On Wednesday, the price of ether (ETH), the cryptocurrency that drives the blockchain that enables smart contracts, was last seen in the vicinity of $1,870, which represented an increase of a little more than 1%.
The US Consumer Price Index inflation data, which came in largely in line with predictions at still-hot levels, provided a minor lift to the cryptocurrency during the trading day. However, at the same time, the report increased expectations that the Federal Reserve’s tightening cycle has already been completed.
Ether, on the other hand, has not broken out of this week’s range of less than $1,900 and is still trading at a loss of approximately 7.5% compared to its highs of the previous week, which were greater than $2,000.
Indeed, investors in ETH are still on edge regarding the impact of the recent surge in popularity of meme coins, particularly with regard to next-wave meme coins like Pepe (PEPE), which are built on blockchain technology.
In current days, there has been an increase in the demand for transfers of meme coins on the Ethereum blockchain, which has led to a decrease in the amount of available block space. This has caused transaction costs to rise.
According to Etherscan, the average transaction cost was recently above $27, having previously been under $18. This marks the highest level it has been in approximately twelve months.
Some people believe that high fees indicate a great demand for the blockchain, which would indicate that the number of people using Ethereum is growing.
And because ETH is the currency that is used to pay transaction fees, an increase in transaction fees will result in an increase in the demand for ETH among blockchain users.
However, hefty transaction costs underscore the scalability challenges encountered by the Ethereum blockchain. These issues, according to detractors, hamper Ethereum’s road toward general use.
However, the Ethereum Foundation, which is in charge of the blockchain’s upkeep and development, has expressed interest in implementing enhancements such as “dank sharding” in the few coming years in order to increase transaction capacity while simultaneously reducing transaction fees.
As the exchange rate for ETH/USD settles within the recent range of $1,800-$2,000, investors are wondering what comes next.
ETH is currently trading below both its 21-Day and 50-Day Moving Averages (DMAs), suggesting that the strong short-term technical momentum that had been building appears to have petered out.
The region around $1,700, which had been acting as resistance but is now acting as support, is seen by some technicians as having the potential to experience a decline in the near future.
However, longer-term technicals continue to point to a positive outcome. ETH is still trading at a price that is well inside its 2023 uptrend and would have to go below $1,600 for this to be in jeopardy.
Due to the fact that macroeconomic conditions are anticipated to improve in 2023, a greater number of ETH tokens are anticipated to shift into the staking contract, the deflation rate of the Ether supply is speeding, and in light of the recent success of the Shapella update, the price of ETH is anticipated to continue gradually climbing in 2023.
Since the Shapella upgrade enabled staked ETH withdrawals, Glassnode stated in a recent report that “the mechanics… for both incoming and exiting validators have played out as intended,” and that Ethereum’s consensus mechanism has remained stable throughout the process.
“It’s likely that this will reduce the risk of long-standing engineering challenges, which will have net positive effects not only on the safety of the network but also on the economy that is built upon it.”
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