Ethereum’s favorable risk-return ratio has traders ‘insanely bullish’ on ETH price

While Bitcoin (BTC) edges closer to its Feb. 3 low of $91,300, Ether (ETH) remains considerably above its $2,080 monthly low.

With the Solana ecosystem and (SOL) token taking the brunt of bearish pressure over the past few weeks, one analyst believes that the bullish momentum may swing in Ether’s favor once the dust settles, leading to new all-time highs in a couple of months.

Ethereum’s risk-reward is excellent, says analyst

Doctor Profit, an anonymous crypto analyst, released a detailed Ethereum report on X, citing multiple patterns, the psychological state of the market and potential ETH returns over the next few months.

Ethereum 200-week EMA level analysis. Source: X.com

Based on a historically accurate technical indicator, the analyst said he was “insanely bullish” on the altcoin since ETH was only 18% above the 200-week EMA level. The trader explained that the price consistently bounced off this indicator in 2020 and laid out the bottom range during the 2022 bear market, adding,

“The risk-reward here is outstanding! The potential move towards 8-10k is approx 200%, while the potential worst case is only 20%. Risk reward ratio: Excellent.”

Besides the indicator, the analyst also presented two high-time frame (HTF) setups which included the multiple-year ascending channel and the ascending triangle pattern.

ETH liquidity zones. Source: HyblockCapital

Doctor Profit outlined that most liquidity remains above $4,000. Forming a bullish confluence with the above patterns, the market markers are expected to push Ether toward the liquidity cluster to establish a breakout.

Overall, while the upside remains about 200% from the current price, the drawdown is at most 20% from current prices.

Ethereum cost-basis distribution chart. Source: X.com

Meanwhile, data from  Glassnode  pointed to ETH’s cost-basis distribution, indicating the increased accumulation activity of investors around support at $2,632, where 786,000 ETH has been bought. Yet, it is also important to note that a higher accumulation cluster is present at $3,150 with 1.22 million ETH. Drawing a possible inference, the data platform stated,

“This trend suggests that investors are averaging down, accumulating ETH at lower prices rather than completely exiting positions.”

Related: Bitcoin daily transfer volume drops 76%, but $160B net capital rise is bullish — Analyst

Will Ethereum outperform Bitcoin in the short term?

The recent Bybit ETH hack was expected to rattle ETH’s market structure, but the altcoin has somewhat held its own in the market. Analyst ‘crypto sun-moon,’ a verified onchain analyst on CryptoQuant, Ethereum’s taker buy-sell ratio is rising, while BTC’s is currently declining.

Bitcoin vs Ethereum taker buy-sell ratio. Source: X.com

The taker buy-sell ratio highlights the volume of buy orders with respect to sell orders, and a rising metric indicates strong buying pressure. Historically, such a change in dynamic has allowed Ether to gain more bullish momentum against Bitcoin in the short term.

From a technical perspective, Ether might appear a little better than Bitcoin. However, it is still down 6% on Feb. 24, its largest daily drawdown since Feb. 2. With a bearish engulfing pattern forming at the moment, Ether must maintain a daily close above $2,600. Otherwise, the market sentiment may flip bearish with the altcoin as well.

Ethereum 1-day chart analysis. Source: Cointelegraph/TradingView

Related: Why is the crypto market down today?

This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.