the downtrend of ETH.

 

ETH options expiry. Source: Deribit, Unfolded

The word “max pain” in options refers to the price point at which the largest number of traders will face the most losses.

ETH is highly unlikely to fall by nearly 50 percent to $800 by January 29, particularly given its momentum. However, owing to the unparalleled demand for ETH and the high volatility of the cryptocurrency, a marginal decline before expiry may have a detrimental effect on the short-term ETH price cycle.

However, the fundamentals for ETH remain solid, as analysts at Intotheblock have said.

They wrote:

“The price of #Ethereum broke a new ATH today of $1,475. On Friday, we wrote about a few of the reasons why we are bullish on $ETH including: – Increasing supply scarcity – DeFi exponential growth throughout 2020 – Network adoption and growth.”

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