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EOS Price Analysis – dApps on the rise

Despite a shaky start, EOS has begun to find its footing amongst smart contract blockchains. The DPOS consensus mechanism and block producer validation model, albeit more centralized than other blockchains, is proving successful.

EOS has seen a wide range of pricing, but with shrinking volatility over the past month, and is currently down 77% from the record high set on April 29th. The market cap is the 5th largest among coins tracked by BraveNewCoin at US$4.82 billion, with US$754 million in trade volume over the past 24 hours.

EOS was created by Block.One. Much like Ethereum (ETH) and NEO (NEO), as well as other dApp or smart contract enabling blockchains, EOS can be thought of as a global computing network running smart contracts on Virtual Machines. ETH and NEO use gas to pay for units of computing power while EOS uses RAM.

The EOS platform also leverages Delegated Proof of Stake (DPOS), a consensus mechanism pioneered by EOS and Block.One CTO Dan Larimer. With DPoS, users vote for delegates, or Block Producers (BPs), who are considered trusted and good actors. The top 21 EOS BPs validate the blockchain, collect a passive income, and are expected to help further protocol development by proposing changes or improvements. Based on this structure, BPs have been able to successfully return hacked funds and users have voted out corrupt BPs who are not working in the interest of EOS.

The platform went live on June 14th, after raising ~US$4.2 billion in a year long ICO where the average token price was US$5.74. Currently, 60% of all tokens are being staked, and the network is confirming around 20 transactions per second. The record number of transactions on the network stands at 3996 per second.

The average number of transactions per day (line, chart below) rose dramatically throughout July and August but have since begun to decline. The average transaction value (fill, chart below) has declined dramatically since pre-July levels. Together, this suggests that the large spike in transactions was likely smart contract or dApp related and not necessarily transactions focusing on sending value.

EOS Price Analysis 21 Oct 2018 (1)

Source: coinmetrics.io

The 30-day Kalichkin network value to estimated on-chain daily transactions (NVT) ratio (line, chart below) has been steadily increasing since July. Inflection points in NVT can be leading indicators for a reversal of an asset’s value. A rising NVT suggests that a coin is overvalued and the market cap does not support the price based on its utility.

Daily active addresses (fill, chart below) have increased steadily since July. Active and unique addresses are important to consider when determining the fundamental value of the network based on Metcalfe’s law. The data for total unique addresses could not be obtained.

EOS Price Analysis 21 Oct 2018 (2)

Source: coinmetrics.io

The cost of RAM on the EOS virtual machine has remained low since early August, and is currently ~0.1709EOS/kb. RAM on EOS is subject to supply and demand, as well as speculation, and is required to create new accounts or interact with dApps. A few users attempted to corner the RAM market in July, when costs reached as high as 900EOS/MB. New account creation uses 4kb of RAM, which means that creating a new account in July would have cost ~US$32. The current cost is US$3.57. In response, 15 of the 21 EOS BPs recently approved a measure to double the supply of RAM, decreasing the cost.

EOS Price Analysis 21 Oct 2018 (3)

Source: [https://eos.feexplorer.io/](https://eos.feexplorer.io/)

The top dApps over the past week, ranked by volume, are dominated by gambling apps. Gambling dApps are popular because they are normally highly regulated in most countries but are currently outside of legal purview, at least for the moment.

BetDice is a simple cost-free app which allows players to bet EOS on whether a dice roll will produce a number lower than the user guesses. Rolling below lower numbers has a higher payout but lower probability of success. The app has had a staggering 3 million transactions in the past week and If the same app was run on ETH, there would be an additional transaction cost of US$600,000.

EOS Price Analysis 21 Oct 2018 (4)

Source: [https://dappradar.com/eos-dapps](https://dappradar.com/eos-dapps)

Turning to developer activity, the EOS project on GitHub has had a cumulative 646 commits over the past 90 days. EOS also released an update to EOSJS on October 4th and update to EOSIO on September 19th.

Most coins use the developer community of GitHub, which was acquired by Microsoft for US$7.5 billion. Files are saved in folders called "repositories," or "repos," and changes to these files are recorded with "commits," which save a record of what changes were made, when, and by who. Although commits represent quantity and not necessarily quality, a higher number of commits can signify higher dev activity and interest.

EOS Price Analysis 21 Oct 2018 (5)

In the markets, exchange traded volume is led by Tether (USDT), Bitcoin (BTC), U.S. Dollar and Ethereum (ETH) pairs. The exchanges with the highest volume include OKEx, Bitfinex, and Binance. EOS was recently listed in the Circle app and Bitfinex has announced a new EOS focused DEX called EOSfinex.

EOS Price Analysis 21 Oct 2018 (6)

Technical Analysis

EOS has largely remained in a steady downtrend over the course of most of the year. The highest probability for trend reversal typically occurs after a period of consolidation and bearish exhaustion. To help determine a possible trend shift, exponential moving averages (EMAs), Pitchforks, and Ichimoku Cloud can be used to find optimal entry and exits. Further background information on the technical analysis discussed below can be found here.

On the daily chart, the 50/200EMAs have been bearishly crossed for 77 days and price has failed to hold above the 50EMA since June. The volume profile of the visible range (VPVR) shows a gap below the local low at US$4.17 until US$2.10 suggesting that if the local low fails to hold, price will find the next support near US$2.10. Open interest for EOS/USD margin positions is currently 64% long and 35% short (not shown).

EOS Price Analysis 21 Oct 2018 (11)

A bearish Pitchfork (PF) with anchor points in January, March, and April draws a median line (ML) with a current value of ~US$2.10. Price will continually attempt to return to the ML (yellow) throughout any given trend. However, based on the current position of price, the bearish PF may be invalidated soon, with a candle close above the diagonal.

EOS Price Analysis 21 Oct 2018 (12)

Turning to the Ichimoku Cloud, four metrics are used to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, and the Lagging Span. The best entry always occurs when most of the signals flip from bearish to bullish, or vice versa.

The status of the current Cloud metrics on the daily time frame with double settings (20/60/120/30) for more accurate signals are bearish; price is below Cloud, Cloud is bearish, TK cross is nearly bearish, and Lagging Span is below Cloud and in price. A traditional long entry will not trigger until price is above the Cloud. A short entry will trigger with a bearish TK cross.

EOS Price Analysis 21 Oct 2018 (13)

The status of the current Cloud metrics on the twelve hour time frame with double settings (20/60/120/30) for more accurate signals are also bearish; price is below Cloud, Cloud is bullish, TK cross is bullish, and Lagging Span is below Cloud and in price. Again, a traditional long entry will not trigger until price is above the Cloud. A short entry will trigger with a bearish TK cross. Price and RSI have also moved lower following a multi-week triangle consolidation period.

EOS Price Analysis 21 Oct 2018 (14)

Lastly, EOS/BTC also has a similar bearish outlook; 50/200EMAs are bearish and Cloud is bearish with a pending bearish TK cross. A potential Cloud edge to edge trade, where price moves from the bottom to the top of the Cloud, has failed with a price breach below the Cloud support. Price is also sitting near a long term diagonal trendline support, which if breached, will likely result in a large down move.

EOS Price Analysis 21 Oct 2018 (15)

Conclusion

Despite a shaky start, EOS has begun to find it’s footing amongst smart contract blockchains. The DPOS consensus mechanism and block producer validation model, albeit more centralized than other blockchains, is proving successful. RAM costs have remained low and active addresses and transactions are up substantially since launch, which is likely correlated to the highly successful gambling dApps currently on the platform. From a fee standpoint, ETH-based dApps will be hard pressed to ignore the cheap transaction costs on EOS, which will likely cause of migration of more dApps to EOS. DEXs like Bancor and EOSfinex have also begun to make the migration from ETH to EOS, a survival of the fittest battle that will likely continue to play out for months to come.

Technicals for EOS continue to lean strongly bearish. Trend and volume based analysis conclusively show a denied attempt at trend reversal when using Pitchforks and Ichimoku Cloud. A price drop to ~US$2 is possible, especially if BTC breaks for lower lows below US$5,800. Alternatively, the bearish trend will end if price breaks above the bearish Pitchfork and Cloud. However, it is likely that the bear trend will continue to be your friend.


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