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Ethereum Technical Analysis: ETH Bulls Momentarily Stopped By $1,250 Resistance

6 Min Read
Last Updated March 26th 2021

Daily Ethereum ETH Price Analysis

  • Ethereum is no longer overpriced as per the relative strength index.
  • The $1,250 resistance coincides with the upper Bollinger band in the 4-hour chart. 

Ethereum price crashed from $1,280 to $1,050 between January 10 to January 12. Since then, the smart contract leader has jumped to $1,230. As of now, the Ethereum price faces good resistance at the $1,250 psychological level. So, let’s see what’s going on behind the scenes.

 

Ethereum No Longer Overpriced

Prior to this January 10 drop, the relative strength index (RSI) was trending in the overbought zone around 87.25. However, this bearish price drop has pushed the RSI back into the neutral zone, which shows that Ethereum is no longer overvalued.

eth/usd daily chart 011521

Image: ETH/USD daily chart

So, to understand where Ethereum price may go, let’s take a closer look at IntoTheBlock’s IOMAP. As one can see, there is a lack of strong resistance levels upfront. There is a moderate-to-weak resistance barrier at $1,250, wherein 247,000 addresses had previously purchased 500,000 ETH tokens.

eht/usd volume chart 011521

Image: IntoTheBlock

Looking at the 4-hour chart, we can see that the price managed to bounce up from the middle Bollinger band's support and crossed above the 50-bar SMA. As one can see, the Ethereum price has found resistance at the upper Bollinger band, which coincides with the $1,250 resistance barrier.

eth/usd 4-hour chart 011521

Image: ETH/USD 4-hour chart

However, the MACD shows sustained bullish momentum, which means that the price has what it takes to break above the $1,250 resistance barrier.

 

“ETH Buyback” Proposal Face Miner Backlash

As a critical Ethereum implementation (EIP-1559) inches closer, several Ethereum miners have expressed their concerns about the update. Discussions regarding the update took place in the #1559-fee-market thread of the Eth R&D Discord channel this week. Some miners contested the update, pointing to the risk of centralization and attacks.

EIP-1559 update involves burning gas fees and it hopes to reduce the spikes when the network is congested. According to a Crypto Briefing report, Tim Beiko, a coordinator for the various implementers and researchers working on EIP-1559, explained how the update would benefit the network. 

It makes it easier for transactions to be included. First, it makes the price a transaction should pay to be included explicit in the protocol, by having the ‘base fee’ in the block header. It also allows blocks to be up to ‘200%’ full, meaning on average blocks have room for marginal transactions, which means that your transaction is included quicker than today.

The “base fee” (the minimum a transaction needs to pay to be included in a block) also needs to be burned to avoid manipulation. Hence, when the demand for transactions increases, so does the amount burned. It creates deflationary pressure that Beiko refers to as an “ETH buyback” for holders.

Miners have opposed the update as they would lose revenue from part of the transaction fees being burned. To this, Beiko said that they’ll “still receive the full block rewards, as well as ‘tips’ for each transaction.” Some of the miners claimed that the update would make the network more centralized. According to their theory, when mining becomes less profitable for users (once gas fees are burned), it could be dominated by a small number of entities with larger-scale mining infrastructure. 

To this, Beiko noted:

It’s been proven (in Tim Roughgarden’s analysis) that 1559 doesn’t make collusion or attacks easier. While it would be a problem if 51% of miners opposed the update, a proof-of-work network would also lose security if over 51% of miners were able to collude.

Many of the Ethereum community members appear to agree with Beiko. By reducing the supply of tokens with EIP-1559, ETH holders benefit from the asset becoming more scarce and the long-term security it brings to the network, as per the Crypto Briefing report. 

 

Ethereum 2.0 Validators Cross 60K

According to Beacon Chain, the number of validators on the Ethereum 2.0 network has surpassed 60,000 in only six weeks of being live. Ethereum community’s Josh Stark noted this milestone, and he compared the ETH 2.0 validator numbers with other blockchains. 

Stark used the data from Coin98 Analytics to compare the number of validators on ETH 2.0 with others. Of the ten rival chains analyzed, Avalanche was the next highest with a reported 716 validators. While Tezos has 496 validators, Polkadot has 288. 

According to the Launchpad dashboard, the amount of ETH currently staked in the deposit contract for ETH 2.0 is 2.46 million (2.16% of the entire supply). While the supply fraction does not sound like a lot, it is worth noting that this ETH cannot be sold and has been effectively locked away for at least a year. 

It will only re-enter circulation when Phase 1.5 of the Serenity upgrade merges the ETH 1.0 chain with ETH 2.0. Stakers are currently earning a 10% annual yield on ETH, which has increased in value by 83% since the Beacon Chain was launched. For a blockchain that isn’t doing anything yet, ETH 2.0 appears to be already way ahead of its competitors.

 

Ethereum Price is Expected To Hit What Level?

If the Ethereum price manages to break above the $1,250 resistance barrier, they lack strong obstacles on the path back to $1,350.

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