Ethereum Price Forecast: Value Accrual Risks and Market Dynamics

Ethereum’s price currently stands at $1,580, showing a downward trend due to the challenges posed by its data availability roadmap. The upgrade in March 2024 has enhanced scalability but negatively impacted fee capture compared to competitors, particularly Solana and BNB Chain. Analysts suggest critical price support levels between $1,450-$1,550, with potential further bearish indications in technical indicators such as RSI and MACD.

Ethereum’s current price is approximately $1,580, reflecting a 1% decline as the market faces challenges. Binance Research indicates that the data availability roadmap has constrained Ethereum’s value accrual, leading to decreased fee capture compared to Solana and BNB Chain since the introduction of “blobs”. The fragile support level for ETH appears to fall between $1,450 and $1,550 amid weakening technical indicators, which raises concerns about its price momentum.

The Dencun upgrade implemented in March 2024 significantly improved Ethereum’s scalability, achieving a scale factor of 15.95x. However, this boost resulted in reduced Layer 1 (L1) fee capture as Layer 2 (L2) solutions, such as rollups, experienced greater throughput and maintained low costs, undermining the “ultrasound money” principle based on gas fee revenues. Consequently, Ethereum is losing fees to competitors like Solana and BNB Chain.

To mitigate value accrual challenges, the Ethereum community has proposed reforming the blob fee market while simultaneously increasing blob counts. Nonetheless, the report cautions that L2 solutions might consider switching to more cost-effective alternatives if blob fees rise excessively. Alternative data availability layers like Celestia and EigenLayer offer enhanced throughput with minimal costs, posing additional competition for Ethereum.

Despite increased competition, Ethereum remains superior in security, with over 1 million nodes compared to Celestia and EigenDA’s 100 and 170 nodes, respectively. Based rollups have demonstrated potential to enhance ETH’s fee capture significantly, as evidenced by Taiko’s performance, which outperformed the top three L2s with minimal data contribution to the L1. Notably, based rollups are not prioritised in the imminent Pectra and Fusaka upgrades.

In the last 24 hours, Ethereum has witnessed $57.08 million in futures liquidations, with $38.16 million for longs and $18.92 million for shorts. The price has progressively tilted downward following resistance at $1,688, indicating that if ETH can turn existing resistance levels into support, a recovery may be on the horizon. However, the $1,450-$1,550 range is crucial as it previously supported buying activity over 1.2 million ETH.

Technical indicators reveal that the Relative Strength Index (RSI) is currently under its neutral position, suggesting further bearish pressure may arise if it remains below the moving average line. Concurrently, the Moving Average Convergence Divergence (MACD) is producing smaller green histogram bars, signalling a decline in buying momentum, emphasizing the need for cautious optimism regarding ETH’s price movement.