Ethereum Price Rally Pauses as Traders Await Dencun Upgrade

Ethereum Price Rally Takes a Breather

The Ethereum price rally experienced a pause on Thursday after a week of excitement among crypto investors. The focus was mainly on the potential approval of Bitcoin spot exchange funds (ETFs), as there were signs that the US Securities and Exchange Commission (SEC) was warming up to the idea.

The second-largest cryptocurrency, Ethereum, followed the upward trend of Bitcoin and broke out of its longstanding downtrend. For the first time since August, Ether traded above $1,800, although it corrected to around $1,781 on Friday from its highs of $1,864.

Ethereum Price Consolidates Gains, Will It Breakout Again?

With the increasing adoption of Ethereum among traders and investors, the largest smart contracts token has shown a breakout above a falling wedge pattern. This breakout is significant as it is the first breakout above a multi-month trendline that has been in place since April, when the bullish outlook in the early months of 2023 faded at $2,138.

The price action of Ethereum has surpassed all three applied moving averages: the 21-day Exponential Moving Average (EMA) (red), the 100-day EMA (blue), and the 200-day EMA (purple). This has encouraged traders to hold their positions, while investors have resisted the temptation to sell at the slightest sign of profit.

The breakout of the falling wedge pattern was accompanied by a significant increase in trading volume, creating a favorable environment for a major rally. Ethereum's price is currently holding above the 38.2% Fibonacci retracement level, which is crucial for the continuation of the uptrend.

Traders are advised to proceed with caution and avoid panic selling. The Relative Strength Index (RSI) indicates a potential pullback. If the RSI falls back into the neutral area from the overbought region, there could be a decline in price, leading traders to close their positions to secure their gains.

The Ethereum Community Eyes Increased Scalability With The Dencun Upgrade

The Ethereum community is eagerly anticipating the release of the Dencun upgrade, which is expected to enhance the stability of the blockchain. According to a report by Goldman Sachs (GS), the primary impact of the upgrade will be an increase in data availability for layer-2 rollups via proto-danksharding. This will result in a reduction of rollup transaction costs, benefiting end users.

Layer 2 protocols are built on top of the Layer 1 blockchain, in this case, Ethereum, and are often referred to as off-chain systems or separate blockchains. Rollups process transactions on a separate, faster, cheaper, and more scalable blockchain, and then submit the transactions to the parent blockchain (layer 1) later.

The Dencun upgrade is expected to significantly enhance Ethereum's scalability through rollups, leading to lower gas fees and improved network security. This upgrade follows the successful Shapella upgrade, which achieved full staking status for Ethereum. The Shapella upgrade allowed investors to withdraw staked Ether on the Beacon Chain along with the rewards earned. It was particularly beneficial for Ethereum staking on platforms like Lido and Rocket Pool.

In conclusion, the Ethereum price rally took a breather after a week of excitement among crypto investors. The potential approval of Bitcoin ETFs and the upcoming Dencun upgrade are key factors driving the market. Traders should exercise caution and monitor the RSI for potential pullbacks, while the Ethereum community eagerly awaits the scalability improvements brought by the Dencun upgrade.