Price analysis: Ethereum Tests Important Support

Trading
November 26, 2019

Fundamentals

It has now been confirmed that the much-anticipated Ethereum upgrade, known as the Istanbul hard fork, is scheduled to take place on December 4th. More specifically, the hard fork will commence at block number 9069000, which is expected to be mined on December 4th.

“The #Ethereum Istanbul network upgrade is just around the corner! With 6 new EIPs being implemented, this fork will align opcode computational costs, make layer 2 solutions using SNARKs and STARKs more performant, enable zCash interoperability, and more,” tweeted Joseph Lubin, co-founder of Ethereum. 

Istanbul hard fork is one of the two major upgrades that Ethereum will undertake on the road towards Ethereum 2.0 — also known as Serenity. In total, six major upgrades will be performed with Istanbul hard fork while the remaining eight will be implemented in the second instalment, known as Berlin. 

One of the most important changes to the existing Ethereum network will be a proof-of-stake consensus algorithm to validate transactions instead of proof-of-work. Other changes include:

  • Functionality for introducing sharding, 
  • Measures to reduce gas costs, 
  • Improved chain interoperability with privacy coin Zcash,
  • Smart contracts that allow for more creative functions.

While the network is expected to be significantly faster, it will also make Ethereum more expensive. According to Buterin, the co-founder of Ethereum, the planned increase in costs is needed to increase the security of the network and guard against attacks, which are intended to overload the network and create delays. 

“If you are a developer, you can eliminate the largest part of disruption from gas cost changes by proactively making sure you don’t write apps with high witness sizes, ie. measure the total storage slots + contracts + contract code accessed in one transaction and make sure it’s not too high,” said Buterin.

DappRadar, a market analytics site that ranks and tracks decentralized apps, stated that they have identified around $3.8 billion in Ethereum’s economy on an annual basis, after it added ERC20 token tracking for all Ethereum dapps.

“This will greatly increase the transparency of value creation on the Ethereum blockchain, especially for decentralised exchanges that support the trading of ETH-based tokens and the fast-growing DeFi category,” said Skirmantas Januskas, CEO and co-founder at DappRadar.

Similarly, last month DappRadar announced that it identified around $1 billion of previously hidden value value on the EOS blockchain on an annual basis. 

“This transparency highlights just how far ahead of any other smart contract blockchain Ethereum is,” added Jon Jordan, DappRadar’s communications manager.

Moreover, the new data shows that the amount of Ethereum stored in DeFi (decentralised finance) applications has hit a new milestone: 2.7 million ETH, or around $405 million. The data, released by analytics site DeFi Pulse, marks a significant increase in demand for such services.

Technicals

In line with the rest of the cryptocurrency market, Ethereum (ETH/USD) took a significant blow last week as it breached an important support level around the $153 mark. As a result, today’s low of $131.35 marks the new 8-month low for the world’s second biggest digital coin. 

A break of the horizontal support above the $150 mark has pushed Ethereum to the supporting trend line of the descending channel (chart below). For the third time in the last three months, the bulls have used the channel’s supporting trend line to push the price higher. In addition, the 78.6% Fibonacci retracement zone is located near the channel's supporting trend line, thus creating a strong support block.  


Ethereum (ETH/USD) daily chart
Ethereum (ETH/USD) daily chart


Where next? A potential break of the confluence of support, located between $130 and $140, will pave the way for a bigger retreat lower, toward next support zones around the $100 mark. The 2019 low is still at $99.65 as it continues to act as an important horizontal support near the psychologically-important level of $100. 

On the other hand, the price action has slightly recovered today as it tempts to recover last week’s losses. The bulls will have to first break above the previous support, now acting as a resistance, before going for the 100 DMA at $180. The descending channel’s upper trend line comes at $200. 

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