The Ethereum price may be retracing after shrinking from recent highs but its fundamentals are stronger than ever. From first glance, there is confidence judging from on-chain metrics.
The block space demand in Ethereum
Ethereum is on-demand and network fees continue to rise. This competition to pay higher Gas for block space by farmers and opportunists continue to pump ETH much to the delight of holders and miners.
Earlier, Cryptopolitan reported that Gas from Uniswap—the most popular Ethereum-based decentralized exchange, was almost half those of Bitcoin. Meanwhile, the total from Ethereum was almost thrice Bitcoin’s.
Closely behind Uniswap were those generated from Bancor and Aave. At this rate, there is no doubt that the transaction count in Ethereum is higher –which in turn pushes the cost of Gas higher, lining up miners’ pockets.
From these events, it didn’t come as a surprise when data revealed that ETH’s implied volatility is at its highest in six months relative to Bitcoin’s.
As per Skew—a cryptocurrency analytics platform, the three-month spread between ETH and BTC volatility is up 29 percent–and at the highest level since Feb 23.
As adjudged, it appears as if traders—despite the contract in prices in the last trading week, expect ETH prices to edge higher (or lower) over Bitcoin’s. Optimism is from the booming DeFi scene where there is over $7.1 billion worth of ETH under management by different open finance dApps.
Despite negative calls, most ETH holders are in green. The 365-day market-value-to-realized-value ratio stands at 1.88, the highest in two years. At this rate, it means a whopping 88 percent of ETH holders are neck-deep in profits, an incentive that may force profit-taking.
Already, the cumulative amount of ETH held by mining pools is down by over 80,000 ETH which is worrying and show their price pessimism in the immediate term.
OpenEthereum Client Flaw
Amid doubts, a bug in one of Ethereum’s clients, OpenEthereum, may force up-to 12 percent of all Ethereum full nodes to downgrade and re-sync from scratch—a painful task which often takes months.
An admitted flaw of OpenEthereum developers—a client whose source code is maintained by the community, the bug often freezes the screens of full nodes inconveniently forcing a restart.
Ethereum price analysis
The Ethereum price may be recovering but its short-term forecasts are dim. Under-performing the greenback in the last trading week, losing five percent, bears continue to press lower.
In the daily chart, ETH prices are retesting previous resistance—now support trend line, as bears press lower in a correction. Confirming losses of Aug 25, the Ethereum price is now treading below flexible resistance level—the middle BB, as a horizontal consolidation gathers pace.
The immediate support is the base of the bull flag at around $350 to $360. On the flip side, resistance is at $450 although a complete reversal of Aug 25 losses and a close above the middle BB will spark demand, pushing prices higher.
A break below $360 may trigger a dump towards February 2020 highs of $280, the main support level.
Chart courtesy of Trading View
Disclaimer: Views and opinions expressed are those of the author. This is not investment advice. Do your research.