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Ethereum Price Preview October 5 – October 11


Welcome to the Ethereum Price Preview, an analysis of current and upcoming market events and how they might shape the price of ETH and the trajectory of the network.

Last week saw turbulent market developments as well as technical issues for ETH 2 but also the ongoing strengthening of DeFi fundamentals.

In this piece, we take a look at the various factors that may be impacting Ethereum price for the week ahead.

Strong ETH Resistance at $350, but a Breakout May Be Underway

750,000 addresses bought 14 million ETH in the $350 to $358 range recently, and that price range now spells heavy resistance for near-term trading. ETH price is currently trading in a symmetrical triangle pattern which appears to show ETH consolidating towards either a breakout or a price correction.

It’s possible that high trading volume will, along with other indicators, signal a breakout rather than a correction, although the accurate reading of these signals will depend on individual trader skill.

The recent shift in the RSI from the midline indicates consolidation, and some traders will be watching for the line to trend above 50 to signal the type of volume that may indicate a price breakout. Resistance can be expected at $360, $380, and ultimately, $400, based on previous price points in recent months. On the other hand, the longer the consolidation continues without a successful breakout, the more likely it is that the market will turn bearish, with support anticipated at $320.

Venezuela Rolls Out ETH Exchange to Evade Sanctions

In a bid to circumvent sanctions imposed by the US forces, the Venezuelan government has launched a national stock exchange built on the Ethereum blockchain. Following new legislation passed on Tuesday, the exchange will undergo a trial period of 90 days before being evaluated by local regulators.

US sanctions have hit the already-crippled Veneuzuelan economy very hard in what many human rights activists have condemned as a serious human rights violation. The sanctions were introduced in tandem with a failed coup attempt to overthrow the Venezuelan government. In such a turbulent socio-economic climate, the introduction of a means to evade strict sanctions could theoretically be a positive step for Venezuela, but the exchange itself is likely to be highly centralized. 

Venezuela’s prior foray into cryptocurrency, the oil-backed Petro currency, was largely considered to be a cryptocurrency in name only, with none of the benefits of decentralization or freedom from government censorship. As such, while the exchange is being heavily covered by various media platforms, it seems unlikely that the project will have a long-term impact on Ethereum price action.

Buterin Details ETH 2 Scaling Method

Ethereum co-founder Vitalik Buterin released more details of an ETH 2 scaling method called rollups, which could raise the transactions per second (tp/s) capabilities of the network from 15 tp/s to 3,000 tp/s.

In a post on Ethereum Magicians, Buterin stated that while the earlier phases of ETH 2 are quickly approaching, the “base-layer scalability for applications is only coming as the last major phase of Ethereum 2.0, which is still years away.”

He went on to say that “In a further twist of irony, Ethereum 2.0 usability as a data availability layer for rollups comes in phase 1, long before Ethereum 2.0 becomes usable for ‘traditional’ layer-1 applications.”

Buterin’s announcement was significant for advocates and investors alike, as it pointed to a shift in the scaling strategy compared to prior models. If everyone using the network switches to rollups, the tp/s should increase to ~3,000 tp/s. Then, in Phase 1, when rollups move to ETH sharded chains, the tp/s should increase up to 100,000 tp/s, drastically improving network congestion problems.

“These facts put together lead to a particular conclusion; the Ethereum ecosystem is likely to be all-in on rollups (plus some plasma and channels), as a scaling strategy for the near and mid-term future,” said Buterin. The co-founder has previously acknowledged that ETH 2 was much harder to implement than the team initially expected due to the complexity of the project.

ETH 2 Testnet Issues Could Spell Delays

In other ETH 2 news, the recent Spadina testnet launch failed to meet expectations. ETH 2 coordinator Danny Ryan confirmed that the testnet suffered from both small errors and low participation.

The ETH 2 team now have to roll out another testnet, Zinken, to carry out the “dress rehearsal” they need to forecast true network performance. ETH 2 client Prsym published a post-mortem of exactly what went wrong with Spadina, listing a number of issues and stating “ We lagged behind in terms of taking Spadina seriously, having a detailed checklist, and overall having a release ready before the genesis event.”

The testnet failure comes at an impasse in price action, and could potentially contribute to bearish sentiment in the markets. All eyes will now be on Zinken which starts on October 12th at 12pm UTC.

Defi Boom Continues, and Major Tokens May Be Oversold

The total value locked (TVL) in the DeFi ecosystem remains near record highs at $10.95 billion, with $2.3 billion locked in Uniswap alone. Four DeFi protocols now hold assets worth over $1 billion, more assets per protocol than throughout the entire ecosystem just months earlier.

Uniswap and Aave have both seen a pullback in price recently, perhaps signalling that the market is becoming oversold. The altcoin bull market contributed to the rise in DeFi TVL, ending with the Bitcoin price peak and drop from $12,000 in late August. In early September, 93 out of the top 250 cryptocurrency coins lost value accordingly.

While the prices of major DeFi tokens has dropped significantly in the last month, market fundamentals remain strong, as do the revenues of many of the DeFi projects in question. CoinTelegraph points out that Maker suffered a 24% loss last month, but project revenues actually rose approximately 450% as the platforms “Stability Fee” (interest applied to loans) was increased. Uniswap and Aave saw similar price drops, while seeing increased revenues of over 235% each (Uniswap’s fee model, however, will not go live until March 2021).

While the DeFi market is unpredictable, the discrepancy between revenues and token values begs the question of whether those tokens are currently, and temporarily, undervalued.

Media Roundup

On October 08, Taipei Ethereum Meetup is hosting an event called “Tea Party with Vitalik Buterin: Eth 2.0 Highlights, Gas Cost Repricing, and More.” The event will feature live discussion with Vitalik Buterin on the direction and state of the Ethereum project. 

Also in attendance will be chief imToken researcher Dr. Chang-Wu Chen, Ethereum Foundation researcher Hsiao-Wei Wang, and Hakka Finance founder Ping Chen. These speakers will discuss scalability, research and development, and gas prices respectively. The event is hosted by Diode marketing manager Yashin Huang, and there are nearly 100 attendees on the register so far.

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Conor Maloney
Conor Maloney Analyst