- Filecoin implementation of EIP-1559 confirms the transition from inflation to deflation.
- The upgrade on the network does not reduce network congestion whole miner rewards are greatly slashed.
- FIL is seeking support at the 100 SMA in a bid to secure the move toward $50.
Filecoin Foundation has popularized EIP-1559 as a solution to volatile prices on the network during times of congestion. The upgrade was initially a proposal but has transformed into an actionable upgrade currently being implemented on the mainnet.
EIP-1559 unlikely to relieve network congestion
Following the implementation of the proposal, Filecoin found that it achieved deflation and stimulated the price. However, reckoned that network congestion was not relieved. Moreover, the income miners get greatly slashed.
The Filecoin network's upgrade will serve as the benchmark for curbing network congestion and high gas fees on the Ethereum network. EIP-1559 is also referred to as the Ethereum Improvement Proposal. It is advocating for a new on-chain fee pricing mechanism called the market exchange rate. According to Filecoin:
"Ethereum EIP-1559 upgrade: (1) The overall shift from inflation to deflation, prices will be stimulated; (2) Network congestion will not be relieved, and the short-term still depends on the progress of Layer 2; (3) The income of miners will therefore be greatly reduced, estimated to be about 20%-35%."
Filecoin corrects from a 19% triangle breakout
Filecoin is trading at $39 after a recent rejection from highs around $45. Before the barrier, the token accrued massive gains after a technical breakout from a symmetrical triangle. The breakout target was achieved, but bulls lost steam leading to losses under $40.
In the meantime, FIL is seeking support at the 100 Simple Moving Average (SMA) on the 4-hour chart. Slicing through this zone is likely to see Filecoin extend the bearish leg to $35. The Moving Average Convergence Divergence (MACD) cross under the signal line reinforces the bearish outlook.
FIL/USD 4-hour chart
It is worth mentioning that if support at the 100 SMA stays intact, Filecoin will resume the uptrend toward $50. Closing the day above $40 would be a bullish signal.
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