Ethereum Price Prediction: ETH Retreats From the $1,800 Level

Last Updated July 23rd 2021
5 Min Read

Daily Ethereum ETH Technical Analysis
  • The Ethereum price has found support at the 20-bar SMA.
  • The $1,765 resistance is a strong barrier.

This Wednesday, the Ethereum price reached $1,800 but has since retreated down. The bears have managed to push ETH below $1,750 and is currently trading around $1,735. Let’s take a closer look with technical analysis.

 

Ethereum Price Has Strong Resistance At $1,765

The relative strength index is trending along the edge of the overbought zone, so a further growth in Ethereum price is possible. However, as things stand, there is a robust resistance barrier at $1,765 which is pushing ETH down.

eth/usd daily chart 021121

Image: ETH/USD daily

As per the IOMAP, previously at this level, 182,250 addresses had purchased 922,000 RTH tokens. On the downside, the Ethereum price is sitting on several healthy support walls.

eth/usd volume chart 021121

Image: IntoTheBlock

In the 4-hour Ethereum price chart, ETH was able to flip the 20-bar SMA from support to resistance. Plus, the MACD shows increasing bearish momentum. Both of these are very negative signs.

eth/usd 4-hour chart 021121

Image: ETH/USD 4-hour

 

Federal Reserve Branch Calls DeFi A Paradigm Shift

St. Louis Federal Reserve, a branch of the US’ central bank, recently shared a paper about decentralized finance (DeFi) on its website. The paper is written by Fabian Schär, a professor at the University of Basel, who has expertise in blockchain and DeFi technologies. 

In the paper, Schär outlined that DeFi could lead to a “paradigm shift in the financial industry.” The paper says that while DeFi is still small compared to traditional financial services, there are many benefits in terms of “efficiency” and other factors of a financial system. 

“I conclude that DeFi still is a niche market with certain risks but that it also has interesting properties in terms of efficiency, transparency, accessibility, and composability. As such, DeFi may potentially contribute to a more robust and transparent financial infrastructure.”

The paper also discusses how Ethereum smart contracts are composable, meaning they can work together to make way for important innovations and benefits. Additionally, Schär explained the key components of how decentralized protocols (like Aave and Uniswap) work and why they are better than centralized services. 

Many crypto experts responded positively to the paper. Fred Ehrsam, the co-founder of Paradigm, took to Twitter to share his thoughts.

“A branch of the Federal Reserve calls DeFi a potential paradigm shift You can't make this stuff up.”

Notably, although a Federal Reserve branch shared the paper, it isn’t an endorsement of its sentiment. The branch simply hosted the discussion. The paper comes at a time when the viability of the DeFi space appears to be stronger than ever before. 

 

Can EIP-1559 Send Ethereum Price To $20,000?

Gas fees on the Ethereum network have been skyrocketing over the past few months, with the average transaction price currently hovering around $25. Ryan Berckmans, the founder of Predictions Global, recently said that the current level of fees should reflect an asset price of $2,500. 

With the highly anticipated Ethereum Improvement Proposal EIP-1559, the blockchain network hopes to mitigate these incredibly high fees. Berckmans suggested that once this happens, potentially sometime later this year, some of the fees will begin increasing to ETH holders through a burning mechanism, which could drive the asset’s price as high as $20,000. 

EIP-1559 aims to modify the present fee auction system so that everyone pays the lowest bid that was included in the block. The fees would be adjusted depending on the network load and demand. This will allow third-party protocols connected to it to automatically set lower gas prices. 

The proposed system would dynamically burn fees, which would also have an impact on the ETH supply. This should eventually reduce issuance over time when proof-of-stake gets started. In Berckmans opinion, EIP-1559 will give Ether back to holders and not miners as the asset increases in scarcity through fee burns. 

Currently, miners need to sell their ETH to cover costs. So without this selling pressure, the asset has more room to grow in value. The future of Ethereum will not involve mining and will reduce the issuance and supply through ETH 2.0 tokenomics. 

As fees continue to grow, EIP-1559 launches later this year, and Ethereum transitions to proof of stake in two years, the fees accruing to ETH holders seems likely, IMO, to propel ETH to $20k.

 

Ethereum Price Is Expected To Reach These Levels

The Ethereum price is likely going to drop tp the 50-bar SMA ($1,675) in the 4-hour chart before it jumps up again.

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