Ethereum Dencun Upgrade: Will ETH Price Fall Following Major Upgrade?
Will Ethereum keep rising with the latest upgrade?
- Ethereum’s Dencun upgrade is scheduled to launch on the Mainnet on March 13.
- The Ethereum (ETH) price broke out above $4,000 on March 11.
- Will the Dencun Upgrade impact ETH price the same way the Shapella, Paris, and London upgrades did?
Ethereum’s Dencun upgrade is expected to improve the scalability, security, and efficiency of the network. Through its use of Proto-Danksharding, the upgrade is expected to reduce gas fees, which have more than doubled in the past year.
With the Ethereum price breaking out above $4,000 on March 11, the upgrades lead to the question of how the price has reacted to other major upgrades and how it will react to this one.
Did Ethereum Rise or Fall After Previous Upgrades?
The three most recent major upgrades for the Ethereum network are the Shapella upgrade on April 12, 2023, the Paris upgrade on September 15, 2022, and the London upgrade on August 5, 2021.
Ethereum’s price was at distinct points in its market cycle during each upgrade, and reacted differently to them.
The ETH price was trending upward at the time of the London upgrade and continued increasing for four weeks afterward.
Conversely, ETH was trending downward preceding the Paris upgrade and fell 40% in the two months following the upgrade.
Finally, ETH had been on an uptrend before the Shapella upgrade but reached a top in the same week, falling 15% in the next one.
The Ethereum price has increased by 75% in the last seven weeks, sharing similarities with the movement before the London and Shapella upgrades.
How Will Ethereum React to the Dencun Upgrade?
The ETH price accelerated its rate of increase in February 2024 (green circle), breaking out from a long-term ascending parallel channel and the middle of its long-term range.
The breakout was combined with a weekly Relative Strength Index (RSI) increase into overbought territory (green icon).
Currently, the ETH price trades at a confluence of Fib and horizontal resistances near $4,000. If the weekly close holds, it will be the seventh successive bullish weekly candlestick.
The breakout shares similarities to that of November 2020 (black icon), the previous time the weekly RSI crossed into overbought territory after a prolonged period of consolidation.
Following the breakout, ETH increased by 420% and reached a new all-time high price. The upward movement dwarfs the current 60% ETH increase that followed the breakout.
As a result, judging by this fractal, the ETH price still has considerable room for growth.
Is the Short-Term Rally Overextended?
Despite the positive readings from the weekly time frame, the shorter-term 2-day one shows an overextended rally. This is based on the RSI and MACD readings.
Both indicators show values not seen since the 2021 all-time high. While there is no bearish divergence to warn of an impending decrease, there is no doubt that the rally is heavily overbought.
As a result, while long-term readings support a bullish trend, a rejection from the 0.786 Fib retracement resistance level at $4,000 may trigger a short-term correction toward $3,400. This would be a decrease of 15%.
The decrease would be in line with corrections after the Paris and Shapella upgrades. It would not invalidate the positive long-term readings, which support the eventual continuation of the upward trend. The ETH all-time high is at $4,867, 20% above the current price.
ETH Price Facing Multiple Factors
The current rally is well-timed with the Dencun upgrade. While numerous indicators suggest more upswing, there are still concerns with the overextended MACD and RSI and a potential rejection at $4,000. Overall, ETH is still well placed to continue its long-term trend toward a new all-time high.
