Ethereum is the second-largest cryptocurrency ranked by market cap. A recent Merge “upgrade” to a proof-of-stake consensus mechanism and other changes raised discussion of a possible “flippening” — a situation where Ethereum unseats Bitcoin as the top cryptocurrency in the market. 

Instead, Ethereum’s dominance could be in “grave” danger, if an ominous-sounding Japanese candlestick pattern is a prelude of what’s to come across the crypto market. 

Lagging Performance Against Crypto Leaves ETH.D Exposed To Danger

While Ethereum might be up by 90% from its bear market low compared to Bitcoin’s 50%, when comparing year-to-date returns BTC’s 50% gain against USD beats ETH’s mere 40%. From this metric alone, it’s obvious that Ethereum has been lagging behind Bitcoin. 

As of the last couple of weeks in crypto, the reason for the laggard behavior was revealed: the SEC began targeting cryptocurrency businesses, specifically for offering staking to customers. 

Rather than the Merge causing Ethereum to outperform the market, it’s caused an opposite effect. Fears over ETH potentially being labeled a security have also raised concerns. 

Whether the fears end up being valid or not remains to be seen, continued lagging performance while the rest of the cryptocurrency market takes off into a bull run could take a major dent out of Ethereum dominance. 

A Gravestone Doji Could Damage Ethereum Dominance

ETH.D, representing Ether’s dominance compared to the rest of the market, closed the January monthly with an ominous-sounding Japanese candlestick pattern called a gravestone doji. 

The Japanese candlestick pattern is a potential bearish reversal signal, formed when there is an open, low, and close in the same general level, with a long upper wick. The formation shows bulls pushing prices higher, only to met with a strong rejection by bears back down to the open and low of the candle. 

This type of behavior, and the candlestick signal, tend to appear before an extended down move. The opposite signal is called the shooting star and involves inverse formation dynamics. A small, bottom wick is acceptable, but the pattern often appears with a completely flat bottom. 

Like any Japanese candlestick pattern, the signal is stronger when technicals and other chart patterns support what the gravestone doji tells the market. For example, a potential failure to reclaim a long-term trend line and strengthening bearish momentum add to credence to the signal. The gravestone doji is also appearing at long-term resistance that thus far Ethereum has been unable to break through. 

As a bullish alternative, even with 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 talk of a “flippening” in crypto.