Crypto markets extended their downtrend from last week, with ethereum ETH -0.36%, the second-largest cryptocurrency by market capitalization, falling below $1,655 amid bearish sentiment among traders and a lack of fresh catalysts.
Late Sunday, transaction aggregator 1Inch bought 6,088 ETH, but ethereum was still down 1.1%, adding some buying pressure to an otherwise tepid market. Crypto investor and podcast host Keyboard Monkey-KBM recently hinted in his tweets that Bitcoin BTC -0.57% could drop to around $21,000 and ETH could drop to $1,400.
Like Bitcoin, ETH prices seem to struggle to rise above the $1,660 and $1,670 levels, crypto chart analyst Aayush Jindal said in his tweet. It is currently showing bearish signs below $1,670 but is holding the 50% Fibonacci retracement level of the key rally from the $1,580 swing low to $1,698.
Moreover, there is a key bearish trend line forming with resistance near $1,660 on the hourly chart of ETH/USD. If the price stays above the $1,640 support, the bulls could attempt a fresh increase.
On the upside, analysts believe that the price may face resistance near the $1,660 level and trendline area. The next resistance is near $1,670. A close above $1,670 could push the price towards the important $1,700 area. Within this range, the main resistance is near $1,720, above which the price could rise towards $1,780. Any further gains could push the price towards $1,850.
Conversely, if Ethereum fails to break the $1,670 resistance, it could continue to decline. Initial support on the downside is around $1,640. The first major support is near the $1,620 area, or the 61.8% Fibonacci retracement level of the key rise from the $1,580 swing low to $1,698.
The next key support is near $1,580. If $1,580 is breached on the downside, the price could accelerate its decline towards the $1,500 level. Any more losses could lead the price down to the $1,440 level in the short term.
The total daily fees paid by users to execute transactions on ethereum fell to 1,719 ETH ($2.8 million) this past Sunday, the highest since Dec. 26, according to data tracked by blockchain analytics firm CryptoQuant. Minimum daily total.
This volume is down 89% from the year-to-date high of 16,720 ETH observed on May 5. Ethereum uses a proof-of-stake consensus mechanism, which involves validators rather than miners to create and verify blocks of transactions. Therefore, validators (entities that help secure the network by staking at least 32 ETH) will receive transaction fees, but not the full amount. They earn a priority fee, or a tip that users add to their base fee, to entice validators to prioritize their transactions. At the same time, the base fee is destroyed and ETH is no longer in circulation.
A drop in total fees paid represents lower network usage, as fees depend on the level of activity on the network, primarily the number of pending transactions.
That said, the eight-month low in fees may stem from the growing popularity of Ethereum layer 2 scaling solutions, a long-term positive development for Ethereum.
David Lawant, head of research at FalconX, said in a note last week. Since the launch of friends.tech on August 10th, Ethereum L1 fees are 25% lower than the average for the year, which is in sharp contrast to the era when the success of early NFT application CryptoKitties or the latest Yuga Labs NFT launch usually temporarily clog the Ethereum network “.
Lavant also believes: “From a broader perspective, it is encouraging to see such a successful application gain meaningful attention without congesting the underlying blockchain network. Of course, this is based on Ethereum. Development of L2 scalability solutions: Friends.tech is built on Base, Coinbase’s L2 chain using the Optimism stack”.
Launched on August 1, Friend.tech gained over 100,000 users within two weeks and amassed over $25 million in revenue. Layer 2 scaling solutions like Optimism, Arbitrum, and Base help scale Ethereum, ease congestion, and control transaction costs on the main network.
On Aug. 15, the number of daily transactions on the Optimism mainnet hit an all-time high of nearly 900,000 transactions, according to data tracked by analytics firm IntoTheBlock. In addition, the number of transactions processed between the Ethereum mainnet and the main Layer 2 using Optimistic Rollup technology hit the second highest value in history earlier this month.
IntoTheBlock said in its weekly newsletter: “Ethereum clearly benefits as competition between L2s intensifies.”
Ethereum will also continue to dominate the market in terms of total value locked, and with the Holesky testnet and EIP-4844 upgrade approaching in the next few weeks, it may spur a rally for the ETH token.
