Ethereum price rose 1.03% during a low-volatility Sunday trading session and is currently trading at $2,438. The market rally is a recovery from weekday selling pressure spurred by war-like conditions between Israel and Iran. With ETH L1 fees hitting an all-time low, will the correction trend become more widespread, facilitating a reversal from the previous deflationary trend?
Ethereum price rises to $3,000 on the verge of post-denkun inflation
After the Dencun upgrade, Ethereum’s Layer 1 (L1) fees will trend downward and reach an all-time low in mid-2024. Intotheblock analysis shows that implementing EIP-4844 reduced the cost of Layer 2 (L2) transactions by 10x.
The rapid decline in L1 fees reflects the continued growth of L2 solutions such as Optimism and Arbitrum, which offer faster and more cost-effective transactions. Although this move strengthened Ethereum’s scalability, it also had unintended consequences.
As the fees burned decreased, the supply of ETH entered an inflationary phase, reversing the previous deflationary trend. If crypto buyers struggle to demand pressure to match the additional supply, Ethereum price predictions are likely to witness temporary declines and volatility.
After Denkun, Ethereum mainnet fees reached an all-time low due to a surge in L2 transactions. EIP-4844 reduced L2 costs by 10x and boosted record activity.
However, if the fees consumed decrease, $ETH The recent deflationary trend has been reversed and inflation has turned. pic.twitter.com/W3p0xuKRXe
— Into the Block (@intotheblock) October 6, 2024
Additionally, prominent cryptocurrency analyst Ali Martinez highlights a notable decline in large Ethereum holders with ETH balances of 10,000 ETH or more. Since July, Whale holdings have plummeted 7%, indicating that smart money traders are exiting primarily in anticipation of a price correction.
number of #Ethereum There are over 10,000 whales $ETH That’s down more than 7% since July! pic.twitter.com/rRnIDVj2VO
— Ali (@ali_charts) October 5, 2024
ETH price signals major breakout from triangle
Over the past two months, ETH price has shown a sideways trend above the $2,200 support. This consolidation of the daily transient chart shows that price is actively resonating between two converging trends, indicating the formation of a symmetrical triangle pattern. In theory, this chart pattern leads to a temporary sideways movement for the general trend to gain momentum.
As the crypto market eased from geopolitical tensions in the Middle East, Ethereum’s price rebounded from $2,308 to $2,440, accounting for a 5.7% increase.
If the sellers break out of the lower trendline of the pattern at $2,200, the bearish momentum will accelerate and ETH will fall below the $2,000 level, delaying the $3,000 rally.
Coin prices below the 50-day and 200-day exponential moving averages confirm the bearish narrative.
ETH/USD -1 day chart
However, if buyers manage to replenish the bullish momentum, Ethereum price could rise 9% before challenging the triangular resistance. A potential breakout will likely attract more buyers towards the $3,000 target.
Frequently asked questions (FAQ)
Ethereum’s $3,000 rally is at risk due to transition from deflationary to inflationary phase after Dencun upgrade
The current Ethereum price consolidation shows a symmetrical triangular pattern, indicating temporary sideways movements as the general trend gains momentum.
The Dencun upgrade lowered Ethereum’s Layer 1 (L1) fees and significantly reduced fee burn, causing Ethereum’s supply to enter an inflationary phase.
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Sahil Mahadik
Sahil is a dedicated full-time trader with over 3 years of experience in financial markets. He has a strong grasp of technical analysis and keeps a close eye on daily price movements of top assets and indices. Drawn by his fascination with financial products, Sahil enthusiastically embraced the emerging field of cryptocurrencies and continues to explore opportunities driven by his passion for trading.
Disclaimer: The content presented may contain the personal opinion of the author and is subject to market conditions. Do your market research before investing in cryptocurrencies. The author or publication assumes no responsibility for your personal financial loss.
