Ethereum Price Analysis - Continued consolidation to end before December

Ethereum (ETH) now has a US$29.4 billion market capitalization, second only to Bitcoin (BTC) with US$96.7 billion. Yesterday, Bitcoin Cash (BCH) briefly held the number two spot in the setting of record trading volume from South Korea on weekend hours. Global volume in ETH trading has been ~US$1.5 billion over the past 24 hours, behind that of Bitcoin (BTC) and Bitcoin Cash (BCH). Compared to the other top coins by market cap, ETH has seen very little price action.

Ethereum Price Analysis 13 Nov 2017 1ETH difficulty and hash rate have also remained stable since the difficulty and block reward reduction after the hard fork on October 17th. ETH continues to have substantially more transaction per day, ~200,000, than Bitcoin (not shown). With 13 second block times, ETH also currently has no unconfirmed transactions or fee problems.

Ethereum Price Analysis 13 Nov 2017 2Highlighting the youth of many cryptocurrency related products, a platform which offered multi-sig ETH was found to have a vulnerability this week. 573 users with assets in multi-sig wallets created by Parity Wallet and deployed after 20th July are affected.

Following a fix for the original multi-sig vulnerability that had been exploited on 19th of July, a new version of the Parity Wallet library contract was deployed on 20th of July. Unfortunately, that code contained another vulnerability which was undiscovered at the time.

The vulnerability has effectively tied up an estimated sum of over 500,000 Ether (~US$1.5m). These funds are currently frozen and most observers are still unsure of how these funds can be returned to their holders.

ETH trading volume has been led by Bitcoin (BTC) and the US Dollar (USD) pairs on Poloniex and Bitfinex respectively. Chinese Yuan (CNY) no longer has a direct fiat pair but is tradable as a USD future on OKEX.  

Ethereum Price Analysis 13 Nov 2017 3Over the past week on Bitfinex, longs and shorts against USD have decreased while longs against BTC continue to increase. Shorts against BTC are stable. This together suggests more and more people are using their BTC to open longs on an ETH position.

Ethereum Price Analysis 13 Nov 2017 4Ethereum Price Analysis 13 Nov 2017 5Technical Analysis

Price continues to be range bound by a large ascending triangle chart pattern, which holds a bullish bias, with a 1.618 fib extension and measured move of ~US$650 and ~US$800 respectively. The pattern is currently in its 154th day of consolidation since the ATH and has remained above the 200EMA, reinforcing the continued bullish bias. The resolution of the triangle should be known by the end of the month. The pattern is currently in its 154th day since the ATH.

Ethereum Price Analysis 13 Nov 2017 6Bollinger Bands (BBands), which measure volatility and attempt to predict resolution of that consolidation, have only been this tight one other time. The bands have begun to widen slightly, with price above the median line, suggestive of a larger move North on the horizon.

Ethereum Price Analysis 13 Nov 2017 8Ichimoku Cloud on the daily chart with singled settings (10/30/60/30) for a faster signal show mixed Cloud metrics, as is often the case during extended consolidation. A bullish TK recross should occur soon and will be an early long entry signal. A bullish TK cross above the Cloud is the most bullish signal the Cloud can yield. However, whether or not to use this signal during a period of heavy consolidation is the question. Lagging Span, the last of the Cloud Entry signals, will also be above Cloud and Price soon.

Ethereum Price Analysis 13 Nov 2017 9Ichimoku Cloud on the daily chart with doubled settings (20/60/120/30) for a more accurate and smoother signal show all Cloud metrics essentially bullish. These signals will likely be too late to accurately capture the resolution of consolidation. Signals turning decidedly bearish would likely be a confirmation of BBands and singled Cloud.

Ethereum Price Analysis 13 Nov 2017 10Lastly, the ETH/BTC ratio has recovered on bullish divergence due to ETH remaining flat while Bitcoin pulls back. The next target above the Kijun and 200EMA will be the flat Kumo at 0.075BTC.

Ethereum Price Analysis 13 Nov 2017 10Conclusion

ETH has avoided the raucous volatility shared by Bitcoin and Bitcoin Cash recently, which is largely a debate over scaling in the setting of price and network manipulation. ETH has its own scaling issues which will need to be addressed in due time, part of which includes a transition from PoW to PoS.

Extended periods of consolidation, which typically signal continuation, are not unusual for an asset that had explosive growth early in the year. Technicals suggest a large chart pattern ending within the month to the upside. Watch BBands and Cloud for early confirmation of this process, which will be subtle but obvious. If price does not break upward, expect a test of the daily 200EMA at ~US$245. It’s surprising that USD price has barely moved considering the large pullback Bitcoin has experienced.