A bronze statue of a bull fighting with a bear on display in the Museum of American Finance on Wall Street in Lower Manhattan in New York is seen on Wednesday, August 18, 2010. With the Dow dropping again today many analysts are predicting we are leaving a Bull Market and entered a Bear Market. (�� Richard B. Levine) (Photo by Richard Levine/Corbis via Getty Images)
An ominous-sounding technical pattern could soon occur on ether's price chart, suggesting more pain ahead for the battered second-largest cryptocurrency by market value.
On the three-day chart, where each candlestick represents 72-hours, the 50-candle simple moving average (SMA) is trending south and looks set to cross under the 200-candle SMA by the month-end, confirming the so-called death cross, a bearish indicator.
According to technical analysis theory, the death cross represents accelerated selling that could eventually translate into a long-term downtrend.
The impending death cross on the three-day chart would be just the second in ether's seven-year history. The first, which occurred in October 2018, presaged a 60% price crash to $80. Yes, ether was that cheap four years ago.
While the soon-to-be confirmed death cross warrants caution on the part of the bulls, but is not a guarantee that the price is going to decline further. .
The death cross pattern is based on backward-looking moving averages and is a lagging indicator. So by the time it occurs, the asset is already down significantly from the bull market peak. At the going market price of $1,770, ether is down 175% from the record high of $4,868 reached in November. The native token of Ethereum's blockchain has declined 50% this year.
To contrarian traders betting against prevailing market trends, the death cross signifies an end of peak selling and potential reversal higher.
It remains to be seen if the impending death cross entices contrarian traders into buying or invites more selling from trend-following traders.
Fundamentals appear mixed, with Ethereum eyeing the much-anticipated upgrade to a proof-of-stake (PoS) design amid aggressive policy tightening by the Federal Reserve (Fed) and other major central banks.
On Wednesday, Ethereum developers successfully merged Ethereum's oldest test network Ropsten's proof-of-work chain, with the proof-of-stake beacon chain. Ropsten's merge has set the stage for the mainnet's merge to PoS design, which is expected to have bullish implications for ether's price.
The Fed has raised rates by 75 basis points this year and is likely to lift borrowing costs by 50 basis points at upcoming meetings. The hawkish expectations would strengthen if today's U.S. inflation report shows heady price growth in May.