According to CoinMarketCap data, Ethereum is approaching $1,800, but there are concerns that it will break this support level in the total cryptocurrency market by showing a significant downward trend. So what do the latest data show on the leading smart contract platform?
A close look at the daily chart reveals that Ethereum is in a consolidation phase and finds support near an important trend line. The trend line is aligned with the 50% Fibonacci retracement and the $1,800 support levels. This convergence of factors may attract buyers, enabling them to enter the market with a clear risk management strategy and set stop-loss orders below the trend line. Their goal may be to take advantage of a potential breakout above the resistance.
If the price of Ethereum falls below this trend line, it is expected that sellers will become more active and potentially pull the price down to the $1,600 support level. When zoomed in, it is clear that the price movement is confined within a range around the support area. This may indicate that market participants are expecting a significant event or catalyst that will give direction and momentum to the price movement.
However, the macro-level outlook may not currently indicate a major move on either side. According to cryptocurrency research platform Kaiko, Ethereum and Bitcoin now have lower 90-day volatility levels than oil. While ETH and BTC volatility have dropped to the lowest levels in recent years at 37% and 35% respectively, oil is at 41%.
On top of this stagnation, news about Layer 2 solutions on the Ethereum network may not be very helpful. Vitalik Buterin, the co-founder of Ethereum, revealed that Layer 2 projects such as Arbitrum and Optimism, designed to increase scalability, have a backdoor in the Ethereum blockchain.
This understanding challenges the concept of full decentralization in these scaling solutions. It aligns with the views of crypto and DeFi analyst Chris Blec, who sees Layer 2 projects as resembling some sort of banking 2.0 and therefore sensitive to future regulations.
Despite their popularity in increasing efficiency and reducing transaction costs, Layer 2 solutions like Arbitrum and Optimism have sparked controversy due to the existence of this backdoor. All Layer 2 projects and aggregators may include a backdoor feature that allows developers and project owners to access multi-signature wallets for protocol changes.