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Ethereum Price Analysis – Buterin reinvents the ICO

Having gained over 11,000% last year and making a new all time high, Ethereum (ETH) dropped sharply this week. The market cap currently stands at US$97.1 billion, with US$7.1 billion traded over the past 24 hours.

Having gained over 11,000% last year and making a new all time high, Ethereum (ETH) dropped sharply this week. The market cap currently stands at US$97.1 billion, with US$7.1 billion traded over the past 24 hours.

The number of transactions per day on the networks continues to rise, with Initial Coin Offerings (ICOs) and Decentralized Applications (dapps) continuing to bloom. Over US$1.35 billion was raised by ICOs last year, accounting for ~83% of all ICO funding ever raised.

While ETH continues to hold a relatively low Network Value to Transaction ratio, suggesting the coin is undervalued, it seems doubtful the current pace can be sustained.

Ethereum Price Analysis 18 Jan 2018 1In an effort to create more responsible ICOs, Ethereum founder Vitalik Buterin discussed a new ICO fundraising model which borrows properties from the DAO and is dubbed a Decentralized Autonomous Initial Coin Offering (DAICO).

This new model allows users to determine how much the team receives over time, by voting on the “tap.” The team is therefore rewarded for their performance, and not immediately given access to millions of dollars before a project is worked on or completed.

Ethereum Price Analysis 18 Jan 2018 2The Ethereum network Hash rate and difficulty continue to rise. The most recent hard fork decreased the block reward to 3 ETH from 5 ETH, and the difficulty was lowered accordingly. Block times are up slightly, at 15 seconds.

Ethereum Price Analysis 18 Jan 2018 3With the lowered block reward and difficulty rising, mining profitability will begin to decrease substantially, should the price remain stagnant or decrease. Rising prices generally mean rising mining profitability, but also attracts more hashing power to the network.

These protocol level changes are an attempt to reduce inflation, while the continuing move towards Proof of Stake (PoS) from Proof of Work (PoW) is an effort to address scalability concerns. Unconfirmed transactions, currently at 16,000, have been around 20,000 since the beginning of the year, with network fees at all time highs.

On the exchange side, ETH trading volume has been led by the US Dollar (USD), Bitcoin (BTC), and the Tether (USDT) trading markets. South Korean Won (KRW) trading volume is down sharply, likely due to regulatory uncertainty around the South Korean government’s stance on cryptocurrency exchanges.

Ethereum Price Analysis 18 Jan 2018 4Technical Analysis

Although the recent ~50% correction seems dramatic, it’s always important to check long term support and resistance zones with indicators such as EMAs and the Ichimoku Cloud. These tools can indicate where reversals and new trends may form. Whether or not an asset misses an exact support level is irrelevant, as the price will almost always reach for key levels and, in this case, spring back quickly if bullish continuation is expected to occur.

On the daily chart, the price is holding well above the 50 and 200 Exponential Moving Averages (EMAs), and bounced fervently off the 50EMA. If it breaks below the 50EMA, a touch of the 200EMA will be likely. Similar events occurred in July and September.

Ethereum Price Analysis 18 Jan 2018 5All the signals from the Ichimoku Cloud on the daily chart, using singled settings (10/30/60/30) for faster signals, are bullish with a strong upward slope.

The Cloud uses a moving-average-type system with dynamic support and resistance to make projections of key zones, as well as capturing 80% of any given trend. As long as the price remains above the Cloud, sentiment remains bullish. Price in the Cloud indicates a neutral trend, and below the Cloud indicates a bearish trend.

When the Tenkan (blue) is over the Kijun (red) sentiment is bullish, as shown below. When the Kijun is over the Tenkan sentiment is bearish. When the Lagging Span (dark green) is above the Cloud and current price sentiment is bullish, as shown below. When the Lagging Span is below the Cloud and current price sentiment is bearish.

The best entry signals when using this indicator occur when the trend is obvious, but 1 or 2 of the signals have yet to become confluent on a higher timeframe trend.

As the price gets further and further away from Kijun (red), it will eventually want to retest the mean as support. So either; price goes flat allowing the Kijun to play catch up, or, price falls towards the Kijun.

The price recently dipped well below the Kijun (red) and recovered, as it did in late December. This is typically viewed as an extended correction driven by emotion. This indicates that the trend remains heavily bullish with no indication of a long exit. A key exit signal would be a bearish TK cross.

Ethereum Price Analysis 18 Jan 2018 6

All the signals from the Ichimoku Cloud on the daily chart, using singled settings (20/60/120/30) for more accurate signals, are also bullish with a strong upward slope. This also indicates that the trend remains heavily bullish with no indication of a long exit.

Ethereum Price Analysis 18 Jan 2018 7On the four hour chart, the price is below Cloud with a bearish TK cross. Cloud will likely also flip bearish shortly. Overall, this is the best outlook for a bullish re-entry because the signals are essentially resetting. The best entry will always occur when bearish signals flip bullish again, as was the case around December 28th, the bottom of that uptrend. This may also be preceded by an Adam (V) and Eve (U) double bottom before a kumo breakout around the end of the month.

Ethereum Price Analysis 18 Jan 2018 8Conclusion

The necessary scalability conversation will continue among Ethereum and other blockchain developers through 2018. Ethereum has continued down the path of shifting from PoW to PoS through a series of planned hard forks. Constantinople, the next hard fork, will likely introduce a further shift towards PoS with Casper.

Technicals show a pullback towards an expected mean reversion. There are currently no targets for bullish continuation other than the high likelihood of trend continuation. After US$1,400, ETH re-enters price discovery mode with a yearly pivot horizontal resistance around US$1,900.


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