Bitcoin and Ethereum are poised for extreme volatility, with multiple on-chain measures pointing to a market low. Still, in order to resume their upward trajectory, these cryptocurrencies must clear a big hurdle. Ethereum appears to have entered an accumulation zone, attracting investors who had been sitting on the sidelines back into the market.
Ethereum in the Zone of Opportunity
Despite the fact that Ethereum is resting on weak ground, transaction history shows that it only needs to overcome one obstacle to resume its upward path.
Approximately 21 million ETH worth $3,300 to $3,900 have been sent to over 5.44 million addresses. A strong candlestick close above this resistance level could propel ETH to new highs.
In any case, investors should keep a close eye on the $2,800 support level, as any signs of weakness in the area could drive traders to sell. In such a situation, Ethereum may fall to $2,500 or perhaps $2,000 in value.
Getting Rid of the Bears
The development of a fee-burning mechanism through EIP-1559 was another factor that shifted the tides in Ethereum’s favour last year. Since then, approximately 1.55 million ETH worth around $4.8 billion has been torched in an attempt to deflationize the digital currency. This week, a new high of almost 20,000 ETH was burned in a single day, putting the target within reach.
Furthermore, due to its restricted supply, its inflation rate has fallen below that of Bitcoin, which was once thought to be an inflation hedge.
A ‘OpenSea’ of possibilities
The rekindled, or maintained, NFT craze has also pushed Ethereum’s viability to new heights, according to Outumuro’s analysis. The emergence of new platforms such as LooksRare, that has already taken the market, is only adding to the fervor.
While Ethereum-based NFT marketplace OpenSea has consistently carried out trades worth millions each week, the rise of new platforms such as LooksRare, which has already taken the industry by storm, is only adding to the fervour.
In fact, JP Morgan recently stated in a report,
“With NFTs being the crypto ecosystem’s fastest-growing universe, Ethereum’s part in the NFT space may prove more essential than its share of the DeFi area in terms of influencing its future worth.”
The competition is becoming more intense.
Despite the bullishness, Ethereum’s success has been hampered by persistent congestion difficulties. The rise of Layer 2 scaling solutions, according to Outumuro’s research, is to blame for the network’s minor decline in transaction count over the last year. For example, Arbitrum and Optimism are much less expensive than Ethereum.
However, when rival blockchains emerge as alternatives, the trend could signal Ethereum’s declining supremacy. Cardano’s daily transaction count has been catching up to Ethereum’s, even temporarily topping it this week. Add in the emergence of Fantom, which could prove to be a worthy opponent as well.