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Concerns surrounding Ethereum’s gas limits have continued to surround the world’s second biggest digital coin. At the beginning of the month, Ethereum’s co-founder Vitalik Buterin suggested that the blockchain community should push for an increase in gas limits.
“Historically the large mining pools have listened to community pressure,” commented Buterin.
“It’s not clear that exactly now is the best time; it could be better to do a bigger gas limit jump at the same time as the Istanbul fork when the opcodes that present the greatest risks will see their gas costs bumped up so higher gas limits become safer,” he added.
It seems that community pressure has delivered the desired results as the capacity of the network has been increased by the mining community by 25%. Each miner is allowed to increase the limit by 1/1024 of its current value. The increase has led to a break of 10 million transactions per block, allowing the platform to process more transactions per second and help reduce the rising transaction costs.
According to Coin Metrics, Ethereum transaction fees were almost as high as Bitcoin transaction fees in the previous week, $270,000 compared to $308,000 respectively. The increase in the capacity of Ethereum network will likely help ease the pressure on transaction fees.
One of the main reasons behind the network’s congestion is Tether’s switch to Ethereum. It has been reported that Tether’s transactions, since moving to Ethereum, have increased by more than 1,000%. As a result, Tether’s use of Ethereum blockchain now accounts for 25% of the entire network capacity.
Despite the obvious setbacks, it's not all doom and gloom for Ethereum. For instance, projects such as Connext Network has made upgrades to make the platform faster and easier to use. Connects is an infrastructure layer that scales the Ethereum platform. As such, it is helping the Ethereum network process more transactions.
Open Interest, one of the indicators used to measure the market activity, suggests that an inflow of money into Ethereum’s derivatives. According to Investopedia, Open Interest is defined as “the total number of outstanding derivative contracts, such as options or futures that have not been settled for an asset.” In essence, the increasing Open Interest indicates there is new money coming into the Ethereum market. At this moment, this inflow of money has still not translated into the bullish price action for Ethereum.
Looking at the weekly price chart, Ethereum registered one of the largest weekly bearish candles recently, as the world’s second largest digital coin lost nearly 20% of its value in one week only. This represents the largest drop in value since the first week of July, when it lost more than 26% of the value in one week. On a daily basis, 17.26% loss in value recorded on September 24th is the largest since September 5th of last year, when Ethereum lost 19.96% in one day.
The daily ETH price chart shows the potential impact of the break of the ascending trend line (the purple line). Following the break, the price action has consolidated near the recent swing lows around the $170 handle, where the horizontal support/resistance sits. On the upside, the underside of the ascending trend line will now provide strong resistance for the bulls.
Furthermore, both the 100 DMA and 200 DMA are currently trending above the market price and will only add to that resistance. From the FIbonacci perspective, the 50% retracement currently intersects with the ascending trend line. Overall, look for the $190 - $220 block to provide strong resistance to the bulls’ aspiration to move higher.
On the downside, the horizontal support (the blue line) is the first level of support. The last week’s low of $153, which represents also the 5-month low for Ethereum, will only add to the horizontal line support.
Looking mid-term, the price has breached the key 61.8% Fibonacci support. The next level of Fibonacci support is the 78.6% retracement, located just above the $140 handle. Moreover, 78.6% retracement sits between 127.2% and 161.8% extensions. Overall, these three Fibonacci lines create a support block, ranging from $126 to $148.
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