Ethereum price eyes 35% rally after 6,000 ETH gets burned in one week
Ethereum's native token, Ether (ETH), looks ready to undergo a massive rally due to a mix of technical and fundamental factors.
From a technical perspective, ETH's price now eyes a 35% rebound by the end of October after holding testing a key support level. This level is a rising trendline that has capped Ether's downside attempts since June 2022, as shown below.
In other words, traders have shown interest in buying Ethereum tokens near this level in recent weeks. Meanwhile, the accumulation sentiment has prompted the price to rise toward another significant level — a horizontal trendline resistance near $1,800, about 35% above the current price.
Ether supply drops by 6K ETH
The bullish technical outlook for Ether takes further take cues from its depleting supply in recent days.
Ether supply has dropped by nearly 6,000 ETH (~$7.9 million) since Oct. 8. That marks the Ethereum network's first deflationary move — where more ETH is being destroyed than created — since its switch from proof-of-work (PoW) to proof-of-stake (PoS) via the Merge one month ago.
Users must pay so-called "gas fees" to validators to confirm their on-chain Ethereum transactions. Historically, more Ethereum network traffic resulted in higher gas fees and more revenue for validators.
But after the August 2021 EIP-1559 update, a portion of the gas fee is permanently removed from Ether circulation. Simply put, more ETH gets burned in a high-demand environment.
The same started happening after Oct. 8 with evidence showing that a new crypto project named XEN Crypto is increasing network traffic. In the last seven days, XEN Crypto has contributed to the burning of 4,490 ETH tokens against 16,690.52 ETH tokens.
XEN Crypto started over the weekend with no supply.
Still, it was free to mint, requiring users to only pay ETH gas fees. In other words, a new project made Ether deflationary for the first time since Merge, currently comprising over 40% of all Ethereum transactions.
XEN is over 40% of all Ethereum Transactions. pic.twitter.com/Y5HO5MLN9U
— XEN Crypto Official (@XEN_Crypto) October 8, 2022ETH price long-term outlook remains bearish
Ethereum's outlook for the long term tilts bearish, nevertheless, due to constant macro warnings led by the Federal Reserve's interest rate hikes to hot inflation. Ether remains susceptible to these risks owing to its consistently positive correlation with U.S. equities.
Thus, a drop below Ether's current rising trendline support — as explained above — could mean further declines in the event of a technical breakdown, as show in the chart below.
Ascending Triangles are continuation patterns that resolve after the price breaks out in the direction of its previous trend. In ETH's case, the prevailing trend is downward, suggesting that the token's next course will be bearish if it breaks below the triangle's rising trendline support.
Related: Why is the crypto market down today?
As a rule, an ascending triangle breakdown prompts the price to fall to a level at length equal to the triangle's height. Therefore, ETH's profit target comes to be near $750, down approximately 40% from today's price.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.