Ethereum price tanked to a low of $2,100 today, Feb. 4, as the crypto market crashed and liquidations jumped. ETH token has slumped by 57% from it all-time high. However, the coin may rebound to $3,000 after forming an inverted head-and-shoulders pattern. It may also bounce back after Vitalik Buterin warned on layer-2 networks.
Vitalik Buterin’s Warning to Layer-2 Networks
Vitalik Buterin, the founder of Ethereum, delivered a major warning on layer-2 networks like Polygon, Base, and Arbitrum. In a long post, he noted that he did not see the use in Ethereum’s scaling.
He noted that layer-2 networks’ progress to stage two of interoperability was much slower than originally expected. Also, he argued that layer-1 was scaling and that its fees was too low today. He added that the original vision of a layer-2 network was no longer necessary.
Indeed, third-party data support this view as Ethereum’s fees have been in a strong downward trend in the past few months. The fees have slumped even in periods of high congestion, such that many developers and users are opting for the network.
Ethereum’s scaling has been a work in progress, including with some major upgrades like Fusaka and Pascal. This growth will likely continue when the developers implement the Glamsterdam upgrade later this year.
Buterin believes that layer-2 networks should identify greater value add other than scaling. Also, they should focus on specific application, add more features like oracle or decentralized dispute resolution, and support maximum interoperability with Ethereum.
A good example of this is Polygon, a leading layer-2 network that is focusing on the payment industry. Polygon has inked partnerships with top players in payments like Revolut, Shift4 Payments, and Stripe and is now handling millions of dollars a month.
Data shows that the Ethereum network is firing on all cylinders as its scaling grows. For example, its transactions jumped by 40% in the last 30 days, while active addresses have soared by 45% to over 15 million.
Ethereum Price Prediction: Technical Analysis
The weekly chart provides a contrarian long-term ETH price prediction. It has formed a giant inverted head-and-shoulders pattern, a common bullish reversal sign in technical analysis. Its current price coincides with the left shoulder of this pattern.
At the same time, the Relative Strength Index (RSI) is nearing the oversold level of 30. The two lines of the Stochastic Oscillator have moved to the oversold level.
Therefore, there is a likelihood that Ethereum price will rebound, and moved to the key resistance level at $3,000. Such a move would be a 45% jump from the current level.
The bullish ETH price forecast will become invalidated if it drops below the head section at $1,450.