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Ethereum

3 reasons why Ethereum price might not hit $5,000 anytime soon

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Ether (ETH) price has been in a downward spiral ever since the Ethereum co-founder Vitalik Buterin presented at the StartmeupHK Festival 2021. In a fireside chat session on May 27, Vitalik stated that several internal team conflicts caused the Proof-of-Stake migration to delay its launch.

As reported by Cointelegraph, ‘Phase One,’ which introduces scalability through sharding, has been postponed to 2022. Furthermore, DeFi’s inherently decentralized nature might not be entirely beneficial because the sharding-style processing would need to run transactions through a relay chain.

Ether price in USD at Coinbase. Source: TradingView

It’s impossible to pinpoint the reason behind Ether’s sharp fall from its all-time high, but the surging gas fees certainly impacted investors’ expectations. Not only did it made evident how limited the network was, but it also incentivized traders to experiment with alternative networks like the Binance Smart Chain (BSC) and Polygon’s layer-2 solution.

Ethereum 7-day average gas fees in USD. Source: CoinMetrics

The chart above shows that the $45 average gas fee took place a whole month after the Berlin upgrade went live on April 15. The consensus in the Ethereum community was that Berlin was less impactful in the short term but  paved the way for the awaited London hard fork’s EIP-1559 protocol on Aug. 4.

This takes us to one of the 3 factors that could negatively impact Ether’s price in the short term. 

London Fork delay

The Ethereum London hard fork is part of the roadmap to the final Eth2 release in 2022. The long-awaited update is scheduled for Aug. 4 but has been delayed already as the previous schedule mentioned late July.

Miners will be the most affected by the EIP-1159 proposal, which aims to burn part of the fees generated on the Ethereum blockchain, hence reducing their revenue. Furthermore, EIP-3554 introduces an incremental difficulty adjustment that incentivizes the migration to the new Proof-of-Stake blockchain.

Ethereum developers’ delivery track record also does not inspire confidence. If a partial upgrade were to take place and the more controversial changes were delayed, Ether price could slide as a portion of the current rally is build on the hype surrounding the hardfork.

Miner exodus

This time around, the main concern isn’t technical but social. Once it becomes clear for Ethereum miners that their revenue source will be gradually cut off, it is a matter of time until some competing network benefits.

Even though most smart contract blockchains have been designed for the proof of stake consensus model, some lesser-known projects could change their algorithm to support Ethash mining.

Analysts should not discard the possibility that Binance Chain or Solana could implement an additional security layer using the extra hashing power caused by an Ethereum miner exodus. Although this scenario is distant, these movements would undoubtedly put pressure on Ether price.

Multi-chain dApps

The longer it takes for Eth2 to be fully implemented and for dApps to upgrade their code to support parallel processing (shardin) capabilities, the higher the incentives for adding multi-chain support.

Curve and AAVE, the two leading DeFi protocols by total value locked, have both added support for blockchains other than Ethereum. Meanwhile, Polygon holds $550 million worth of Curve contracts and AAVE another $1.8 billion, according to data from DeFi Llama.

In the end, the most likely “Ethereum killer” would be the network itself because postponing the scaling solution would push users and dApps to alternative solutions. At the same time, the migration to PoS opens room to strengthen competing blockchains.

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.



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Ethereum

Ethereum price can hit $14K if the March 2020 chart fractal holds

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Ethereum’s native asset Ether (ETH) faces prospects of closing above $14,000 sometime in 2021 based on its current trend’s striking similarity with the one from last year.

Ether price fractal

First spotted by user TradingShot, the Ethereum fractal involves three technical indicators: a 50-day simple moving average (50-day SMA), a Fibonacci channel, and a relative strength index (RSI).

Ether closed above its 50-day SMA in July 2021, the first time since the May 2021 bearish correction. As TradingShot noted, breaking above the said moving average wave historically predicts bull runs. For instance, a run-up above the 50-day SMA in April 2020 took the ETH/USD exchange rate from around $170 to over $500 in September 2020 — in only 137 days.

Ethereum bullish fractal by TradingShot. Source: TradingView.com

The period of extreme upside gains also witnessed Ether’s daily RSI shooting higher from 60 (neutral) to over 90 (overbought). Meanwhile, as the cryptocurrency rallied, its price moves found interim support and resistance levels inside a Fibonacci channel.

New all-time high anticipated

TradingShot recounted multiple instances based on the April-September 2020 fractal, each showing Ether closing above its 50-day SMA and rallying higher inside the Fibonacci channel while its RSI wobbled between neutral and overbought levels. The same is happening in July 2021.

“Once [the 50-day SMA] breaks, it takes ETH either 132, 137 or 70 days to reach its next top on the Fibonacci scale,” the analysts stressed. “As you see, tops are progressive one level higher each time—first 1.0, then 1.5, and the most recent in May on 2.0 Fib).”

Approximately, the 1.0 level on the next leg upward could have ETH/USD test $4,000. Meanwhile, an extended uptrend could have the pair reach 1.5 and 2.0 Fibonacci levels, which coincides with $6,000 and $9,000, respectively.

Related: Price analysis 7/28: BTC, ETH, BNB, ADA, XRP, DOGE, DOT, UNI, BCH, LTC

But TradingShot noted that on each rally after closing above the 50-day SMA, Ether’s upside target progresses one level higher on the Fibonacci scale. Therefore, the cryptocurrency’s next price target may be at the 2.5 Fib level, which is above $14,000. The analyst added:

“Technically, we may assume that the next Top will be at 2.5 or higher but certainly that appears to be a very high level from the current prices especially if it technically “needs” to be achieved in 137 days (or even worse 70 days) as the model suggests.”

The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.