Caution on Ether Ahead of London Hard Fork

Everything you need to make sense of the crypto markets and beyond

By the CoinDesk Markets Team

Edited by Lawrence Lewitinn, Managing Editor, Global Capital Markets

August 4, 2021

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Bitcoin (BTC)

-1.7% $38,101

Ether (ETH)

-0.3% $2,501

(Price data as of August 4 @11:00 UTC)

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Market Moves

by Omkar Godbole

Analysts Take Cautious Stance on Ether as London Hard Fork Nears

As the crypto community awaits the supposedly bullish London hard fork on the Ethereum blockchain, some analysts are taking a cautious stance on ether (ETH) and foresee little price reaction after the upgrade.

“I don’t expect much action in any direction,” trader and analyst Alex Kruger said. “The upgrade itself is overrated, and what matters is what happens after.”

Ether is the native token of Ethereum’s blockchain, which is scheduled to undergo a hard fork, or backward-incompatible upgrade, called “London” on Aug. 5. The change will implement four proposals, including the Ethereum Improvement Proposal (EIP) 1559 that will activate a mechanism to burn a portion of fees paid to miners.

Once the upgrade takes effect, it is expected to bring a deflationary asset appeal to ether, possibly drawing more investment demand for the cryptocurrency. That’s the popular narrative in the crypto community. “Deflationary ETH upgrade EIP-1559 scheduled. Today’s dip is a blessing,” Simon Dedic, managing partner at Moonrock Capital, tweeted on Tuesday.

However, while the upgrade will introduce a burn mechanism, the amount of ether destroyed will depend on the actual network usage. In other words, EIP-1559 does not directly influence ether’s supply. In that sense, the bullish narrative appears overdone for now, Kruger said.

Stack Funds’ COO and co-founder Matthew Dibb said these types of changes are similar to bitcoin (BTC) halvings and take time to exert an effect. “Long-term, we believe that ether will see significant price appreciation as a result of this upgrade,” Dibb said. “However, we aren’t expecting an immediate move in either direction.”

Bitcoin halving refers to a programmed code that reduces the per-block issuance of the cryptocurrency by half every four years. Halving makes bitcoin’s monetary policy predictable. The EIP upgrade does the exact opposite.

“It is difficult, however, to predict exactly how much ether will be burnt over time given that the base fee dynamically adjusts according to network activity and demand for block space,” CoinDesk’s Christine Kim noted.

Another source of uncertainty is the impact of EIP-1559 on miner economics and how the community will respond after the upgrade. According to Compass Mining, miners will see their revenues dip by 20% to 30% after the upgrade because part of their fees will be burnt.

All these things will become apparent over time. Thus, traders may sit on the fence in the short term – more so as the popular bullish narrative appears to have been priced in, according to Pankaj Balani, CEO of Delta Exchange.

“The upcoming upgrade could be a non-event,” Balani said. “The cryptocurrency remains dependent on bitcoin in terms of price action in the short term.”

The options market seems to agree with Balani. Ether’s one-month implied volatility continues its sideways churn, a sign investors do not expect big moves over the next four weeks.

Ether one-month implied volatility (Source: Skew)

Joel Kruger, a currency strategist at LMAX Digital, said: “The combination of the market running up into technical resistance at a time when the event is happening could indeed translate to a sell-the-fact reaction.” However, setbacks, if any, are likely to be well supported down into the $2,000 area, he said.

Ether daily chart (Source: TradingView)

Ether is currently trading near $2,500, having reached two-month highs above $2,650 on Aug. 1, CoinDesk 20 data show.

Balani foresees ether rallying to $3,000 if bitcoin manages to secure a foothold above the long-held resistance of $40,000. The biggest cryptocurrency is priced about $38,250 at press time.

Read the original story here:

Analysts Take Cautious Stance on Ether as London Hard Fork Nears

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Technician's Take

by Damanick Dantes, CMT

Bitcoin Stuck Below $40K; Eyes Short-Term Oversold Bounce

Bitcoin (BTC) buyers continue to struggle below $40,000 resistance as the short-squeeze rally fades. The cryptocurrency was trading around $38,000 at press time and is down 4% over the past week. Short-term oversold signals suggest the pullback could stabilize above $36,000 support.

Bitcoin hourly price chart shows short-term support and resistance levels with RSI (Source: TradingView)

Read the original story here:

Bitcoin Stuck Below $40K; Eyes Short-Term Oversold Bounce

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Disclaimer: The information presented in this message is intended as a news item that provides a brief summary of various events and developments that affect, or that might in the future affect, the value of one or more of the cryptocurrencies described above. The information contained in this message, and any information liked through the items contained herein, is not intended to provide sufficient information to form the basis for an investment decision. The information presented herein is accurate only as of its date, and it was not prepared by a research analyst or other investment professional. You should seek additional information regarding the merits and risks of investing in any cryptocurrency before deciding to purchase or sell any such instruments.

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