Ether (ETH) has lost more than 40 percent since hitting a record $4,384 in May.
Some indicators are showing that the Ether price may experience a recovery earlier than expected.
Network update coming in July
Investors still have a month to get an idea of Ethereum as it prepares for the major network update scheduled for July.
The update, named EIP-1559, is expected to address one of the biggest problems of the Ethereum network: high transaction fees. The update will bring the solution in question by replacing Ethereum’s “price action-based” fee model with a base network fee model that fluctuates based on network demand.
Vitalik Buterin and Eric Conner, who wrote EIP-1559, expect the update to create a more efficient fee market and simplify the gas payment process.
On the other hand, EIP-1559 also proposes burning transaction fees and initiating deflation in the Ethereum ecosystem. The effect of this on ETH price could be similar to the effect of halvings (halving) to Bitcoin, and low supply may increase the price.
Still, not everyone is equally hopeful of EIP-1559. Multicoin Capital Managing Partner Kyle Samani suggested that it would still be costly to use Ethereum if the price of Ether increases.
Many people view EIP 1559 as bullish for Ethereum. However, @KyleSamani and @kaiynne think adopting EIP 1559 could have a few pitfalls — such as unit bias and higher gas fees (since ETH would be more expensive).
What do you think? Are you worried EIP 1559 could hurt Ethereum? pic.twitter.com/tbUTsrNWSd
— Laura Shin (@laurashin) May 26, 2021
The amount of Ether on the exchanges is decreasing
The latest data from Glassnode reveals that even after the 40 percent crash, Ether continues to be withdrawn from exchanges.
The indicator, called “Ethereum Reserve on All Exchanges”, shows that exchanges’ Ether reserves fell by 5.75 percent from 13.9 million to 13.1 million in the May 1-31 range.
The continued withdrawal of ETH from exchanges reflects that investors want to hold their savings in anticipation of a rise or transfer them to DeFi liquidity pools to earn interest.
Technical indicators point to bullish
Based on technical indicators, the two analysts suggested that Ether is continuing its bull market.
PostyXBT says ETH/USD is forming an ascending triangle Put forward.
Triangle patterns often appear during corrections and can result in a breakout to the downside. Still, PostyXBT expects Ether price to hold on to the triangle support and continue targeting the resistance line for an upside break.
“There is no need to make aggressive entries in these market conditions. A lower bottom price will invalidate the idea.”
Another analyst, The Crypto Cactus, for Ether expressed similar opinionsIn contrast, he only said that the coin is above the medium-term ascending trendline support, as seen in the chart below.
The analyst, who is cautious about the current situation like PostyXBT, explained that investors can take a long position while retesting the ETH resistance line (around $2,500-2,600).