Ethereum price eyes 35% rally after 6,000 ETH gets burned in one week

Due to a combination of fundamental and technical factors, Ethereum’s native token Ether (ETH) is poised for a major rally.

Technically, ETH’s price is now looking at a 35% increase by October’s end after testing a key support level. As shown below, this level is a rising trendline which has stopped Ether from trying to lower its price since June 2022.

Weekly chart of the ETH/USD exchange rate. Source: TradingView

This means that traders are interested in Ethereum tokens at this level in the recent weeks. The accumulation sentiment has caused the price to climb towards a new significant level — a horizontal resistance near $1800, which is about 35% higher than the current price.

Supply of Ether drops by 6KETH

The depleting supply of Ether has further influenced the bullish technical outlook for Ether.

Since Oct. 8, Ether supply has fallen by almost 6,000 ETH or $7.9million. This is the first deflationary move by the Ethereum network — more ETH being destroyed than created since Oct. 8.

Merge of Ethereum supplies Source: Ultrasound.Money

To confirm their on-chain Ethereum transactions, users must pay gas fees to validateators. In the past, higher Ethereum network traffic has resulted in higher gas costs and greater revenue for validators.

After the August 2021 EIP-1559 updates, Ether circulation will be permanently void of a portion the gas fee. In other words, more ETH is burned in a high demand environment.

This trend started after Oct. 8. Evidence shows that XEN Crypto, a new crypto project, is increasing network traffic. In the past seven days, XEN Crypto contributed to the burning 4,490 ETH coins against 16,690.52 ETH.

Leaderboard Ethereum Burn Source: Ultrasound.Money

XEN Crypto began over the weekend without any supply.

It was still free to mint and users had to pay only ETH gas fees. This means that Ether became deflationary for its first time since Merge. It currently accounts for over 40% of all Ethereum transactions.

XEN represents more than 40% of all Ethereum Transactions.
— XEN Crypto Official (@XEN_Crypto) October 8, 2022

ETH price long-term outlook remains bearish

The long-term outlook for Ethereum is bearish due to the constant macro warnings from the United States Federal Reserve’s interest rates hikes to high inflation. These risks remain possible due to Ether’s positive correlation with U.S. stocks.

ETH/USD and Nasdaq Composite daily correlation coefficient. Source: TradingView

Accordingly, a fall below Ether’s rising trendline support could lead to further declines, as illustrated in the chart below.

Weekly price chart for ETH/USD with ascending triangle breakdown. Source: TradingView

Ascending triangles are continuation patterns which resolve when the price moves in the opposite direction to its previous trend. In the case of Ethereum, the prevailing trend in ETH is downward. This means that the token will likely move bearish if it falls below the triangle’s rising support.

Related: Why is the cryptocurrency market still down?

An ascending triangle breakdown causes the price to drop to a level that is equal to its height. ETH’s profit target is therefore near $750, which is approximately 40% lower than today’s price.

com. You should do your research before making any investment or trading decision.

Close Bitnami banner