EOS Price Analysis - US$2.6b already raised in ongoing ICO

EOS has set out an ambitious plan, to create “the most powerful infrastructure for decentralized applications” and has been described by some as an “Ethereum Killer.”

The token was created by Block.One, a company based in the Cayman Islands. The company is led by founder and CEO Brendan Blumer as well as CTO Daniel Larimer. Blumer began his entrepreneurial career at 15, selling currencies in MMORPGs, and later moved into real estate. Larimer’s previous projects include BitShares, a stack of financial services including exchange and banking on a blockchain, and SteemIt, a blockchain based social media platform.

The standout feature of Larimers’ new project is Delegated Proof of Stake (DPOS), a consensus mechanism pioneered by the CTO. DPOS is currently being used by BitShares, SteemIt, Lisk, Ark, Tezos, and others. The key difference between Proof of Stake (PoS) and DPoS is the staking structure.

PoS allows any user to hold a stake in a blockchain by simply holding the coin. This stake entitles the holder to a reward. This sometimes requires running a masternode, which requires a large amount of the currency. Holders can also leverage staking pools, where users pool their holdings and share any rewards.

With a DPoS system, users vote for delegates, or Block Producers (BPs), who are considered trusted and good actors. Top BPs are expected to not only collect a passive income for keeping the blockchain secure, but also help to further protocol development by proposing changes or improvements.

Typically, the top 100 BPs by votes are paid for their services, with the top 20 BPs earning the highest reward. Should any of these BPs go against the community’s wishes, they can be fired and replaced. To encourage voting participation, EOS has implemented a vote decay system with newer votes carrying the most weight. Older votes decay and have a minimal impact after two years.

The governance structure is similar to that of a two-layer representative democracy with landowner suffrage. Each stakeholder has influence proportional to their stake in the system. BPs can also offer reward sharing to encourage votes from stakeholders. However, this encourages BPs offering the highest reward to stakeholders to become elected and does not necessarily encourage what is in the network’s best interest.

The current reward for staking on the EOS blockchain, beyond voting on network proposals, is use of the Virtual Machine (VM) components, including; bandwidth, RAM, and storage. This enables the potential of arbitraging EOS stake for EOS computing power but also creates a type of company scrip, whereby workers are paid in a resource which can only be consumed in the same system. This system also makes it possible to lease token capabilities to other users while retaining token ownership, and is one way of rewarding stakers without diluting the value of all tokens.

The annual EOS inflation rate is hard capped at 5%, where 1% is a proposed cap for BP rewards. The other 4% would fund worker proposals, which includes anything the community thinks is a good idea and approves. The inflation rate distribution within the 5% limit can fluctuate depending on community governance.

Aside from the governance structure, DPoS attempts to improve upon the scalability of PoS. EOS claims to have the ability to eventually reach “millions of transactions per second (TPS), eliminate user fees, and allow for quick and easy deployment and maintenance of decentralized applications.”

On April 5th, the latest software update, Dawn 3.0, was the first feature-complete pre-release of EOSIO and comes with a 0.5 second block interval. The targeted release EOSIO 1.0 is June 2018 and will have a baseline capability of 1000 TPS and be theoretically capable of 6000 TPS, according to Larimer. The current EOS protocol has reached 600 TPS on a testnet. Read the full EOS technical white paper here.

EOS Price Analysis 17 April 2018 1The EOS ICO is structured to create one billion EOS tokens in multiple phases over one year, 90% of which will be sold in the crowdsale. According to Blumer, “We felt an approximately year-long token distribution was the best method to ensure people receive fair market value for EOS Tokens.” 100 million tokens will be kept for the EOS team.

The first phase, a five day period beginning on June 26th, 2017, sold 200 million tokens at a price of US$0.8605. The current phase includes 350 rounds, each lasting 23 hours. Token prices change in each round based on the total ETH contributed.

So far, the ICO has raised 5,148,884.15ETH, over US$2.833 billion, or 5.2% of all ETH currently available. EOS tokens have averaged a price of US$4.42 or 0.00747704 ETH for each token.

EOS currently has a US$6.449 billion market cap, based on it’s ~US$8 market price and 796,942,924 available supply. Exchange traded volume exceeded US$437 million in the last 24 hours, predominantly from Tether (USDT), Korean Won (KRW), and Bitcoin (BTC) trading pairs. The majority of trading has occurred on OKEX, Huobi, Bitfinex, Bithumb, and Binance.

EOS Price Analysis 17 April 2018 2Technical Analysis

EOS was first listed on a secondary market after the first phase of the ICO in July 2017 and therefore does not have ample price history. Lower time frames than the daily can be reliably used in this case to help determine if a trend exists, and where support or resistance targets may be located.

The status of any existing or emerging trend can be determined using Ichimoku Cloud, Moving Averages, and Chart Patterns. Further background information on the technical analysis discussed below can be found here.

The Ichimoku Cloud uses four metrics 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 12 hour frame, with doubled settings (20/60/120/30) for more accurate signals, are beginning to flip bullish; price is peaking through Cloud, Cloud recently flipped bullish, the TK cross is bullish, and the Lagging Span (LS) is in Cloud but above price. The most conservative long entries would occur after the LS is above Cloud and above price. The most aggressive long entries would currently be triggered, based on the Kumo breakout, although waiting for a Kijun retest or for the Kijun to come closer to price may prove to have a better risk/reward profile.

EOS Price Analysis 17 April 2018 3A Pitchfork on the twelve hour chart, with anchor points in December, January, and March, shows price in the bottom zone of support. Buying in the current zone comes with the risk of a bearish invalidation of the Pitchfork, which occurs with a significant break below the lowest diagonal support. The upside potential is a return to the median line (red), followed by a test of the upper limit. Overall, this Pitchfork should be a very loose guide on price trajectory because very few of it’s support and resistance levels have been tested.

EOS Price Analysis 17 April 2018 4A double bottom pattern, the Adam and Eve, was recently completed on high volume after breaking the 200 EMA. The 50/200 EMA cross is also currently bearish. Price will likely return to the 200 EMA, yearly pivot, and Adam and Eve horizontal resistance turned support at ~US$7.40. A long entry will be justified if a bullish 50/200 EMA cross, suggesting further upside potential.

EOS Price Analysis 17 April 2018 5Looking at the EOS/BTC pair, price may have formed a high timeframe Cup and Handle, suggesting bullish continuation. However, this pattern does not meet the traditional guidelines of a Cup and Handle for a few reasons; the formation of the entire pattern is not preceded by a bullish trend, the volume profile is not descending throughout, the duration occurs through many months, and the handle dropped far below the 50% Fibonacci retracement. If the pattern is real, expect a high volume breakout near the 0.00137 BTC horizontal level with a price touch in the zone of resistance between the 1.618 fib and measured move (red box).

EOS Price Analysis 17 April 2018 6On the four hour EOS/BTC chart, a Cup and Handle chart pattern is more likely to come to fruition because price has not fallen below the 50% fib and the entire pattern preceded a bullish trend. The 1.618 fib extension and measured move yields a target between 0.0018 BTC and 0.0021 BTC.

EOS Price Analysis 17 April 2018 7The EOS/ETH trading pair provides the most convincing Cup and Handle pattern, with price already breaking horizontal resistance. The 1.618 fib extension and measured move yields a target between 0.023 ETH and 0.030 ETH.

EOS Price Analysis 17 April 2018 8Conclusion

EOS has opted for a consensus mechanism, DPoS, which attempts to address the trilemma of blockchains; decentralization, scalability, and security. The grandiose scalability goals for EOS remain untested and unproven. However, DPoS analogs like BitShares and SteemIt regularly clear millions of transactions per day with very little of the total network capacity being used.

EOS’s year-long ICO is also extremely unconventional and maybe a thinly-veiled crowd raising scheme with no substance. The ICO prices in recent rounds have greatly benefited from an appreciating secondary market. Like many other overvalued coins that remain in early development, the true potential or pitfalls of EOS will not be known until decentralized applications begin to test the limits of network infrastructure on the mainnet.

Technicals on all pairs analyzed above suggest bullish continuation. A target North of US$25 is not out of the realm of possibilities based on a newly emerging high timeframe bull trend. Being known as a potential Ethereum killer means that EOS believers will be closely watching the EOS/ETH chart for eventual parity and beyond.