Ethereum halted its upward movement as Bitcoin does. The altcoin continues to consolidate near $1,600. Sellers put some pressure on the ETH price, but it was so insignificant that the cryptocurrency instantly recovered above $1,600. The fundamental background around Ethereum suggests that investment interest in the altcoin is likely to continue to grow. Despite this, we should not expect explosive growth of the asset in the short term.
From the technical point of view, the ETH/USD pair shows increased demand from buyers, as well as the formation of several strong support levels. One of them is located at $1,600, which sellers can't break through for the fifth day in a row. This suggests that buyers are in a strong position and remain bullish. Technical indicators continue to move flat. The MACD and the RSI continue to move in the bullish zone, which confirms the strong bullish sentiment.
However, the stochastic oscillator is signaling a local uptrend. The indicator is preparing to form a bullish crossover near the level of 65. This level is located in the overbought zone. We get to the main problem with the ether, which will prevent the coin from a strong uptrend. Over the past few months, commissions on the ETH network have updated swing lows due to a significant decrease in investment activity. However, in July, buying activity on the ETH network began to resume thanks to news about the PoS transition.
Subsequently, this had a fundamentally negative effect on ETH, as low gas prices triggered a peak in ETH coin inflation. As a consequence, the value of each ETH has declined significantly, which hampers the asset's capitalization growth. On the one hand, this is a good sign, indicating a recovery in trading activity. With time, ether may return to its usual state, which will stabilize the rate. On the other hand, Ethereum's inflation peak slows down the current price rally, and it is unlikely that the asset will be able to make a run to $2,000 in the near future.
In addition, we cannot rule out Ethereum's correlation with Bitcoin. The main cryptocurrency also suspended growth attempts due to sellers' activity. For ether, this also serves as a restraining factor, so August may become a month of consolidation or insignificant gains in the ETH/USD pair. At the same time, it is likely that positive data on inflation can fundamentally change the balance of power. If inflation starts to fall, it may trigger the rate cut campaigns. Powell said it would be done by the end of 2022.
If inflation data turns out to be positive, it is likely that the Fed may start easing monetary policy as early as September. In that case, Bitcoin, followed by Ethereum, will get a strong growth signal. However, we are talking about the fundamentals for a full-fledged bullish rally. Ethereum developers have said that the community is expecting several important updates in August that may accelerate the coin's transition to PoS. With this in mind, there is no doubt that Ethereum can continue to rise and try to reach $2,000.
