Three potential bull market catalysts for Ether in June

A combination of technical and fundamental indicators suggest that Ether remains a bullish outlook for the month, despite the recent price consolidation phase.

Three potential bull market catalysts for Ether in June

A combination of technical and fundamental indicators suggest that Ether continues to hold a bullish outlook for the month, despite the recent price consolidation phase.

As of June 1, Ether (ETH) has fallen more than 40% after hitting an all-time high of $4,384 in May.
The world’s second-largest cryptocurrency by market capitalization is going downhill, prompting many analysts to predict an even bigger drop. For example, Clem Chambers, CEO of financial analysis portal ADVFN, believes the recent plunge in ETH/USD is reminiscent of the start of the 2018 cryptocurrency collapse, which occurred before the 24,000%-plus bull run.

Chambers notes that the ETH/USD rate is still at risk of falling, adding that it could take “three and a half years” for the pair to return to its all-time highs.

FXStreet’s financial correspondent Akash Girimath also noted that the ETH/USD rate could fall to $1,200, citing Santiment’s 365-day Market Value and Realized Value (MVRV) model. The index measures the profit/loss position of investors who have purchased ETH in the past 12 months.

Since May 11, the index’s reading has fallen from 120% to 57%, with the number of investors with profitable ETH portfolios decreasing after the May 19 price crash. In turn, this increases the likelihood that other investors – those who remain in profit – will unfold their ETH positions to minimize their downside risk in the event of a prolonged price decline.

However, in a pessimistic scenario, arguments have also emerged to support the prospect of an early recovery in Ether prices.

Major network upgrade coming in July

Investors still have a month to adjust their bias against Ether as the blockchain project prepares for a major network upgrade that is expected to arrive in July.

Dubbed “Ethernet Improvement Proposal 1559,” or EIP-1559, the update is expected to eliminate the main problem with the Ethernet network: higher transaction fees. It will do so by replacing Ether’s “first price action” fee model with a base network fee that fluctuates based on network demand.

EIP-1559 authors Vitalik Buterin and Eric Conner expect the update to create a more efficient fee marketplace and simplify the gas payment process for customers and decentralized application (DApp) software.

At the same time, EIP-1559 also proposes to destroy transaction fees, thus introducing deflation to the ethereum ecosystem. Its impact on ETH prices could be similar to the impact of bitcoin (BTC) markdowns on the BTC/USD exchange rate, with lower supply against higher demand leading to higher prices.

Nonetheless, some argue that EIP-1559 is not as favorable to ETH as it appears, and Kyle Samani, managing partner at Multicoin Capital, believes that if the bid price for ETH/USD rises, the cost of using Ether will still become high.

“Many people think EIP1559 is favorable for Ether. However, @KyleSamani and @kaiynne think there may be some pitfalls to adopting EIP 1559 – like unit bias and higher gas fees (since ETH will be more expensive).

What do you think? Are you worried EIP 1559 will hurt Ether? “

  • Laura Shin (@laurashin) May 26, 2021

OKEx analyst Rick Delaney also appeared cautious in classifying EIP-1559 as a completely positive event for ETH. Nevertheless, he added that the proposal would make Ether attractive to wealthier investors.

“A deflationary ETH – due to EIP-1559’s fee destruction mechanism – could enhance the asset’s appeal to the wealthiest investors on the planet,” Delaney said in April. “Similarly, the introduction of pledges as part of the ongoing Ether 2.0 upgrade appears to have helped the current uptick in demand.”

ETH volumes on exchanges decline

Recent Glassnode data shows that ETH continues to flow out of cryptocurrency exchanges even after a 40 percent price plunge.

The “Ether: Exchange Balances – All Exchanges” indicator shows that ETH reserves held by hot wallets across trading platforms fell from 13.9 million on May 1 to 13.1 million on May 31 – a 5.75 percent drop.

Consistent ETH withdrawals suggest that traders either want to hold their cryptocurrencies in anticipation of higher dollar-based returns in the future, or they want to deposit them into a decentralized financial (DeFi) liquidity pool for a steady rate of return.

A breakthrough in technical structure

At least two independent analysts see Ether prices resuming their bullish trend on the basis of technical setups.

PostyXBT envisions ETH/USD trading within an ascending triangle pattern, the first concrete structure formed after the pair corrected from $4,384 to $3,590.

Generally, triangle patterns surface during bearish corrections and it may lead to a continued downward breakout move. Nevertheless, PostyXBT expects prices to maintain the support of the triangle while targeting its resistance trend line for a bullish breakout move.

“There’s nothing to do or trade right now, just what I’m watching,” the pseudonymous analyst added.

“There’s no reason to get aggressive in these market conditions. The lower lows invalidate that idea.”

Another independent analyst, The Crypto Cactus, offered a similar upside outlook for Ether, except they said the cryptocurrency is in a position of support at the medium-term uptrend line.

The analyst – who is as cautious as PostyXBT – noted that traders could enter the long side on a perfect retest of ETH’s current resistance trendline (a horizontal line near the $2,500-$2,600 area).

“Still avoid leverage altogether as there is enough volatility in spot to make things interesting,” they added.

Posted by:CoinYuppie,Reprinted with attribution to:
Coinyuppie is an open information publishing platform, all information provided is not related to the views and positions of coinyuppie, and does not constitute any investment and financial advice. Users are expected to carefully screen and prevent risks.

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