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Ethereum Price Analysis: $3K Rally Threatened by Inflationary Phase Post-Dencun Upgrade
Ethereum Fees Hit All-Time Low After Dencun Upgrade
Following the recent Dencun upgrade, Ethereum’s Layer 1 (L1) fees have experienced a significant decline, reaching an all-time low in mid-2024. This drop in fees is attributed to the implementation of EIP-4844, which has led to a 10x reduction in the cost of Layer 2 (L2) transactions.
The decrease in L1 fees reflects the growing adoption of L2 solutions like Optimism and Arbitrum, offering faster and more cost-effective transactions. However, this shift has unintended consequences.
With fewer fees being burned, the supply of ETH has transitioned into an inflationary phase, reversing its previous deflationary trend. If demand fails to match the increased supply, the Ethereum price may face temporary pullbacks and increased volatility.
ETH Price Shows Signs of Breakout from Triangle Pattern
Over the past few months, the Ethereum price has been consolidating above the $2,200 support level, forming a symmetrical triangle pattern. This pattern suggests a period of sideways movement as existing trends gather momentum.
As geopolitical tensions ease in the Middle East, Ethereum’s price has rebounded from $2,308 to $2,440, marking a 5.7% increase. If sellers breach the lower trendline at $2,200, a bearish momentum could push ETH below $2,000, delaying the anticipated $3K rally.
Although the current price is below the 50- and 200-day Exponential Moving Average, signaling a bearish trend, a potential breakout above the triangle resistance could propel Ethereum’s price by 9%, setting the stage for a challenge towards the $3,000 target.
Frequently Asked Questions (FAQs)
Ethereum’s $3K rally is at risk due to the shift from a deflationary to an inflationary phase following the Dencun upgrade.
The current consolidation in Ethereum’s price shows a symmetrical triangle pattern, indicating a temporary lateral move as prevailing trends gain momentum.
The Dencun upgrade resulted in a decline in Ethereum’s Layer 1 (L1) fees and a significant reduction in fee burns, causing Ethereum’s supply to enter an inflationary phase.
Disclaimer: The opinions expressed in this article are solely those of the author and do not constitute financial advice. Conduct your research before investing in cryptocurrencies. The author and publication are not liable for any financial losses incurred based on the information presented.