Ethereum Price Surges Amid Low Volatility, Eyes $3K as Layer 1 Fees Hit Record Lows

Ethereum Price Surges Amid Low Volatility, Eyes $3K as Layer 1 Fees Hit Record Lows

Ethereum price saw a modest 1.03% rise during a subdued Sunday trading session, currently trading at $2,438. This uptick marks a recovery from the selling pressure witnessed earlier in the week, largely driven by escalating geopolitical tensions between Israel and Iran. As Layer 1 (L1) transaction fees hit an all-time low, questions arise about whether the ongoing correction trend will persist, especially as Ethereum shifts away from its previous deflationary trajectory.

Post-Dencun Inflation Sparks $3K Ethereum Rally Speculation

Since the Dencun upgrade, Ethereum’s L1 fees have been steadily declining, reaching record lows by mid-2024. According to data from IntoTheBlock, the implementation of EIP-4844 has reduced Layer 2 (L2) transaction costs by a factor of ten. This steep drop in fees reflects the growing adoption of L2 solutions like Optimism and Arbitrum, which offer quicker, more affordable transactions.

However, this has had unintended consequences. As fewer fees are burned, Ethereum’s supply has entered an inflationary phase, reversing its previous deflationary trend. If buying demand fails to keep pace with the growing supply, Ethereum could face short-term pullbacks and increased volatility.

Adding to this bearish outlook, prominent crypto analyst Ali Martinez noted a significant reduction in large Ethereum holders. Since July, the number of whales holding over 10,000 ETH has dropped by 7%, suggesting that institutional investors and “smart money” traders are exiting the market in anticipation of a price correction.

Ethereum Price Poised for Major Breakout from Symmetrical Triangle Pattern

Over the last two months, Ethereum has been consolidating above the key $2,200 support level, with the price moving sideways. This consolidation has formed a symmetrical triangle pattern, indicating the possibility of a breakout as the converging trends squeeze momentum.

As geopolitical tensions in the Middle East have eased, Ethereum rebounded from $2,308 to $2,440, marking a 5.7% gain. Should the sellers manage to break through the lower trendline of this triangle at $2,200, the bearish pressure could intensify, potentially pushing Ethereum below the $2,000 level, thereby delaying the much-anticipated $3,000 rally.

Currently, the price is trading below both the 50-day and 200-day exponential moving averages, reinforcing a bearish outlook. However, if buyers can regain control and build momentum, Ethereum could see a 9% rise before testing the upper resistance of the triangle. A successful breakout could provide the push needed to propel the price toward the $3,000 target.