Expert Says Ethereum Faces Potential December Drop Amid Historical Patterns

Benjamin Cowen expects Ethereum to repeat its 2016 pattern, with potential December drop despite post-Merge changes.

Notably, Ethereum recently experienced bullish momentum, briefly testing and even surpassing critical resistance at $2,700—marked by the 100-day moving average. However, a swift rejection occurred as substantial selling pressure emerged, leading to a sharp decline. 

In the past 24 hours, the altcoin’s price has dropped over 2%, pushing it to $2,552. This development aligns with a broader sentiment that Ethereum may undergo one more dip before any sustained upward move.

Further December Drop?

Per a recent analysis by Benjamin Cowen, CEO of Into The Cryptoverse, Ethereum could be on track for another downturn, citing its historical cycle in 2016 as a possible pattern. During that year, Ethereum faced massive declines in April, August, and December.

In 2016, #ETH had big drops in April, August, and December.

In 2024, #ETH has had big drops in April and August.

So decent chance it plays out in a similar fashion, with one more drop by #ETH before EOY, with the low in December. pic.twitter.com/xRsJ92aXMP

— Benjamin Cowen (@intocryptoverse) October 23, 2024

In 2024, similar drops were observed in April and August, suggesting that another decrease may occur before year-end, potentially hitting a low point in December. 

Change in ETH’s Fundamentals?

Although history often rhymes, it’s worth noting that the broader market context, macroeconomic factors, and ETH’s fundamentals are different in 2024 compared to 2016, which could influence whether this projected drop actually occurs.

For instance, a trader has pointed out that macroeconomic conditions, Ethereum’s improved fundamentals post-Merge, and EIP-4844 could lead to different outcomes compared to 2016.

Notably, Ethereum’s evolution as a blockchain differentiates it from previous cycles. The trader notes that cyclic trends are more accurately applied to Bitcoin, which has seen less structural changes.

Options Expriry and Volatility Concerns

Further, Ethereum’s market currently braces for significant volatility due to the impending expiration of $1 billion worth of options contracts this Friday.

Typically, market makers drive prices toward “maximum pain” levels to minimize trader profitability during options expiry. Ethereum’s price is only 1.85% away from its maximum pain point at $2,600, while it currently trades at $2,552. 

A close examination of the put-call open interest ratio, standing at 0.95 as of October 22, reveals a bearish outlook, with put and call open contracts at 194,050 and 205,155, respectively. 

Fees Encouraging Network Activity?

Despite the bearish short-term outlook, Ethereum has witnessed a significant reduction in transaction fees, potentially boosting network usage.

According to Santiment, transaction fees recently dropped to an average of $1.63 as of October 23. Historically, fees below $2 have coincided with market bottoms, enabling increased user activity and utility. 

In contrast, higher fees, especially those above $10, have previously led to decreased activity, usually seen during market peaks. The current low-fee environment signals reduced network congestion, presenting a more favorable setting for blockchain activity.