ETH/USD outlook: Shanghai Upgrade(s) Ether to $2K
The ETH/USD has climbed above $2K for the first time since August, when it made a high of $2030 before plunging. Bitcoin, which crossed $30K a few days ago, was still going strong at the time of writing. It looks like the Shanghai Upgrade has done more good than harm to the ETH/USD outlook. So, where does Ether go from here?
What is Ethereum’s Shanghai Upgrade?
The Shanghai Upgrade, also known as “Shapella,” means users who had staked their ether in order to secure and validate transactions on the blockchain – or simply put, people who had locked up their coins for rewards – can now withdraw. This is the biggest transition for Ethereum since its “Merge” upgrade last year.
Until the Merge upgrade, Ethereum relied on miners to secure blockchain by using computers to solve complicated mathematical puzzles. That consumed a lot of energy. To solve this issue, the network would now count on validators, i.e., ether holders who lock up their coins, to verify new transactions. In return for locking up their coins, they were rewarded with certain amounts of new coins.
Therein lied the problem: Validators were not able to withdraw their coins.
The solution: The Shanghai upgrade.
Why is ETH/USD rising?
There has been a lot of buzz around Ethereum’s Shanghai hard fork, which some had anticipated would have weighed on ETH/USD. Obviously, this hasn’t happened (yet), which suggests investors are continuing to warm towards the second largest crypto. The Shanghai upgrade could encourage more institutional investors to participate in staking, and thus provide more support for ETH/USD.
In fact, it is not just Ether finding love – the crypto sector as a whole has been finding some love of late.
Indeed, Ether’s fresh rise to above $2K comes on the back of improved risk appetite across financial markets, with stocks, gold and bitcoin all rising noticeably in recent times. The US dollar has weakened, and risk appetite has been supported by growing signs that US inflation has peaked, and that the days of interest rate hikes are numbered.
Following Wednesday’s release of US CPI data, investors were already feeling that we are now a lot closer to the peak in terms of interest rate hikes, now that the annual rate of consumer inflation has cooled to 5.0%. On Thursday, we had more data supporting this narrative as producer prices came in well below expectations. Accordingly, the odds of a 25-basis point rate hike in May have drop to 67%, according to the CME’s FedWatch tool.
ETH/USD outlook: What’s next for ether?
Well, ETH is now 45% better off compared to the low of $1370 made in March. Ether’s ascend has been nice and steady in recent days, creating a strong technical bullish price structure. Given that the prior sell-off was triggered around the $2K in August, don’t be surprised to see some profit-taking here.
However, the path of least resistance is clearly to the upside and in this current macro backdrop we could see short-term dips to find buyers around support levels.
The next nearest support below $2000 is at $1940, the base of Thursday’s breakout and a prior resistance range. Even if Ether deviates below this level a little, this wouldn’t materially change the bullish technical outlook for as long as it doesn’t create a new low beneath $1825, the most recent low prior to the latest rally.
-- Written by Fawad Razaqzada, Market Analyst
Follow Fawad on Twitter @Trader_F_R
The information on this web site is not targeted at the general public of any particular country. It is not intended for distribution to residents in any country where such distribution or use would contravene any local law or regulatory requirement. The information and opinions in this report are for general information use only and are not intended as an offer or solicitation with respect to the purchase or sale of any currency or CFD contract. All opinions and information contained in this report are subject to change without notice. This report has been prepared without regard to the specific investment objectives, financial situation and needs of any particular recipient. Any references to historical price movements or levels is informational based on our analysis and we do not represent or warranty that any such movements or levels are likely to reoccur in the future. While the information contained herein was obtained from sources believed to be reliable, author does not guarantee its accuracy or completeness, nor does author assume any liability for any direct, indirect or consequential loss that may result from the reliance by any person upon any such information or opinions.
Futures, Options on Futures, Foreign Exchange and other leveraged products involves significant risk of loss and is not suitable for all investors. Losses can exceed your deposits. Increasing leverage increases risk. Spot Gold and Silver contracts are not subject to regulation under the U.S. Commodity Exchange Act. Contracts for Difference (CFDs) are not available for US residents. Before deciding to trade forex, commodity futures, or digital assets, you should carefully consider your financial objectives, level of experience and risk appetite. Any opinions, news, research, analyses, prices or other information contained herein is intended as general information about the subject matter covered and is provided with the understanding that we do not provide any investment, legal, or tax advice. You should consult with appropriate counsel or other advisors on all investment, legal, or tax matters. References to FOREX.com or GAIN Capital refer to StoneX Group Inc. and its subsidiaries. Please read Characteristics and Risks of Standardized Options.
Please note that foreign exchange and other leveraged trading involves significant risk of loss. It is not suitable for all investors and you should make sure you understand the risks involved, seeking independent advice if necessary.
Contracts for Difference (CFDs) are not available to US residents.
FOREX.com is a trading name of GAIN Capital - FOREX.com Canada Limited, 30 Independence Blvd, Suite 300 (3rd floor), Warren, NJ 07059, USA is a member of the Canadian Investment Regulatory Organization and Member of the Canadian Investor Protection Fund. GAIN Capital – FOREX.com Canada Limited is a wholly-owned subsidiary of Stonex Group Inc.
Complaints are taken very seriously at FOREX.com. You can view our complaints procedure here.
© FOREX.COM 2024