Ethereum: Can it break the $2,000 price barrier as EIP 8361 splits builders?

Ethereum traded at $1,868 as it slid below the descending trendline on August 5, while EIP-8361 debate added another variable to market expectations.

Ethereum Price Drops Below $1,900

Crypto.news reports that Ethereum (ETHPrice was $1,868 when I wrote this, with little change over the last 24 hours. Price has been unable to stay above $1,900 ever since the end of July. The psychological level of $2,000 is now out-of-reach.

On the daily chart, ETH is trading at $1.887.53, below its simple moving average of 20 days. Another resistance level is the 100-day SMA, which stands at $1,918.22. The 200-day SMA, however, remains at $2,074.86.

The structure of Ethereum leaves it below three out of four major moving-averages. ETH remains above the SMA 50 at $1.788.07. This is preserving the recovery begun after the July sell-off around $1,500.

Bull Bear Power is now at minus 14.96. This negative reading indicates that sellers still have a slight advantage. However, the indicator is far from the deep negative levels seen during the decline in June.

ETH is approaching a descending channel breakout

Ethereum’s 4-hour chart shows it nearing the upper limit of a channel that descends. This has led to a price decline since July 27, when the peak was near $1,975.

Between $1,875 to $1,885, the immediate breakout zone is located. The buyers would have the opportunity to test $1,900 if the 4-hour close was above the channel.

The Momentum is still weak and not clearly bearish. Aroon Up is 14.29% while Aroon Down stands at 0%. The fact that both readings are near the bottom indicates that there is no strong trend in either direction.

Chaikin money flow is slightly negative, at minus 0.02. This indicates a modest amount of net selling pressure, and that ETH is yet to receive the capital inflows necessary for a clear breakout.

In the event that Ethereum fails to reach $1.850, it could fall back towards this level. Support zones are formed by the 50-day SMA, which is around $1788, and the psychological level of $1,800.

Liquidation rates could drive ETH towards $1,940

The heat map of CoinGlass for the past week shows that several leveraged positions are above Ethereum’s present price.

Around $1,890 – $1,905 has been a concentration of liquidity, with an even larger amount near $1940. If ETH crosses above the descending trendline, these levels may act as a short-term magnet for price.

Moving through 1,940 will open up the path to 1,975 and $2,000 The bullish setup will only gain credence if the 100-day SMA daily at $1918 is reclaimed.

There is liquidity below the $1.850 market, around $1.820, and $1.800. The rejection of ETH below $1,900 may trigger a large liquidation that pulls ETH to the lower clusters.

Analyst Michaël van de Poppe identified $1,800 as the decisive support level. He anticipates that the break over $2,000 will put $2,300 to 2,500 in reach.

“ETH holds a crucial support level at $1,800,” van de Poppe said. “A breakout to $2,000+ is simply on the horizon.”

The EIP-8361 puts staking into the spotlight

Ethereum developers are currently debating the test of technical feasibility. EIP-8361. a draft of a proposal to gradually reduce the issuance from consensus layers as staked ETH rises.

A proposal was made to gradually burn more validator reward money. All newly-issued consensus rewards will be burnt instead of being paid out to validators at a stake ratio 50%. Validator income would be derived from transaction fees as well as the maximum extractable value.

The EIP-8361 does not set a limit on the amount of ETH that can be staked. The EIP-8361 aims to reduce the issuance-based incentives to stake once the ratio nears 50 percent. It is under review and the proposal hasn’t been approved to upgrade the network. Six authors submitted the draft, including Ethereum foundation researcher Justin Drake on August 4.

Members of the Ethereum community are divided over this plan. Stani Kulechov, founder of Aave, argued developers should focus on privacy and Ethereum’s role in financial systems instead.

Ted Pillows backed that opinion. writing:

“ETH should be focused on capturing more value and scaling the network. Build a valuable, scalable flywheel, not spend time talking about reducing staking fees.”

This proposal may support ETH’s long-term outlook for supply, by limiting new issuance. However, it will not have an immediate impact on prices. Near-term effects are largely determined by market expectations and a debate about validator incentives.

Ethereum Reclaims $2,000

Ethereum’s bullish confirmation will be when it closes above $1.885 for a period of four hours, followed by daily movement through the resistance zone between $1.918 and $1.940.

If ETH reaches those levels, it could cause short-liquidations. It will then be able to retest the $1975 and $2,000 levels. If the $2,000 level is sustained, then it will bring into focus the SMA 200 days at $2 074.

A second rejection under $1,900 is the beginning of a bearish scenario. A loss of $1,850 exposes $1,820, $1,800 and a close daily below the 50 day SMA, at $1 788, would weaken the recovery.

Ethereum’s capacity to return $2,000 for US investors will be more dependent on EIP-8361, broader risk appetite, and institutional flow than EIP-8361. This proposal could influence ETH’s long-term issuance policies, but first the price needs to escape from its current descending trend.