Ethereum is the second largest cryptocurrency ranked by market capitalization. A recent Merge “update” to a proof-of-stake consensus mechanism and other changes raised the discussion of a possible “repositioning,” a situation in which Ethereum unseats Bitcoin as the top cryptocurrency on the market.
Instead, Ethereum’s dominance could be in “serious” jeopardy, if an ominous-sounding candlestick pattern is a prelude to things to come in the crypto market.
Lagging Performance Against Crypto Leaves ETH.D Exposed to Danger
While Ethereum might be up 90% from the bear market low compared to Bitcoin’s 50%, when comparing year-to-date returns, BTC’s 50% gain against the USD beats a mere 40% gain. ETH. From this metric alone, it is obvious that Ethereum has lagged behind Bitcoin.
As of the last few weeks in crypto, the reason for the lagging behavior was revealed: The SEC began targeting cryptocurrency firms, specifically to offer participation to clients.
Instead of the Merger causing Ethereum to outperform the market, it had the opposite effect. Fears of ETH potentially being labeled as a security have also raised concerns.
Whether or not the fears end up being valid remains to be seen, continued lagging performance as the rest of the cryptocurrency market launches into a bull run could put a dent in Ethereum’s dominance.
A tombstone doji could hurt Ethereum’s dominance
ETH.D, which represents Ether’s dominance compared to the rest of the market, closed the month of January with an ominous-sounding candlestick pattern called a tombstone doji.
A gravestone dojo appears | ETH.D at TradingView.com
The Japanese candlestick pattern is a potential bearish reversal signal, formed when there is an open, low, and close at the same general level, with a long upper wick. The formation shows the bulls pushing prices higher, only to be met with strong rejection by the bears until the open and the low of the candlestick.
This type of behavior, and the candlestick signal, tends to come before a prolonged move lower. The opposite sign is called a shooting star and implies reverse formation dynamics. A small streak in the background is acceptable, but the pattern often appears with a completely flat background.
Bearish momentum is increasing | ETH.D at TradingView.com
Like any candlestick pattern, the signal is strongest when technical indicators and other chart patterns support what the tombstone doji is telling the market. For example, a possible failure to recapture a long-term trend line and strengthening bearish momentum add credibility to the signal. The tombstone doji is also turning up at long-term resistance that Ethereum has so far been unable to break.
The bullish alternative | ETH.D at TradingView.com
As a bullish alternative, even with a further correction in ETH dominance, the chart could be forming a massive inverse head and shoulders pattern, possibly pointing to a future price target that would set new all-time highs against Bitcoin and renew the conversation of a “flipping” in cryptography.
