As the trading pair of Ethereum (ETH) against Bitcoin (BTC) (ETH/BTC) has seen its Bollinger Bands compress to the narrowest level in years, the market expects that this trading pair will experience significant volatility, and the upcoming Pectra upgrade may serve as a catalyst for this volatility.
ETH/BTC consolidation accumulates energy
According to CoinDesk reports, the Bollinger Bands for ETH/BTC on the daily chart have compressed to the lowest level since June 2020. Bollinger Bands are a technical analysis tool that measures asset price volatility, and when the range of price fluctuations narrows, it typically indicates that the market is in a low-volatility consolidation phase, potentially leading to sharp price movements.
According to previous reports from Zombit, ETH/BTC has formed a large number of long and short positions within the range of $95,700 to $97,000. Well-known trader TheKingfisher mentioned on X (formerly Twitter):
These price levels become magnets for the market, and significant oscillations and fluctuations are expected when testing these levels.
CoinGlass data also indicates that current selling liquidity is mainly concentrated around $96,000.
Pectra upgrade may become a driving factor
Market observers generally believe that the Pectra upgrade implemented on May 7 may trigger a potential eruption of volatility in ETH/BTC. This upgrade is seen as a significant advancement in Ethereum's blockchain scalability and validator operations, expected to have a substantial impact on market activity.
Key focus of the upgrade includes:
Increase the staking cap for a single validator from 32 ETH to 2,048 ETH.
Increase the number of 'blob' data units per block from 3 to a maximum of 9, significantly increasing data capacity.
Advance the transition to the EVM Object Format (EOF), aimed at improving the efficiency of smart contracts.
Analytical agency Nansen stated:
Layer-2 networks will be the biggest beneficiaries of this upgrade. By increasing blob capacity and raising the cost of call data, the Pectra upgrade further solidifies Ethereum's core role as a data availability layer and strengthens its rollup-centric scaling strategy.
Nansen also pointed out that applications in decentralized finance (DeFi), NFT, and blockchain gaming may also benefit from these improvements.
Market direction is unclear
Traders and analysts unanimously agree that the market is currently in an energy accumulation phase. Although the direction of future breakthroughs remains unclear, historical experience shows that Bollinger Band breakouts are often accompanied by significant price changes. Noted crypto analyst Michaël van de Poppe added:
If ETH/BTC can hold the support range of $91,500 to $92,000, it will lay the foundation for challenging historical highs.
On the other hand, he also warned that the interest rate decision to be announced by the U.S. Federal Reserve (Fed) early tomorrow may affect market sentiment in the short term, and investors should remain vigilant.
Source
