Ethereum approaches a critical support level as the battle between bulls and bears continues.
Ethereum nears critical support level amid ongoing bull vs bear battle.
Due to bearish sentiment from traders and a lack of new catalysts, the cryptocurrency market has continued its downward trend since last week, with the second largest cryptocurrency by market capitalization, Ethereum, falling below $1,655.
On Sunday evening, the trading aggregator protocol 1Inch bought 6,088 ETH, but Ethereum still fell by 1.1%, bringing some buying pressure to the previously tepid market. Cryptocurrency investor and podcast host Keyboard Monkey – KBM recently implied in his tweets that Bitcoin could fall to around $21,000, while ETH could drop to $1,400.
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Strong resistance around $1660
Cryptocurrency chart analyst Aayush Jindal tweeted that similar to Bitcoin, the price of ETH seems to have difficulty rising above the levels of $1,660 and $1,670. Currently, it shows bearish signs below $1,670, but it holds the 50% Fibonacci retracement level from the swing low of $1,580 to the key high of $1,698.
In addition, there is a key bearish trend line forming on the hourly chart of ETH/USD, with resistance near $1,660. If the price holds above the support level of $1,640, the bulls may attempt a new upward move.
Analysts believe that from a positive perspective, the price may face resistance near the $1,660 level and the trendline area. The next resistance is near $1,670. A close above $1,670 could push the price towards the important area of $1,700. In this range, the main resistance is near $1,720, and if that resistance is broken, the price could rise to $1,780. Any further gains could push the price towards $1,850.
On the contrary, if Ethereum fails to break the resistance level of $1,670, it may continue to fall. The initial support is near $1,640. The first major support is near the $1,620 area, which is the 61.8% Fibonacci retracement level from the swing low of $1,580 to the key high of $1,698.
The next key support is close to $1,580. If there is a downside break below $1,580, the price could accelerate its decline towards the $1,500 level. Any further losses could lead to a short-term drop to the $1,440 level.
The Ethereum ecosystem continues to evolve
According to data tracked by blockchain analysis company CryptoQuant, the total daily fees paid for transactions executed on Ethereum dropped to 1,719 ETH (2.8 million USD) on the just past Sunday, the lowest daily total since December 26. This amount represents an 89% decrease from the year-to-date high of 16,720 ETH observed on May 5. Ethereum uses a proof-of-stake consensus mechanism, which involves validators rather than miners to create and validate transaction blocks. Therefore, validators (entities that help secure the network by staking at least 32 ETH) collect transaction fees but not in full. They receive priority fees or tips added by users in addition to the base fee to incentivize validators to prioritize their transactions. Meanwhile, the base fee is burned, reducing the circulating supply of ETH.
The decrease in total payment fees represents a low network utilization, as fees depend on the level of network activity, mainly the number of pending transactions.
In other words, the low point in fees over the past eight months may be due to the increasing popularity of Ethereum Layer 2 scaling solutions, which is a long-term positive development for Ethereum.
“Since the launch of friends.tech on August 10, Ethereum L1 fees have been 25% lower than the average level of the year, which is in stark contrast to the era when early NFT application CryptoKitties or the latest Yuga Labs NFT releases would temporarily congest the Ethereum network,” said David Lawant, Head of Research at FalconX, in a report last week.
Lawant also believes, “From a broader perspective, it is encouraging to see such a successful application gaining meaningful attention without congesting the underlying blockchain network. Of course, this is based on the development of Ethereum L2 scalability solutions: Friends.tech is built on Base, which is Coinbase’s L2 chain using the Optimism stack.”
Friends.tech launched on August 1 and gained over 100,000 users within two weeks, accumulating more than $25 million in revenue. Layer 2 scaling solutions such as Optimism, Arbitrum, and Base help scale Ethereum, alleviate congestion, and control transaction costs on the main network.
According to data tracked by analytics firm IntoTheBlock, on August 15, the daily transaction volume on the Optimism mainnet reached a historical high of nearly 900,000 transactions. In addition, the number of transactions processed between the Ethereum mainnet and major Layer 2 solutions using Optimistic Rollup technology hit the second-highest value in history earlier this month.
“As competition intensifies between L2 solutions, Ethereum is clearly benefiting,” IntoTheBlock stated in its weekly newsletter.
In terms of the total value locked, Ethereum will continue to dominate the market, and with the approaching Holesky testnet and EIP-4844 upgrade in the coming weeks, it may stimulate a rebound in ETH tokens.
Author: LianGuaiBitpushNews Mary Liu
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