Critical Analysis for Ethereum: ETH is Ready to Explode, But in Which Direction? Analyst Explained!

The largest altcoin Ethereum (ETH) has been lagging behind Bitcoin for a long time and continues to show weak performance against Bitcoin.

ETH/BTC has dropped to its lowest levels in a long time, while market analyst Omkar Godbole stated that the Bollinger Bands on the ETH/BTC chart have reached their narrowest level since June 2020.

An analyst indicating that this situation points to a possible increase in volatility stated that investors should follow the ETH/BTC chart this week.

The analyst, who stated that the squeeze indicates that Ethereum may soon experience increased volatility against BTC, noted that investors need to closely watch which direction the price breaks.

An analyst stating that the situation in the ETH/BTC chart is referred to as "Bollinger band squeeze" said, "This situation occurs when the bands narrow tightly and indicates low volatility and a consolidation period. The market typically generates energy during the squeeze, and this energy is eventually released in both directions, leading to a volatility explosion."

The increased volatility signal in the price of Ethereum comes ahead of the Pectra upgrade scheduled for May 7.

The Ethereum Pectra upgrade aims to improve scalability and may affect market activity. The Pectra upgrade significantly increases the maximum amount of ETH that a validator can stake from 32 ETH to 2,048 ETH.

In a recent report, Nansen stated the following regarding the Pectra upgrade:

"Layer-2 networks will benefit the most from the Pectra upgrade. By doubling the blob capacity and making call data more expensive, Pectra is standardizing blob data transmission for collection."

This strengthens Ethereum's role as a data availability layer and enhances the aggregation-centric scaling strategy. Subsequently, an increase in DeFi will also be observed.