Ethereum lost bullish momentum over the weekend and hints at a near-term pullback. The cryptocurrency is still leading the current rally in the crypto market with a 14% profit over the past week, but could be negatively affected by macroeconomic factors.
Related Reading | Bitcoin bulls try to recover as BTC dislodges from the $22,000 level
At the time of writing, Ethereum (ETH) is trading at $1,530 with a 5% loss in the last 24 hours.
According to a senior analyst at research firm Messari, the second-largest cryptocurrency by market capitalization will face several challenges this week. As reported by NewsBTC, Ethereum was central to the current market relief rally.
ETH core developers have set a date for “The Merge,” the event that will complete its transition to Proof-of-Stake (PoS) consensus. The highly anticipated event will take place in September this year, but the announcement may be insufficient to alleviate the current macroeconomic conditions.
The Messari analyst believes this week will be key in shedding light on the future price action of ETH. As of last week, major corporations in the United States have released their earnings reports.
So far, big tech companies have performed relatively well. In the coming days, Apple, Meta, Google, Exxon, Ford, Amazon, Intel and other behemoths will release their earnings.
If the results are favorable, Ethereum and the crypto market could continue to rally past critical resistance. The reverse will be true if these companies fail to meet market expectations. The analyst said the following while sharing the image below showing the correlation of ETH and BTC with the S&P 500:
The Eth correlation with stocks is reversing. If we have big misses on earnings, a bad reaction to the Fed and the actions unfolding this week will be THE test is the meltdown > macro.
As the chart shows, the price of ETH has been decoupling from the traditional market, especially the S&P 500 since the start of July 2022. Most likely in reaction to the announcement of “The Merge”, this trend could s reverse following a poor earnings season. .
What awaits us for Ethereum
On the other hand, if companies post losses, the S&P 500 and other indices could trend lower and eventually hint at a potential macro bottom for the multi-month downtrend in global financial markets.
The analyst noted that only 21% of S&P 500 companies reported earnings. This leaves a majority of this index to determine the upcoming trend in legacy markets and crypto markets. The analyst added:
If the big tech misses out and the guides drop, we might finally see the stock drop to reflect the forward p/e people were expecting. Incomes are always historically high for any period, forget one with a war, inflation record, pandemic, etc.
Related Reading | Over 57,000 traders liquidated as Bitcoin drops below $22,000
If Ethereum can get through the next week unscathed from the turbulence in stocks, the bullish momentum could continue. $1,700 is still a major resistance point to gauge bullish conviction, if these investors can push ETH past this point, the cryptocurrency could be set to recover to much higher levels.