Ethereum’s transition from Proof of Work algorithm to Proof of Stake requires a lot of changes. One of the milestones of this journey is right in front of us. The London Hard Fork is just around the corner!
An extended wait and high hopes
Updates like to have delays. This time is no different. The London Hard Fork, scheduled for mid-July, after a slight slip is now just around the corner. Its launch is announced for August 3-5. To be precise, it will appear with the block number 12,965,000.
The fork will include several key changes. Here is what the developers of the second strongest cryptocurrency are preparing for us:
– EIP-1559 – fee change for Ethereum 1.0 chain,
– EIP-3198 – code BASEFEE,
– EIP-3529 – reduction of refunds in the area of gas fees,
– EIP-3541 – rejection of new 0xEF contracts,
– EIP-3554 – delaying the so-called hardship bomb until December 1, 2021.
Of course, the biggest market excitement is over the first of the proposals, EIP-1559.
EIP-1559 and its significance for Ethereum
We covered this change very extensively in the article titled “What EIP-1559 means for Ether”. If you haven’t read it yet and are interested in the Ethereum project, be sure to take a look! In a nutshell, EIP-1559 will force the network to partially burn ETH tokens during their transfer. This will involve reducing the fraction of tokens that will not have the ability to return to the network.
The EIP-1559 update could have very interesting long-term implications. Assuming exponential growth in the utility of the Ethereum network, it can be expected to help change the nature of Ether and make it deflationary. Looking ahead, this would be due to increasing demand that would simultaneously encounter decreasing supply. Such a factor could result in significant price increases.
The London Hard Fork is just a stop on the long road Ether has to take to transition to version 2.0. It is also necessary for subsequent updates to take effect over time. Without it, the transition process could have been significantly prolonged, perhaps even impossible.
Ether’s reaction to the upcoming update
Watching the ETH price action, there are a few interesting factors. First and foremost, Ether has recently perfectly defended the level near $1,750, testing it twice in the process. Thus, it formed the double bottom marked on the chart. At the same time, combining the lowest daily price closes, comparing them with the RSI, we observe a bullish divergence, which has been played out through the price increase since July 21. The uptrend resulted in the formation of a “W” pattern, which, if played out, could lead to a breakout of the resistance at the levels near $2,880, pushing the value of ETH to near $3,000 (blue dotted line). A possible negation of the pattern could lead to a drop to the USD 2,040 level, and a failure to successfully defend this level will result in a retest of USD 1,750 and possibly the formation of a triple bottom.
