() fell on June 16, indicating that its drop, coincided with the Federal Reserve's announcement that it would raise interest rates to 0.75%.

Are the bulls stuck in Ether?

dropped 9.2% to around $ 1,070 in a day after it recovered 23% from lows near $ 1,000, its worst since January 2021.

The pair's bullish move ETH/USD, followed by a sharp correction, appeared in tandem with US stocks, confirming that it is trading like a risk asset.


The correlation coefficient between ETH/USD and Nasdaq | Source: TradingView

The drop means Ether has lost 77% in value since November 2021 and is currently trading below the “real price” of $ 1,740, according to data from .


Actual price of (USD) | Source:

Additionally, the rising interest rate environment adds to selling pressure, with investors moving away from high-risk trades and seeking safety in traditional hedging assets, such as cash.

Investors' confidence in cryptocurrencies also eroded after the collapse of (originally , now LUNC), a project $40 billion algorithm and lending platform Network decided to suspend withdrawals.

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On top of that, Three Arrow Capital, a crypto hedge fund overseeing nearly $10 billion as of May 2022, is said to face insolvency risk. Fears of a domino effect have further limited the crypto market's rally, hurting Ether.

From a technical perspective, Ether's recent rally looks like a bear market rally, likely due to investors taking profits short.

Specifically, investors close their short positions by buying back the underlying asset in the market — usually at a lower price than it was at the time of borrowing — and paying it back to the lender. That spurred the asset to recover from major downside moves, but it did not indicate a bullish reversal.

These small rallies can be a bull trap for investors who mistakenly believe this rally is a sign of bottoming.

On the other hand, experienced bears will use this pump to open new short positions at the local top, knowing that the market trend has not changed.

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ETH’s “bear flag” shows more losses to come

Ether’s “bear flags” on lower timeframes are supporting the scenario that the rally is a bull trap.

A bear flag is a bearish continuation pattern that forms when price consolidates inside a triangle structure after a strong downward move.

According to the rules of technical analysis, traders measure the profit target of a bear flag by taking the height of the previous drop (known as a “flagpole”) connected to the breakout point, as shown below. .


ETH/USD 4-hour chart | Source: TradingView

This puts the next downside target for ETH price at $ 850, down nearly 25% from the June 16 price.

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