Analysts caution against a potential “buy the rumor, sell the news” pullback for ETH while historical data shows that the price tends to rise following major network upgrades.
Ethereum advocates are bubbling with anticipation over the upcoming London hardfork which is scheduled to take place at block height 12,965,000 on Aug. 5.
Data from Cointelegraph Markets Pro and TradingView shows that the price of Ether rallied from a low at $2,450 in the early hours on August 4 to an intraday high at $2,772 for an 8.2% gain on the day.
One of the most common occurrences in the crypto market is a large price run-up ahead of a major news announcement or protocol upgrade which is subsequently followed by a price dump as those who got in early cash-out to lock in gains and those who were late to the party become bag holders.
Ethereum’s London hard fork has been one of the most talked-about events of 2021 so it would be short-sighted to assume that the price is only going to go up, a point highlighted in the following tweet from Murfski, a pseudonymous analyst on crypto Twitter.
We all ready to sell the news?
**Turns Notifications Off** pic.twitter.com/Ve7FgUHzcF
— Murfski (@Murfski_) August 4, 2021
As shown in the chart provided, the analyst cautioned against assuming Ether price would pump above $3,000. According to Murski, if the price managed to hit $3,000, it could quickly be followed by a pullback to as low as $2,000 if the token sells off following the upgrade.
While nothing is certain, the historical trend of price dumps following major developments should not be dismissed despite the bullish price-performance seen from Ether.
“In my defense, I was bullish at the bottom. As we approach the range highs you better be cautious. Good luck.”
Hard forks have historically been bullish for Ether price
Insight into what to expect from Ether price following the London hard fork can be gleaned from looking at how past upgrades affected the price. According to cryptocurrency analyst Josh Olszewicz, local highs in Eth come an average of 80 days following major upgrades.
$ETH local highs have historically occurred 80 days, on average, after previous hard forks
if London is similar, local high should occur around late October/early November pic.twitter.com/YFtj9L1Kiz
— Josh Olszewicz (I will not dm you) (@CarpeNoctom) August 4, 2021
These observations by Olszewicz were further confirmed by crypto economist Ben Lilly, whose detailed breakdown shows that the average returns after upgrades were “5.1% in the following 30 days, 28.8% after 60 days and 64.4% after 90 days.”
Due to this historical performance, Lilly is cautiously optimistic that there are still gains to be had in the future for Ether following the London upgrade.
“While at first glance a lot of the gains we typically see with Ethereum upgrades might have already played out, I suspect there is still room. This is especially true when we lean on our internal signals, which are hinting at bullishness for ETH. London is definitely a great catalyst event to watch unfold in the coming days to weeks.”
Related: DeFi attracts 2.91M Ethereum addresses, according to ConsenSys
A short-term correction could occur in the short term
According to Cointelegraph contributor Michaël van de Poppe, there is a possibility of a pullback once the hard fork is implemented.
I’m expecting a short-term top to be happening tomorrow on $ETH.
Healthy correction after EIP-1559 before the heaviest bull run of them all happens.
— Michaël van de Poppe (@CryptoMichNL) August 4, 2021
While van de Poppe expects a short-term correction in Ether price, his long-term perspective for the altcoin is bullish and he predicts that “the heaviest bull run of them all” will come after the pullback.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.