The battle between the long and short forces of Ethereum is in full swing, will the upgrade of Constantinople break this deadlock?
Will the Constantinople upgrade break the deadlock in the ongoing battle between the long and short forces of Ethereum?
Author: Mary Liu
Due to bearish sentiment from traders and lack of new catalysts, the cryptocurrency market has continued its downward trend since last week, with the second largest cryptocurrency by market capitalization, Ethereum, dropping below $1,655.
On Sunday evening, decentralized exchange aggregator 1Inch bought 6,088 ETH, but Ethereum still dropped 1.1%, bringing some buying pressure to the previously lackluster market. Cryptocurrency investor and podcast host Keyboard Monkey-KBM recently hinted in a tweet that Bitcoin could fall to around $21,000, while ETH could drop to $1,400.
Strong resistance near $1,660
Cryptocurrency chart analyst Aayush Jindal tweeted that like Bitcoin, the ETH price seems to struggle to rise above the levels of $1,660 and $1,670. Currently, it shows bearish signs below $1,670, but holds the 50% Fibonacci retracement level from the swing low of $1,580 to the key upside of $1,698.
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In addition, there is a key bearish trend line forming on the ETH/USD hourly chart, with resistance near $1,660. If the price holds above the support level of $1,640, the bulls may attempt a new round of upward movement.
Analysts believe that from a positive perspective, the price may face resistance near the $1,660 level and the trend line area. The next resistance is near $1,670. A closing price above $1,670 could push the price towards the important area of $1,700. Within this range, the main resistance is near $1,720. If that resistance is broken, the price could rise to $1,780. Any further upward movement 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 decline. The initial downside 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 upside of $1,698.
The next key support is close to $1,580. If it breaks 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.
Ethereum ecosystem continues to evolve
According to data tracked by blockchain analytics firm CryptoQuant, the total daily fees paid for transactions executed on Ethereum dropped to 1,719 ETH ($2.8 million) on the just-passed 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 creating and validating transaction blocks. As a result, validators (entities that 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 to the base fee to incentivize validators to prioritize their transactions. Meanwhile, the base fee is burned, reducing the circulation of ETH.
The decrease in total payment fees represents a low network usage rate, as fees depend on the level of network activity, primarily the number of pending transactions.
In other words, the low point in fees over the past eight months may be attributed to the increasing popularity of Ethereum Layer 2 scaling solutions, which is a long-term positive development for Ethereum.
According to FalconX research director David Lawant in a report last week, since the launch of friends.tech on August 10, Ethereum L1 fees have been 25% lower than the average level for the year, which contrasts sharply with the era when early NFT application CryptoKitties or the recent Yuga Labs NFT releases would temporarily congest the Ethereum network.
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. Second-layer 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 count on the Optimism mainnet reached a historical high of nearly 900,000 transactions. Additionally, the number of transactions processed between the Ethereum mainnet and major Layer 2 solutions using Optimistic Rollup technology set the second-highest historical value at the beginning of this month.
IntoTheBlock stated in its weekly newsletter, “As competition intensifies among L2 solutions, Ethereum is clearly poised to benefit.”
In terms of total locked value, Ethereum will continue to dominate the market, and as the Holesky testnet and EIP-4844 upgrade approach in the coming weeks, it may stimulate a rebound in ETH tokens.