- Ethereum introduced burn mechanism in its London Hard Fork update.
- Since the update went live, more than 21,000 ETH burnt.
- Ether gained 17% since the hard fork.
NEW DELHI (CoinChapter.com)— Ethereum, the second-largest cryptocurrency by market cap, is on a bull run since the blockchain’s latest update went live on August 5. Dubbed as the London hard fork, the update introduced a fee-burning mechanism for Ether, the blockchain’s native crypto. As a result, its prices gained by 17% since the burn started, from August 5’s open of $2,725.31 to August 10’s high of $3,214.599.
In crypto, burning is a process that takes existing cryptocurrencies out of active circulation, thus reducing supply. Theoretically, the reduced supply helps bolster prices, which seems to be working for Ethereum. In addition, the EIP-1559, which includes the burn mechanism, also introduced measures to reduce gas fees on the blockchain.
Ethereum Price Rally
The burning mechanism that EIP-1559 introduced seems to be adding fuel to Ether’s bull run as the crypto continues to paint green candles on the daily chart. ETH went north of $3,000 for the first time, since May 19’s market crash, on August 5.
However, prices pulled back before ETH finally closed above $3,000 on August 7, just two days after the update went live.
Ether prices are trading above their 50-Day (Yellow) and 200-Day (Violet) Moving Average trendlines, indicating ETH is bullish in short and long-term ranges. Moreover, the 50-Day and 200-Day MA lines are forming a support confluence at $2,234.52.
The 20-Day Exponential MA provides dynamic support for ETH at the $2,618.71 level. Nonetheless, immediate support for Ether’s current bull run lies at $3,005.66, followed by support at $2,856.69.
On the other hand, resistance for Ether is at the $3,200 price level. Once ETH bulls breach above, the next resistance at $3,350 will likely cap any further upside movements, barring an extended crypto rally.
Ethereum is charting positive bars on the MACD histogram since July 22. The bars represent the difference between the MACD line (12-Day and 26-Day EMA difference) and the MACD signal line (9-Day EMA of MACD). In detail, when the MACD line moves above the MACD signal line, it denotes a bullish momentum.
While the MACD is strongly bullish for the altcoin, the relative strength index may worry traders. The RSI, a price momentum indicator, is in the overbought region with a value of 73.34. Often, RSI values above 70 (or below 30) indicate a trend reversal may occur soon.
However, Ethereum’s strong daily volumes may alleviate some fears of a trend reversal. Moreover, the RSI trendline is moving downwards and may go below 70 soon.
As per data from ultrasound.money, the burn mechanism has removed about 21,415.9 ETH ($67.2 million) from active circulation. The burn rate for Ether (24 hours) is 3.12 ETH/min. OpenSea, the leading NFT marketplace, leads the burn leaderboard with 2,620.26 ETH burned. In second place is the automated token exchange, Uniswap, with 1,585.95 ETH burned. Finally, Axie Infinity, the blockchain gaming platform, ranks third with 1,316.13 ETH burns.
Ethereum’s burning protocol cuts into the transaction fee that would have otherwise gone to miners. As such, the update might face some controversies. However, for now, it seems Ethereum is rallying at the $3,000 price level.
Previously, Gas prices on Ethereum were based on guesswork. However, the new update has introduced base gas prices, which the blockchain determines. Hence, everyone would pay the same amount for a transaction unless someone wants to tip a miner for prioritizing their transaction.
Moreover, Ether burns will introduce deflation in its prices, leading to upward movement in prices.
In the future, Ethereum plans to do away with mining altogether by transitioning to the Proof-of-stake algorithm. Hence, stakers will replace miners. The target date for PoS implementation is 31 March 2022.
At the time of writing, Ethereum was trading at $3,116, down 1.50% on the day.