Ethereum shows a classic bullish pattern on its Bitcoin pair, indicating a 50% upside

The formation of a bullish trading pattern suggests that the ETH/BTC pair may be on the verge of a trend reversal.

In the days leading up to the start of 2023, ether, Ethereum's native token, appears poised to see a surge in the price of its main rival bitcoin.

Key points:

Ethereum shows a classic bullish pattern on its Bitcoin pair, indicating a 50% upside.
The bullish clues come mainly from a classic technical setup called the "Cup Grip" pattern.
A decisive break above the 0.079 BTC neckline could push the price of Ether towards 0.123 BTC or 50% by early 2023.

Ethereum has a 61% chance of surpassing Bitcoin

The bullish clues come mainly from a classic technical setup called the "Cup Grip" pattern. It forms when the price undergoes a U-shaped recovery (cup) and then moves slightly downward (handle) - while maintaining a common resistance level (neckline).

Traditional analysts see Cup and Handle as a bullish setup, with veteran Tom Bulkowski noting that the pattern hits its profit target 61 percent of the time. In theory, the profit target for a cup-and-handle pattern is measured by adding the distance between its neckline and its lowest point to the neckline level.

The Ethereum to Bitcoin (or ETH/BTC) ratio is a widely used pairing that is somewhat similar in setup. The pair now sees its neckline resistance near 0.079 BTC, as shown in the chart below.

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ETH/BTC weekly price chart featuring a cup and handle. Source: TradingView

Therefore, a decisive break above the 0.079 BTC cup and handle neckline could push the price of Ether towards 0.123 BTC or 50% by early 2023.

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ETH/BTC weekly price chart featuring cup-and-handle breakout setup. Source: TradingView

Is it time to get bullish on ETH?

Ethereum’s strong initial fundamentals relative to Bitcoin further raise the odds for a 50% price rally in the future.

First, Ether’s annual supply rate plummeted in October, in part due to a fee-burning mechanism called EIP-1559 that removes a certain amount of ETH from permanent circulation whenever an on-chain transaction occurs.

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Ethereum supply rate post-Merge. Source: Ultra Sound Money

As previously reported by Cointelegraph, social mining project XEN Crypto was largely responsible for increasing the number of on-chain Ethereum transactions in October, which resulted in more ETH being burned.

According to EthBurned.info, more than 2.69 million ETH (~$8.65 billion) has been burned since the EIP-1559 update was launched on Ethereum in August 2021.

It suggests that the more congested the Ethereum network becomes, the more likely it is that ETH will enter a "deflationary" mode. Therefore, if the demand for the token increases at the same time, the reduction in the supply of ETH could prove bullish.

Additionally, Ethereum's transition to a proof-of-stake consensus mechanism via "The Merge" has become a sucker for the ether supply, as each staker - be it an individual or a mining pool - has to lock 32 ETH in a smart contract to get the Earn back.

On October 31, the total supply of Ethereum PoS smart contracts reached an all-time high of 14.61 million ETH.

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Ethereum 2.0 total value staked. Source: Glassnode

By contrast, Bitcoin, a proof-of-work (PoW) blockchain that requires miners to solve complex mathematical algorithms to earn rewards, has faced constant selling pressure.

In other words, there is relatively more selling pressure on Bitcoin relative to Ethereum.

ETH/BTC needs to break out of range resistance

Ether’s 50% price rise against Bitcoin’s path has a strong resistance area halfway through, which is a potential happy-killer for the bulls.

In more detail, the 0.07 BTC to 0.08 BTC area has been a strong resistance area since May 2021, as shown below. For example, the December 2021 pullback started as resistance after testing the aforementioned range, leading to a 45% price pullback by mid-June 2022.

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