Ethereum Price $3K Rally at Risk as ETH Turns Inflationary Post-Dencun

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As a seasoned analyst with over two decades of market experience under my belt, I must say that the current state of Ethereum is intriguing and somewhat challenging. The recent surge in price, following the low-volatility Sunday trading session, has brought ETH to $2,438 – a promising sign for those who have been closely watching its trajectory. However, the post-Dencun inflation, coupled with the decline in large Ethereum holders, raises some concerns about the sustainability of this rally.

As a crypto investor, I observed that the price of Ethereum (ETH) climbed by 1.03% during yesterday’s relatively quiet trading session, now trading at approximately $2,438. This upswing appears to be a rebound from the weekday selling pressure driven by geopolitical tensions between Israel and Iran. However, with ETH L1 fees reaching an all-time low, I find myself wondering if this could signal a reversal from the previous deflationary trend and potentially extend the correction phase.

$3K Ethereum Price Rally at Stake as Post-Dencun Inflation

After the Dencun update, Ethereum’s main network (Layer 1) transaction fees have been decreasing and are expected to reach an all-time low in mid-2024. According to Intotheblock analytics, the deployment of EIP-4844 has reduced the cost of Layer 2 transactions by ten times.

The significant drop in L1 (First Layer) fees is attributable to the expanding use of alternative L2 (Second Layer) platforms such as Optimism and Arbitrum, which deliver swifter and less expensive transactions. This shift towards L2 solutions has undeniably enhanced Ethereum’s ability to handle more transactions, but it also brings unforeseen implications.

With less ETH being destroyed through fees, the circulation supply of Ethereum has shifted into an inflationary state, marking a reversal from its previous deflationary trajectory. If the increased supply fails to match demand, the price prediction for Ethereum may experience temporary dips and heightened volatility due to a lack of sustained buyer interest.

After the Dencun event, the transaction fees on the Ethereum Mainnet reached a historic minimum due to the rise in Layer 2 (L2) transactions. The introduction of EIP-4844 reduced L2 costs by ten times, sparking a surge in unprecedented activity.
But with fewer fees burned, $ETH has turned inflationary, reversing its recent deflationary trend.
— IntoTheBlock (@intotheblock) October 6, 2024

Moreover, prominent crypto analyst Ali Martinez draws attention to a significant drop in large Ethereum holders possessing more than 10,000 ETH. Over the past few months, these ‘whale’ holdings have fallen by approximately 7%, suggesting that experienced traders are largely offloading their Ethereum as they predict a potential price adjustment.

The number of #Ethereum whales holding over 10,000 $ETH has decreased by over 7% since July!
— Ali (@ali_charts) October 5, 2024

ETH Price Hints Major Breakout From Triangle

For the past two months, the Ethereum (ETH) price has moved horizontally above the $2,200 support level. This daily price action suggests that ETH is oscillating between two trend lines, forming a symmetrical triangle pattern on the chart. In theory, this triangle pattern implies a temporary pause as the prevailing trends build up momentum.

Due to reduced geopolitical tensions in the Middle East, the value of Ethereum bounced back, increasing from $2,308 to $2,440 – representing a 5.7% rise.

If the sellers break through the lower support line at $2,200, it could intensify the downward trend for ETH, potentially causing it to plummet beneath the $2,000 mark. This downturn might postpone the anticipated surge towards $3K.

The coin price below the 50-and-200-day Exponential moving average supports the bearish narrative.

Ethereum Price $3K Rally at Risk as ETH Turns Inflationary Post-Dencun

If purchasers successfully regain their bullish strength, the Ethereum price might increase by as much as 9%, potentially reaching a barrier set by the triangle’s resistance. Should it break through, this could provide additional support for the goal of $3,000.

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2024-10-06 20:44