Ethereum Classic (ETC) now has a market capitalization of US$1.7 billion, making it the 15th largest cryptocurrency. Trading volume recently hit record highs of US$1 billion in a 24 hour period, exceeding even Ethereum (ETH) on that day. Trading volume puts ETC in the top five most traded cryptocurrencies. The coin is up 979% from January 1st this year.
ETC was born out of a questionably contentious hard fork following the Decentralized Autonomous Organization (DAO) hack. The DAO, which was originally established as a venture capital fund, launched with a crowdsale in April 2016. As of May 2016, the fund held ~14% of all ETH issued at the time, roughly ~US$150 million, from 11,000 investors.
In June 2016 several vulnerabilities allowed ~US$50 million to be drained from the DAO through recursive call attacks. With no governing or protecting body, community members and the creator of Ethereum, Vitalik Buterin, came to the conclusion that hard forking the chain to recoup lost funds would be the best solution.
The original chain survived as Ethereum Classic, due to several users, miners, and later exchanges listing the currency. ETC proponents questioned the immutability of the ledger after the hard fork solution.
Barry Silbert, of Digital Currency Group, was a prominent member of the community embracing ETC and encouraged future development very early on, establishing a US$10 million developer fund and an ETC trust.
Since the DAO debacle, the U.S. Securities and Exchange Commission (SEC) declared that the DAO or future DAO-like enterprises would be considered a security, stating “U.S. securities laws may apply to offers, sales, and trading of interests in virtual organizations.” However, no legal action was taken following the dissolution of the DAO, despite an investigation by the SEC.
An ETC specific conference, the first of its kind, was held this week in Hong Kong. Meltem Demirors, of Digital Currency Group, told BraveNewCoin that her three takeaways from the conference were; a large amount of work happening in the sphere, mainly in the protocol layer; there is substantial miner support for ETC, based on its immutability and decentralized development team; and there is a slow-but-steady emergence of protocol tools specific for developers using ETC. The event was largely sponsored by the ETC Cooperative which is granted 1% of the management fees from Grayscale’s ETC trust.
The number of transactions per day has been steadily increasing since the beginning of this year, although they are still ~8% of ETH transactions, which are largely due to ETH ICO development. Block times have remained a steady 23 seconds throughout (not shown) as opposed to ETH’s 13 seconds currently.
ETC hashrate and difficulty have also trended upward since the beginning of the year, with a record high in hashrate on November 12th. Despite this, ETC has attracted a mere 7% of ETH hashrate. According to CryptoCompare, ETC is also slightly more profitable to mine. Unlike ETH, the block reward for ETC remains at 5 ETC per block. Difficulty, block times, and price all affect mining profitability.
ETC trading volume has been led by the South Korean Won (KRW), Bitcoin (BTC), and the US Dollar (USD) pairs on Bithumb, Poloniex, and Bitfinex. Zero fee trading has plagued volume reporting in the past, by inflating real volume, and continues to do so with the South Korean exchanges.
For the sake of simplicity, this analysis will focus on the USD pair first, but it’s important to note that the BTC and ETH pairs are also relevant to the price action. Should a reliable signal form on any of the pairs, trades should be entered accordingly. The KRW pair is difficult to assess due to its dominant fee-free trading model, but should be observed for signals as well.
Following an all time high at the end of May, ETC continued to form a disrupted downward channel reminiscent of a Falling Wedge, a bullish reversal pattern. Should it continue to behave as such, the measured move and 1.618 fib extension both yield a target of ~US$34, or 2x the current price.
Ichimoku Cloud on the daily chart with singled settings (10/30/60/30) for a faster signal show all Cloud metrics recently flipping bullish for the first time since September. Based on this, a long entry should be considered.
Ichimoku Cloud on the daily chart with doubled settings (20/60/120/30) for a more accurate and smoother signal show Cloud metrics beginning to lean bullish, based on the recent Kumo breakout. Subjectively, it may be preferable to use the doubled Cloud for signals, based on the consistency of signals since June. A bullish Kumo twist with a definitively bullish TK cross would grant a long entry signal.
The EMAs on the daily and four hour chart show trend continuation. A failed bearish cross on the daily timeframe (left) and a bullish cross on the four hour timeframe (right) foreshadowed a break of the previous downtrend.
The ETC/ETH ratio, or how ETC and ETH have traded against each other, had shown a falling wedge with bullish divergence, suggesting an end of bearish momentum. The pattern recently broke to the upside, and currently finds the 200EMA as resistance. ETC/ETH has benefited from ETH’s multi-month tight consolidation and low volatility.
Cloud (10/30/60/30) also shows strength suggestive of a trend flip with all metrics excluding the Lagging Span, pointing bullish. A 50/200EMA Golden Cross would be a strong long entry signal. Despite this, ETH is nearing an end to its own consolidation, which is suggestive of a heavy bullish bias.
The ETH/BTC ratio, or how ETC and BTC have traded against each other, has shown a precipitous decline since mid-July, eventually finding support in the previous orderblock. The 50/200EMA Death Cross and bearish TK recross in mid-September both signaled strong bearish continuation at the time.
Currently, price has found resistance at both the Cloud (10/30/60/30) and 200EMA. The Cloud metrics have begun to flip bullish with a bullish Kumo twist for the first time since the drop in mid-July. A long entry signal would trigger with a Kumo breakout. The 50/200EMA Golden Cross is also not far behind.
Born out of a fiery debate post-DAO hack, and initially left for dead by most of the community, ETC has had a resurgence in strength based on the nurturing influence of the Digital Currency Group and its popularity amongst South Korean traders. The development community continues to grow, and many view ETC as an alternative to ETH and Buterin’s changes towards PoS.
Technicals strongly suggest bullish continuation to ~US$34. ETC has also traded strongly against both ETH and BTC recently with those technicals flirting with an outright bullish trend shift as well.
IMPORTANT: Information provided is for educational purposes only and does not constitute investment advice. Readers should always conduct their own due diligence before making any investment decision.