The Ethereum price retreated on Monday as the strong crypto rally fizzled. The coin declined from this week’s high of $2,697 to $2,550. It is still about 48% above the lowest level in July.
Most altcoins like Bitcoin have a close correlation with Bitcoin. Most times, these coins tend to move in the same direction as the BTC.
As a result, during the weekend, Ether surged to a multi-week high of almost $2,700. As this happened, Bitcoin also rose to more than $42,000. Therefore, the current retreat of Ethereum is partly because of the overall price action of Bitcoin.
Ethereum and other cryptocurrencies are declining partly because of the proposed cryptocurrency transaction taxes. This week being infrastructure week, some Senators have suggested adding taxes on crypto transactions. They hope to achieve this by expanding the definition of brokers to include entities that facilitate digital transactions. Their estimate shows that the new bill will raise $30 billion, which is a small amount of their $1 trillion bill.
Such a bill would hurt many cryptocurrency traders who will suffer higher costs of trading. It will also likely include transactions in the Decentralized Finance (DeFi) industry.
Ethereum is the leading infrastructure provider for the industry since it powers the biggest platforms like Curve Finance, AAVE, Maker, and Uniswap. The industry has made a spectacular recovery in the past few months. The total value locked (TVL) has jumped to more than $70 billion after it declined to about $45 billion in May and June.
London hard fork
While the Ethereum price is currently struggling, there is a catalyst that could push the price substantially higher. Ethereum developers are hard at work to migrate the platform from a proof-of-work (PoW) to a proof-of-stake (PoS) network. This will make it more efficient and safer to use. It will also lower gas prices.
This week, the network will go through the London hard fork, which is part of the upgrade. The hard fork will split the number of Ethers minted every day into three parts. It is estimated that there are 13,000 new Ethers issued every day.
The fork will also reduce the so-called user base fees that account for between 25% to 75% of the gas fees paid to miners. At the same time, it will introduce a burning feature in which the number of coins in circulation will be reduced. This, in turn, will likely lead to higher prices for Ethereum. The hard fork will take place between Wednesday and Thursday this week.
Historically, many cryptocurrencies tend to rally before and after a major software upgrade. Bitcoin rallied before the halving event in 2020 while Ethereum rose ahead of the ETH 2.0 launch.
Meanwhile, the Ethereum price will react to the latest US employment numbers that will come out on Friday. The numbers are expected to show that the economy added more than 900k jobs in July. These numbers are important because they tend to influence monetary policy.
Ethereum price analysis
The daily chart shows that the Ethereum price found strong support at $1,700. It failed to move below that level in May, June, and July. The coin also managed to move above the descending trendline last week. It has also risen above the 25-day and 15-day moving averages. Therefore, the coin remains in a bullish trend in the near term. If this happens, the next key level to watch will be the resistance at $3,000.