Ethereum Price Analysis - Dapp testing network limits

Ethereum (ETH) underwent a tumultuous week following a breach of all time highs, and now currently carries a market cap of US$43.8 billion with US$819 million trade volume over the past 24 hours.

Ethereum Price Analysis 4 Nov 2017 1ETH continues to have more transactions per day than all other cryptocurrencies, excluding Ripple. It is important to note that what constitutes a transaction on various blockchains, such as ETH, Bitcoin (BTC), and Ripples (XRP), can be vastly different. BTC has 4.5x or more average transaction value per transaction compared to ETH.

A new decentralized application called CryptoKitties, where you can buy, sell, breed, and collect virtual cats has taken the ETH blockchain by storm. The Genesis Kitty sold for $117,00 USD and about 17 have sold for over $10,000. You can track the marketplace. The app is so popular that it has caused a significant backlog of transactions and has highlighted issues of scaling on the network.  

Vitalik is very aware of the problem and continues to discuss scaling solutions for Ethereum. Casper, which will be used to transfer the consensus algorithm from PoW to PoS, is currently live on a testnet.

Block size had decreased dramatically after a scheduled difficulty adjustment and subsequent block time reduction following the most previous hard fork.

Ethereum Price Analysis 4 Nov 2017 8Unlike BTC, ETH has dynamic block size known as a gas limit based on the quantity of transactions. Priority is determined by the amount of gas spent on a transaction, similar to the dynamic fee structure of BTC. When there are more transactions pending, fees go up.

Ethereum Price Analysis 4 Nov 2017 9Hash rate also hit a new all time high, while difficulty is steadily increasing. With a decrease in block reward following the most recent hard fork, miners will begin to experience decreased profitability. This will, however, be mitigated by increasing ETHUSD price for the time being.

Ethereum Price Analysis 4 Nov 2017 10The storage space for an ETH full node, including all Parity operation modes with various chain data, continues to require more than 300GB. Although this format is not needed to be considered a full node. A lighter full node, with the raw historical block data containing the blocks and transactions, is approximately 12-15GB in size and the latest state around 1-2GB.

Ethereum Price Analysis 4 Nov 2017 11ETH trading volume has been led by Bitcoin (BTC), and the US Dollar (USD), and Tether (USDT) pairs on Poloniex, Bitfinex, and OKEX respectively. Tether is a centralized cryptocurrency pegged to the US Dollar instead of fiat USD and has been under increasing scrutiny lately over a lack of audits regarding reserves backing the currency.

Chinese Yuan (CNY) no longer has a direct fiat pair but is tradable as a USD future on OKEX. Japanese Yen (JPY) also has very limited exposure. Japanese traders typically use the ETH/BTC pair.

Ethereum Price Analysis 4 Nov 2017 12Technical Analysis

Price recently broke above resistance of the multi-month Ascending Triangle chart pattern. The resistance targets remain between the 1.618 fib extension and measured move, ~US$650 and ~US$800 respectively. The pattern broke after 165 days of consolidation. The fractal stop loss level on the daily time frame for an active long trade is currently US$396.60.

Ethereum Price Analysis 4 Nov 2017 2A Point and Figure chart with Wyckoff count math also yields a ~$700 target. Point and Figure is a charting system that uses price action instead of time frames. Wyckoff count math allows the target to be determined by high and low of the range as well as the time spent consolidating.

Ethereum Price Analysis 4 Nov 2017 3A Kijun bounce, or mean reversion, occurred on both the singled (10/30/60/30) and doubled (20/60/120/30) Ichimoku Cloud. The singled cloud is used for faster signals whereas the doubled settings are used for more accurate signals.

A bullish Kijun bounce is a long re-entry signal and can be utilized if you miss the initial trade entry. Kijun bounces can also occur many times throughout a trend and represent bullish continuation.

Ethereum Price Analysis 4 Nov 2017 4Ethereum Price Analysis 4 Nov 2017 5ETHBTC on the daily chart, using singled Cloud settings, shows bearish continuation with price below the Cloud. A bearish TK cross below the Cloud would be highly suggestive of bearish continuation. The most immediate target would be local lows around 0.0377BTC.

Ethereum Price Analysis 4 Nov 2017 6Lastly, on the six hour chart, there is a bullish harmonic (shark) forming with a bounce around 0.0325BTC. The long accumulation zone is located above the 1.272 fib extension (green) with an expected target of 0.0457BTC.

Ethereum Price Analysis 4 Nov 2017 7Conclusion

Ethereum continues to be an experiment lab testing the fringes of possibility. First, the birth of the DAO, then the ICO, and now CryptoKitties. In every case, the network was tested for scalability and anti-fragility. CryptoKitties is no different. While seemingly inconsequential, the dapp is stress-testing the network, may help increase understanding and adoption of blockchain technology, and will very likely drive scaling solutions. The CryptoKittie dapp may do to blockchain what PokemonGo did for augmented reality technology.

Technicals for the ETHUSD pair continue to suggest targets around US$700, with a current stop loss at US$396. The ETHBTC pair is strongly suggestive of continued downtrend with supports at 0.0325BTC and 0.0377BTC.