Ethereum, the altcoin king, has been generating a lot of buzz lately. according to CoinGeckothe coin appreciated 4.5% on a weekly time scale.
This is due to the future “Shanghai” upgrade which is expected to increase the overall usefulness of Ether’s Layer 1 chain.
The term “Layer 1” describes the basic components of the network. Transactions on the L1 blockchain do not require additional network involvement for verification or settlement.
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The essence of the Upgrade
After the much-acclaimed shift from Proof-of-Work to Proof-of-Stake Consensus last year, Ethereum’s next big update is called Shanghai.
The team has stated that the upcoming Shanghai upgrade, which is scheduled to be released this September or later, will allow the withdrawal of staked ETH in addition to other small additions.
The most important development to come out of Shanghai is a proposal known as EIP-4895, which will allow those who participate in staking ETH to the Ethereum 2.0 contract to withdraw cash and staking incentives.
Another major highlight is the reduction in Layer-2 gas costs as improvements will be made to the L2s rollup system. This will allow more data to be processed in one transaction, hence the cost will be lower.
Short-Term: Anything can happen
While this news is good and all, the hype generated by this event can be sensational. Join, which was announced so much that the change happened, see ETH put after completing consensus changes.
This increase could be another news selling event that sees strong anticipation that the asset will rise in price. But with the upgrade happening over a long period of time, there may be a decline as macroeconomics play a big role in ETH price movements.
As of this writing, ETH is trading at $1,244, up 4.5% in the last seven days, data from Coingecko shows.
ETH total market cap at $152 billion on the daily chart | Chart: TradingView.com
If next week Consumer Price Index (CPI) data see if the macro trend increases, we can see the US Federal Reserve loosen up as they are aggressively try to pin inflation at 2%. A dovish central bank will see more investors believing that the market will be safe, thus moving their capital to more stable assets like crypto.
Meanwhile, Ethereum investors and traders should focus on consolidation above the $1,244 level. Bulls can and should target $1,270 short-term resistance to generate profits.
But just a few days before the CPI data is released, investors and traders should capitalize on this small gain made by Ethereum this week.
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