Ethereum Price Analysis – Increasing experimentation and awareness

Ethereum (ETH) has quietly trended sideways over the past week. The market cap now stands at $84.27 billion, with US$980 million traded on exchanges in the past 24 hours.

The Ethereum Enterprise Alliance (EEA), which aims to nurture and enable further Ethereum based technologies, recently announced 83 new members. The Enterprise Ethereum Alliance is a non-profit corporation that connects Fortune 500 enterprises, startups, academics, and technology vendors with Ethereum subject matter experts. While the name Enterprise Ethereum Alliance is a trademark of the Ethereum Foundation, it does not create a partnership, agency, sponsorship, endorsement or any other similar relationship between the Enterprise Ethereum Alliance and the Ethereum Foundation.

Porsche has also been testing the Ethereum blockchain, in collaboration with XAIN, a Berlin-based start-up. XAIN won the first “Porsche Innovation Contest” on the subject of blockchain in the summer of last year, beating over 100 other applicants in the process. Following the contest, interdisciplinary teams from across Porsche worked in collaboration with XAIN over the course of three months to develop and test applications. Blockchain was introduced into the Porsche Panamera using an energy-efficient mining process from XAIN. In addition, Porsche is currently working on further applications for the technology, including in the areas of charging and parking.

However, transactions per day and transaction fees are both down sharply after peaking in late December and early January. This pattern largely follows the price of ETH itself. Transactions on the network will likely increase dramatically when price volatility returns.

The Ethereum network hash rate and difficulty are pushing new record highs, despite the hard fork in October 2017 decreasing the block reward from 5ETH to 3ETH. Mining profitability is currently ~69% down from peaks established in both June 2017 and January 2018. Both of these time periods were marked by record price levels and peaks in transaction fees.

A major driver of the network has been the Initial Coin Offering (ICO). According to ICO tracker CoinSchedule, almost US$4 billion was raised in ICOs during 2017. Over half of that figure has already been raised in 2018, 67 ICOs have raised in excess of US2.7b. The communications sector has lead the charge, thanks to Telegram’s US$850 million round one pre-sale. These statistics exclude Venezuela’s Petro ICO, which has not been able to be verified. The Petro tokens remain in a single address.

In an effort to combat fraud in the nascent ICO funding space, the Security and Exchange Commission has begun to crackdown. As many as 80 subpoenas have been sent to companies and individuals recently, according to a former lawyer in the S.E.C.’s enforcement division, Nick Morgan. ICOs are also prone to hacking, with an estimated US$400 million stolen since 2015 according to auditor Ernst and Young.

In a rare twist of fate, a hacker recently returned 20,000ETH stolen from the CoinDash ICO in July 2017. The Israeli startup planned to raise capital by selling its own digital tokens in exchange for ETH, but just 13 minutes into the token sale an attacker hacked the project’s website and changed the advertised wallet address to a fake one. The “unknown perpetrator” originally diverted 43,000ETH.

A second driver of network used is the success of Decentralized Applications (dApp) According to dApp tracking website dAppradar.com, the two most used Ethereum based dApps over the past week have both been decentralized exchanges. The sector accounted for more than 72,000ETH in transactions.

A new dApp called CryptoCountries, a smart contract allowing users to buy countries and compete for ownership, made it’s developer US$500,000 in 24 hours. Etheroll and CryptoKitties had the highest volume over the past week, and operate in the casino and game categories respectively.

The dApp browser metamask.io was recently updated with a new UI, and has had over 1 million installs according to Joseph Lubin, the Ethereum co-founder and Consensys founder. Lubin was recently on CNBC, where he further discussed the demand of dApps and Ethereum.

Exchange traded volume is led by the Bitcoin (BTC), Tether (USDT), and U.S. Dollar (USD) pairs. The majority of trading has been conducted on OKEX, Binance, Bitfinex, and GDAX. The Korean Won (KRW) trading pair holds a premium of 1.6%.

The Over The Counter (OTC) exchange LocalEthereum averaged ~200ETH per day in transaction volume over the past week. In comparison, LocalBitcoins averaged 5,753BTC worldwide in the past week, according to coin.dance. Traditional OTC desks often require a minimum order of between US$100,000 and US$250,000, whereas these peer-to-peer marketplaces have no minimum order size.

Technical Analysis

ETH has been essentially trendless on high time frames, since posting a record high in January. The overarching trend continues to be bullish, and a return to this trend can be confirmed using Ichimoku Cloud and Moving Averages. Further background information on the technical analysis discussed below can be found here.

The Ichimoku Cloud metrics on the weekly chart, with singled settings (10/30/60/30) for quicker signals, remain strongly bullish. Price has stayed above the Kijun, or mean, for seven weeks. Bounces like this are strongly suggestive of momentumless bullish continuation.

The Ichimoku Cloud metrics on the daily chart, also with singled settings, are mostly bearish, excluding the TK cross. The Tenkan (T) and Kinjun (K) lines have recrossed bullishly, suggesting bearish momentum has begun to wane based on Cloud probability. Should bullish momentum exist on or near March 10th, price will likely move upward, through the Kumo twist. The 50EMA is also currently acting as resistance, around US$893. This zone will typically be used as a stop loss zone, based on the fractal stop.

The Ichimoku Cloud metrics on the daily chart, with doubled settings (20/60/120/30) for more accurate signals, are neutral based on the position of price in the Cloud. A short entry opportunity would be indicated by the price falling below the Cloud, when the Cloud itself is bearish. Price will likely move to the mean, Kijun, at around US$994. A long entry would be indicated when price moves above Cloud, as the TK cross is already bullish.

On the twelve hour chart, Bollinger bands (BBands) are the tightest they have been since March 2017, when a break in the bands led to an explosive bull run. BBands measure volatility over time, and attempt to predict the resolution of consolidation. The volatility channel between the upper and lower bands will squeeze during low volatility and expand during high volatility. The position of price relative to the median, above or below, helps to predict the bias of the breakout.

On the four hour chart, the 50EMA and 200EMA cross remain bearish. A long entry would be indicated by a bullish 50/200EMA cross. Volume has also decreased dramatically since the beginning of February. A large increase in volume will likely confirm the direction of the breakout.

Lastly, ETH/BTC on the daily chart has fallen below the 200EMA and dropped below Cloud, both indicating strong bearish momentum. Price has also formed a bearish head and shoulders pattern, currently breaking support. The measured move, 1.618 Fibonacci extension, and monthly pivot all point to 0.050BTC, a strong psychological support as well.

Conclusion

Fundamentals continue to show an increase in network experimentation and awareness, despite the drop off in transactions over the past month. Overall network use has recently been driven by dApps, mainly DEXs, and ICOs.

Technicals are neutral, but leaning bullish with no momentum. BBands and volume on high timeframes are set to break bullishly around March 10th. A long entry is warranted as soon as there is a close above the twelve-hour BBands, with an expected target and retest of the all-time high in December.