Ethereum preparing a 'bear trap' ahead of the Merge — ETH price to $4K next?

Ethereum's native token, Ether (ETH), continues to face downside risks in a higher interest rate environment. But one analyst believes that the token's next selloff move could turn into a bear trap as the market factors in the possible release of the Merge this coming August.

ETH to $4K?

Ether's price could reach $4,000 by 2022's end, according to a technical setup shared on May 20 by Wolf, an independent market analyst.

The analyst envisioned ETH moving inside a multi-month ascending triangle pattern, which comprises a horizontal trendline resistance and rising trendline support.

Notably, ETH's latest retest of the structure's lower trendline could initiate a big rebound toward its upper trendline, which sits around the $4,000-level, as shown below. 

Wolf took his bullish cues from a similar triangle setup from 2016, whose formation preceded a major bull run from $1 to $27. Similarly, another ascending triangle occurrence in 2017 coincided with a bullish follow-up, wherein ETH/USD rose 270% to over $1,500.

The Merge vs. low liquidity "death spiral"

Wolf's fractal-based analysis came as Preston Van Loon, one of the Ethereum core developers, confirmed that the blockchain project's much-anticipated upgrade to a proof-of-stake consensus mechanism would occur sometime in August.

Wolf noted that Ethereum was setting up a "bear trap," which would make sense prior to the upgrade, complimenting his technical setup, as discussed above.

Bear trap few months from the #merge makes sense. $ETH

— Wolf (@IamCryptoWolf) May 20, 2022

The pending upgrade was one of the key catalysts behind Ether's price rally in 2021, as many investors believed it would improve the long-standing scalability problem in the Ethereum blockchain while cutting transaction and gas costs. Nonetheless, Ethereum Foundation kept delaying the launch.

"Undoubtedly, this lack of progress has played a major role in Ethereum's recent price decline,"  Bitfreedom Research, a tech-stock and crypto research entity, noted while predicting ETH's price to decline toward $950–$1,900 by October 2022.

Related: Analysts note parallels with March 2020: Will this time be different?

The firm cited higher interest rates as the core reason behind its bearish outlook for Ethereum, noting:

"The crypto market moves extraordinarily fast, which means crypto companies need LOTS of cash to power rapid growth. With no cash available, this can lead Ethereum's ERC20-token economy to move in a death spiral."

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