Ethereum’s Strength Degrades Following Rejection at $250; What Comes Next
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Ethereum is Plunging, But It’s Too Early to Say Bulls Have Given Up
Ethereum is down more than 6% and it broke the $235 support against the US Dollar. ETH tested the $228 support zone and it is currently correcting higher.
Yesterday, Ethereum faced a strong rejection near the main $250 resistance against the US Dollar. ETH price formed a high near the $250 level and recently started a sharp decline below $245.
The recent drop was initiated after there was a break below a major triangle with support near $244 on the hourly chart of ETH/USD. It opened the doors for more losses below the $240 level and the 100 hourly simple moving average.
Ether price even broke the key $235 support and traded close to the $225 support. A low is formed near $228 and the price is currently correcting higher. It is approaching the 23.6% Fib retracement level of the recent decline from the $250 swing high to $228 low.
Ethereum price trades below $235. Source: TradingView.com
On the upside, there is a crucial resistance forming near the $235 level (a multi-touch zone). If Ethereum closes above the $235 resistance, it could test the 50% Fib retracement level of the recent decline from the $250 swing high to $228 low at $238.
Any further gains may perhaps open the doors for a fresh increase towards the significant resistance at $250 in the coming sessions.
On the downside, the $228 and $ 2 25 levels are important supports. If Ethereum fails to stay above the $225 support, it will negate the chances of a near-term recovery.
In the mentioned bearish case, the price is likely to continue lower below the $220 level. The next major support is near the $215 level, where the bulls may take a stand.
Hourly MACD – The MACD for ETH/USD is slowly moving in the bullish zone.
Hourly RSI – The RSI for ETH/USD is now just below the 40 level, with a bearish angle.
Major Support Level – $225
Major Resistance Level – $235
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Surge in Stablecoin and DeFi Growth Bring Ethereum Fees to 2-Year High
The median transaction fees on the Ethereum network are the highest they have been in two years and have risen above Bitcoin fee for the second time in the last three months.
Recently, Coinbase researcher Max Bronstein tweeted the chart below and suggested that the most recent surge seems to be due in largely in part to increased interaction with stablecoins on the Ethereum network.
Tx. fee earnings of Bitcoin and Ethereum
As previously reported by Cointelegraph, Tether’s USDT stablecoin is the biggest user of gas in the network, with around $2.56 million spent in Ether gas fees in the last month according to ETH Gas Station. While stablecoin activity is certainly one the main reasons for the sharp increase in the median fees for Ether transactions, it is certainly not the only one.
Data from ETH Gas Station shows that USDT is the biggest spender of gas on the network, followed by popular DeFi dapps like Uniswap and Kyber Network. This shows that DeFi is also an extremely important factor to consider when analyzing the surge in gas fees.
As reported by Cointelegraph, gas usage rose to an all-time high in May but the sheer number of transactions is not at an all-time high. This shows that the current activity comes not just from simple transactions like USDT transfers but also from complex smart contracts.
While the number of daily transactions are far from the January 2018 all-time high of 1,349,890 transactions, other metrics point to growing interest or at least movement of Ether (ETH) itself.
ETH Active Supply 3y-5y. Source: glassnode
As shown on the chart above, the active supply of Ether is at an all-time high relative to the Ether units that have been moved in the last 3 to 5 year period.
Other signs of growing interest in the altcoin can be seen in the derivatives market where Ether open interest on options has grown at a phenomenal rate. Deribit open interest has surged 315% to $158 million over the last two months, temporarily outpacing the interest shown in Bitcoin (BTC) options.
The growing interest and activity in the Ethereum network might bring about a bitter-sweet taste for blockchain fanatics. While this growth reveals a rise in interactions with Ether and dapps running on the Ethereum network, it also brings to light the network’s growing technical debt.
Ethereum 2.0 is set to be released this summer and it promises to solve the current scalability issues with its sharding technology. However, it will take more than a year for the new iteration of the blockchain to be complete and for the current blockchain to migrate to the new staking and sharding system.
As Joseph Todaro, managing partner at Blocktown Capital noted in a recent tweet, these scalability issues can drive potential users and enterprises away from the Ethereum network and into other smart contract platforms with better scalability solutions and less congestion.
If investment continues to pour into Ethereum dapps, pressure for an effective and easily-implementable solution will continue to mount. Solutions like increasing the total gas allowed per block may help avoid congestion but it only kicks the problem down the line and exacerbates some of the network’s other challenges like the growing blockchain size.
Ethereum daily gas used. Source: Etherscan
Ironically, there is a remote possibility that Ethereum’s growing popularity could be its Achilles’ heel and a large number of Ethereum supporters are looking at Ethereum 2.0 as the solution that will solve all the network’s problems.
There is also the possibility that third-party layer 2 solutions like Matic, Skale Labs, or other scaling solutions like Plasma could address these issues but at this stage only time and the success or failure of Ethereum 2.0 will tell.
Ethereum Miners Are Spamming the Network
Ethereum miners are flooding the network with penny transactions and tens of thousands of them a day.
Ethermine is the worst, performing 13,200 transactions in the past 24 hours for usually 0.05 eth or even less.
Notice the page number, 132. That’s how far we had to go (100 transactions per page) to reach transactions older than 24 hours with this pool sending out so many transactions every minute.
That’s while others pay as much as $40 in fees in the case of Vitalik Buterin, the ethereum co-founder.
Fees that go to the likes of Ethermine and now amount to as much as 25% of the sum they get paid by ethereum holders in block and uncle rewards.
Nor is Ethermine the only one doing it. SparkPool has made six million transactions in total. Nanopool has made more than 15 million transactions.
They seem to be doing it in bursts, having a quiet period and then they turn on some sort of machine, flooding the network with transactions.
So you can see here for example Nanopool made no transactions in the past 19 minutes at the time of the screenshot, but before it was on and on.
And it’s for small amounts. We’ve even seen 0.001 eth. That’s while people are paying $5 or even $10 for a smart contract transaction with the recent increase in capacity seemingly achieving nothing where fees are concerned.
The only legitimate explanation for this is that they’re sending earnings to small miners straight out and as they go, with each pool seemingly using some sort of very small threshold and automatic payments in bursts or continuously depending on the pool.
There’s no reason whatever however to not set such threshold at a reasonable level instead of a tenner.
That’s where automatic payments are concerned. If miners want to manually withdraw, then that’s a legitimate action. But constantly sending out tenners to the same address every day or as soon as the threshold is reached, instead of bundling them to a $10,000 payment or manual withdrawal, is straight out spamming.
Just to understand the scale, these pools in combination have made 50 million transactions. That’s two months of the network running at full capacity, amounting to gigabytes of data and hours added to synchronize an ethereum node.
That’s amid significant congestion when you’d expect network players to start using the blockchain very, very economically, not the very opposite.
Ethereum News Today – Headlines for June 24
- Ethereum’s transaction fees have risen recently
- ETH’s overall outlook still looks strong despite high rates
- Ether’s demand has risen in recent times
Ethereum News Today – there is data to back reports that Ethereum’s demand has risen in recent times. The recent boom experienced by the digital asset can be attributed to the explosive expansion of the DeFi sector recently. Although this rise in demand is yet to trigger a bullish price action for ETH, it appears that the coins’ growing utility is improving its macro outlook.
The explosive rise in the DeFi sector may have an unintended negative impact on Ethereum. It has caused the crypto’s transaction fees to rise which has potentially caused its competitors to get more attention. However, this hasn’t been enough to stop the digital asset from seeing some intense bullish movement in the near-term outlook. Because analysts have noted that ETH/USD is building up some strength which could propel it to higher levels.
The Ethereum space has had a massive influx of users in the last few days due to the growth of “yield farming.” This pattern comprises of individuals leveraging Ether-based tokens in a bid to get DeFi incentives. These incentives can be massive in some cases. Some users have even harvested yields as high as 200% yearly.
The prospect of massive yields with minimal risk has brought in a huge number of users into the Ether ecosystem. It has also provided many DeFi-based tokens with massive upward action. Although it hasn’t had any notable impact on the price of ETH. An interesting byproduct of the shift in Ethereum’s landscape is the rise in transaction rates. Because Ether users transact in ETH using most DeFi protocols, transaction fees have rocketed recently.
Even though Ether may be overshadowed by the DeFi-sector tokens in the near-term, this action may not persist for an extended period. Ethereum is currently up by 2% and is changing hands at $243. This is the position where it has been seating on for the last 24-hours. It also marks a notable rebound for the coin from its recent low of $220. It is important to indicate that ETH is still stuck in its long-held trading range ($230 and $250).
According to one analyst, Ethereum is staying strong at the moment. The coin will likely push higher before it will face any form of resistance. ETH is not looking weak. Rather it is holding the top area of its previous point against BTC. Ultimately, the fact that the coin is holding the $238 area on the lower time frame, shows a bullish action even if there is a pullback.
Author: Published 22 hours ago