Ether (ETH), the native token of Ethereum, appears poised for a significant rebound as a result of a combination of technical and fundamental considerations.
Technically, the price of ETH is now anticipating a 35% increase by the end of October after staying at a crucial support level. As demonstrated below, this level represents a rising trendline that has stopped attempts by Ether to fall since June 2022.
In other words, traders have recently indicated an interest in purchasing Ethereum tokens close to this level. The price is currently rising toward a horizontal trendline resistance above $1,800, which is about 35% above the present level, as a result of the accumulation of sentiment.
The bullish technical outlook for Ether takes further take cues from its depleting supply in recent days.
Ether supply has dropped by nearly 6,000 ETH (~$7.9 million) since Oct. 8. That marks the Ethereum network’s first deflationary move — where more ETH is being destroyed than created — since its switch from proof-of-work (PoW) to proof-of-stake (PoS) via the Merge one month ago.
Users must pay so-called “gas fees” to validators to confirm their on-chain Ethereum transactions. Historically, more Ethereum network traffic resulted in higher gas fees and more revenue for validators.
But after the August 2021 EIP-1559 update, a portion of the gas fee is permanently removed from Ether circulation. Simply put, more ETH gets burned in a high-demand environment.
The same started happening after Oct. 8 with evidence showing that a new crypto project named XEN Crypto is increasing network traffic. In the last seven days, XEN Crypto has contributed to the burning of 4,490 ETH tokens against 16,690.52 ETH tokens.
XEN Crypto started over the weekend with no supply.
Still, it was free to mint, requiring users to only pay ETH gas fees. In other words, a new project made Ether deflationary for the first time since Merge, currently comprising over 40% of all Ethereum transactions.
Ethereum’s outlook for the long term tilts bearish, nevertheless, due to constant macro warnings led by the Federal Reserve’s interest rate hikes to hot inflation. Ether remains susceptible to these risks owing to its consistently positive correlation with U.S. equities.
Thus, a drop below Ether’s current rising trendline support — as explained above — could mean further declines in the event of a technical breakdown, as shown in the chart below.
Ascending Triangles are continuation patterns that resolve after the price breaks out in the direction of its previous trend. In ETH’s case, the prevailing trend is downward, suggesting that the token’s next course will be bearish if it breaks below the triangle’s rising trendline support.
As a rule, an ascending triangle breakdown prompts the price to fall to a level at a length equal to the triangle’s height. Therefore, ETH’s profit target comes to be near $750, down approximately 40% from today’s price.