Ethereum Price Up 10% Despite Inflationary Pressure – ETH Targeting $4,000
Will Ethereum Reach $4,000? | Credit: Derek Fenech
Key Takeaways
- Ethereum’s (ETH) price has increased over 10% last week.
- Ethereum’s supply has become inflationary since April.
- Will Ethereum reach a new yearly high in July?
Ethereum’s price surged to a new yearly high in March, but soon after, things turned for the worst as it faced a decline, which only intensified in May following the formation of a lower high, resulting in a crash on July 5.
Ethereum has since rebounded from its July dip and is now gearing up to reclaim its lost valor, leaving market participants wondering whether ETH will successfully breach its resistance or encounter further rejection.
Ethereum’s Price Increase Mirrors 2021
Ethereum has been steadily declining since hitting its yearly high of $4,093 in March, as shown in the weekly chart. The situation worsened after it set a lower high in May, leading to further drops in its price.
In July, Ethereum fell to a low of $2810, breaking past the ascending support trend line. However, last week’s bounce flipped the previous low as a support, and could result in a reclaim of the trend line.
Technical indicators are pointing to an interesting similarity to the 2021 uptrend.
Recently, the weekly RSI bounced back from overbought levels to 50 (green circle), signaling a potential continuation of the upward trend. In 2021, a bullish MACD cross (green icon) led a massive rally, a signal that has yet to occur in 2024.
Should this scenario unfold, Ethereum’s price would confirm a bullish trend reversal, potentially reclaiming the long-term ascending support trend line
Will Ethereum Break Through Resistance?
The daily time frame forecast shows Ethereum is gearing up to break out from the key horizontal, diagonal, and Fibonacci resistance levels near $4,000. The diagonal resistance lies within the center of a descending parallel channel, while the horizontal resistance aligns with a former support level at $3,400. Additionally, this level coincides with the 0.5 Fibonacci retracement resistance.
The daily RSI and MACD indicators suggest ETH could successfully break past these levels. The MACD made a bullish cross (green circle) while the RSI broke out from a resistance trend line and is increasing above 50.
Should ETH break out, it is expected to surge towards the resistance trend line of the channel. Channels typically confine corrective movements, making a breakout probable. In such a scenario, the wave count can provide insights into the potential level for the next high.
Ethereum Price Prediction – New All-Time High Soon?
The most likely wave count suggests that ETH completed wave four in a five-wave movement that started in November 2022 (white). The sub-wave count shows a completed A-B-C structure (black) inside wave four. If the count is accurate, ETH has finished its correction and started the fifth and final wave of the increase.
The initial target range for the peak of wave five is between $4,678 and $4,883. This range is determined by extending wave five to 0.618 times the combined length of waves one and three. The upper limit, set by the 1.61 external Fibonacci retracement level, could potentially establish a new all-time high, surpassing the current peak of $4,868.
Is Ethereum’s Inflationary Supply a Cause for Concern?
Following Ethereum’s Dencun upgrade, which significantly lowered transaction fees, the network’s supply has shifted to become inflationary. Since April, the ETH supply has grown by 150,000 tokens , equating to an annual inflation rate of 0.12%.
While this remains substantially lower than the pre-Proof-of-Stake era’s 3.12% annual inflation, it contrasts with the token’s previous deflationary trend of -0.12% post-merge.
Ethereum Transaction Fees | Credit: ArtemisEthereum average transaction fees have declined notably, falling to $2. This is a far cry from the over $20 transactions at the beginning of the year. However, this is also the main reason for the increase in inflation, With the decline in transaction fees, each transaction burns less ETH.
This would not present an issue if Ethereum transactions increased significantly and offset this fee decline. However, this has not been the case. While Ethereum transactions have increased since June, they have done so at a proportion between 10 and 20%. This is not enough to offset the 90% decline in transaction fees.
As a result, Ethereum may remain inflationary, though at a much smaller scale than before the merge.
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