As of June 1, Ether (ETH) is down more than 40% after setting a record high of $4,384 in May.
The major decline in the world’s second-largest cryptocurrency by market capitalization has prompted many analysts to predict additional declines. For example, Clem Chambers, Chief Executive Officer of the financial analysis portal ADFVN.com, Recently saw a decline in ETH / USD Reminiscent of the start of the 2018 crypto crash that preceded the 24,000%-plus bull run.
Ether rose more than 4,500% after bottoming out in March 2021, before wiping out about 60 percent of those gains in just two weeks of trading in May 2021. Chambers noted that there is a risk of a drop in the ETH / USD rate, adding that the pair may take “three-and-a-half years” to regain their all-time high.
Akash Girimath, a financial correspondent at FXStreet, also noted ETH/USD is likely to drop to $1,200, citing Sentiment’s 365-day Market Value to Realized Value (MVRV) model. The index measures the profit/loss position of investors who have bought ETH over the past 12 months.
The reading of the metric dropped from 120% to 57% since May 11, noting that the number of investors holding profit-making ETH portfolios has declined After the May 19 price crash. In turn, this increases the chances of other investors – who remain in profit – to reveal their ETH positions, so they reduce their downside risk in the event of an extended price drop.
But amidst pessimistic scenarios, such narratives also emerged that supported the prospects of improving the initial price of ether.
Major network upgrades in July
Investors still have a month to adjust their bias towards Ethereum as the blockchain project prepares for it Major network upgrade In July.
Dubbed as Ethereum Reform Proposition 1559, or EIP-1559, The update is expected to address the major issue of the Ethereum network: high transaction fees. It will do this by replacing Ethereum’s “first-price-action” fee model with a base network fee that will fluctuate based on the demand for the network.
Vitalik Butirin and Eric Conner, authors of EIP-1559, predict that the protocol will create a more efficient fee market and simplify the gas payment process for customers and decentralized application software.
Meanwhile, EIP-1559 also Offer to burn transaction fees, thereby triggering deflation in the Ethereum ecosystem. Its effect on ETH prices could be similar to that of the bitcoin halving, which affects BTC/USD rates – higher prices are impacted by low supply versus higher demand.
Nevertheless, some believe that EIP-1559 is not as fast for ETH as it appears. Kyle Samani, managing partner at Multicoin Capital, argued that Ethereum would become expensive to use if bids for ETH/USD increase.
Many see EIP 1559 as bullish for Ethereum. However, @Kilesamani And @kaiynne The adoption of EIP 1559 seems to have some disadvantages – such as unit bias and higher gas fees (since ETH will be more expensive).
what do you think Are you worried that EIP 1559 could hurt Ethereum? pic.twitter.com/tbUTsrNWSd
– Laura Shin (@laurashin) May 26, 2021
OKEx analyst Rick Delaney also appeared cautious in calling EIP-1559 an outright bullish event for ETH. Nevertheless, he said the proposal would make Ethereum attractive to wealthy investors.
“A possible deflation ETH – thanks to the fee-burn mechanism of EIP-1559 – could increase property appeal among the wealthiest investors on the planet,” Delaney said in april. “Similarly, the launch of staking as part of an ongoing upgrade to Ethereum 2.0 is contributing to the current growing demand.”
Decreasing amount of ether on exchanges
Recent data from Glassnode shows that ETH continues to exit cryptocurrency exchanges even after the 40% price crash.
“Ethereum: Balance on Exchange – All Exchanges” metric has shown That the ETH reserves held in the hot wallet of the trading platform declined from 13.9 million on 1 May to 13.1 million on 1 May – a decline of 5.75%.
Persistent ETH withdrawals suggested that traders either want to hold on to their crypto holdings in the hope of higher dollar-based returns in the future, or they want to deposit them in the Defy liquidity pool to earn consistent interest rate returns.
technical structure breakout
At least two independent analysts believe the bullish trend of Ether price on technical setups has resumed.
Ideally, the triangle pattern comes to the surface during a bearish correction; This should result in continued breakouts moving to the downside. Nevertheless, PostyXBT expects to maintain triangle support while targeting its resistance trend for a bullish breakout move.
The pseudonym analyst said, “There is nothing in the bank right now and there is no business, just something that I am looking at.”
“There is no reason for aggressive entries in these market conditions. A lower bottom invalidates the idea.”
Another independent analyst, Crypto Cactus, made a similar reverse approach For Ethereum, apart from the medium-term ascending trendline support for the cryptocurrency, as shown in the chart below.
A cautious analyst like PostyXBT said that traders line their current resistance trend[$ 2,500-2,600 क्षेत्र के पास क्षैतिज रेखा]One can enter a long position upon full retest.
“There is still complete leverage being avoided because the spot has swings that are enough to make it interesting,” he said.