The price of Ether (ETH) has broken past the $4,000 price level following months of lackluster price performance — reclaiming levels not seen since March 2024.
According to data from CoinMarketCap, the price of Ethereum is up 2.8% on the day and has gained 10.7% over the past week.
Ether’s positive performance follows months of trading below its 200-day exponential moving average, which is a dynamic level of support. Currently, the relative strength index (RSI) is approximately 71 and entering into overbought territory.
From August until early November, Ether experienced sideways price action until the current rally ignited on Nov. 6 in response to Donald Trump’s electoral victory.
Analysts believe that the price of Ether could reach $7,000 during the current market cycle, bolstered by record inflows from exchange-traded funds and a robust ecosystem of developers building on the Ethereum blockchain.
Ethereum price action. Source: TradingView
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Ethereum layer-1 revenues imperiled by L2 competition
The release of the Dencun upgrade in March 2024 dramatically lowered fees for Ethereum layer-2 scaling networks, causing Ethereum layer-1 revenues to collapse by 99%.
Decreased fees translated into reduced demand for the native asset of the smart contract platform. However, network fees began to rebound in September.
Data from Token Terminal shows the Ethereum base layer generated approximately $10.9 million in fees on Dec. 5. For comparison, Ethereum generated fees in the $500,000 range during the height of the fee suppression in August.
Ethereum layer-1 network fees June-December 2024. Source: Token Terminal
The collapse in layer-1 revenues prompted some investors and analysts to proclaim that the Ethereum network was dying due to cannibalization from competing layer-2 networks.
Longtime Ethereum Foundation researcher Justin Drake proposed saving the Ethereum roadmap by introducing a native sequencer on the layer-1 network run by Ethereum validators. A sequencer allows layer-2 scaling solutions to order transactions.
Drake explained that introducing a layer-1 sequencer for Ethereum would boost composability between decentralized applications and rollups in the ecosystem.
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This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.