The decentralised application platform, Ethereum, has seen a small 0.16% drop over the past 24 hours. This could be considered as good news and a sign that the bearish momentum is slowing downs as Ethereum drops over 13% over the past 30 trading days. Ethereum is currently exchanging hands at around $406.47, at the time of writing and has seen an 11% price drop over the past 7 trading days.
Ethereum was created by the young genius mind of Vitalik Buterin on July 30th 2015 and was created to become a platform where developers can come and create decentralised apps without the need for the middle men. It is important to distinguish Ether (the cryptocurrency) and the Ethereum network. The Ethereum network is much more than just a regular cryptocurrency. It is a protocol, an advancement in crypto that allows developers to run their applications directly on the blockchain.
Ether is the cryptocurrency behind the Ethereum Network. It is the currency that helps facilitate the functioning of the Ethereum Network.
Ethereum investors are looking forward to a scalability upgrade of the Ethereum network. Currency Ethereum can only handle between 20-25 transactions per second. This is more than triple the 7 transactions per second that Bitcoin can handle but is far far away from what the network needs to be at.
Solutions to the scalability of Ethereum have been proposed and many are under development and testing. The plasma network and Sharding is one proposal, that will batch all transactions into smaller ‘Shards’ which will make it easier for the transactions to be processed.
Another proposed solution is known as the Raiden network. This is similar to the Lightning Network for Bitcoin. It is an off-chain solution where the majority of transactions are handled off the blockchain through direct peer-to-peer payment channels opened between parties. This should take the majority of small transactions off the main chain resulting in less congestion.
Ethereum is still ranked at second place in terms of overall market cap across the entire cryptocurrency industry. It has a total market cap value of $41 billion.
Let us continue to analyse price action for Ethereum over the short term.
ETH/USD – SHORT TERM – DAILY CHART
Analysing the market from the short term perspective above, we can see that Ethereum had experienced a bullish run during April when price action started from a low of $358 on the 1st of April 2018 and continued to rise until it reached a high at $838 on the 6th of May 2018. This was a price increase totalling 135% from low to high.
The market could not sustain this level and proceeded to roll over during May. It is important to point out that the high experienced in May correlated directly with the upper boundary of a long term symmetrical triangle.
We can see that the market initially had found support at the .618 Fibonacci Retracement priced at $542 in May, drawn in black. This is a short term Fibonacci Retracement measured from the entire bullish run aforementioned.
The market continued to drop throughout June and July until a significant level of support was found at the long term .886 Fibonacci Retracement priced at $413. The area was also significantly bolstered by the short term .886 Fibonacci Retracement which is priced in exactly the same area.
We also can notice that, during the initial stages of August, price action for Ethereum has found support directly at the lower boundary of the symmetrical triangle, slightly below the .886 Fibonacci Retracement.
The market is vastly approaching the apex of this symmetrical triangle, where a serious break out to either the downside or the upside is expected. Usually in falling markets symmetrical triangles resolve themselves to the prevailing trend, in this case we are in a bearish downtrend. However, the crypto markets are extremely irrational so we do not rule out an upside break. All we can do is monitor the market and make our trading decisions based off of the direction that price action dictates to us.
If the lower boundary of the symmetrical triangle can provide significant support, we expect the market to rebound from this point and make its way to the upper boundary of the symmetrical triangle. The market will require significant momentum to break above it but if it does, we expect immediate resistance to be located at the short term .786 Fibonacci Retracement priced at $461. Resistance following this area is expected at the 100 day moving average which is currently hovering at the $520.
Alternatively, if the market does break below the symmetrical triangles lower boundary, we expect immediate support to be located at Aprils price low at $358.
The technical indicators, at this moment in time, are heavily favouring the bears. The RSI is well below the 50 handle indicating that the bears are still predominantly in control. If we are to see a bullish run, we need to see the RSI make its way back above the 50 handle and continue to rise.
Let us quickly analyse the market relative to Bitcoin over the short term.
ETH/BTC – SHORT TERM – DAILY CHART
Analysing the market relative to Bitcoin, we can see that Ethereum had experienced a price surge totalling 60% when the market rose from a low of 0.05359 on the 4th of April 2018 and extended to a high of 0.083851 on the 20th of May 2018.
The market had met resistance at a falling trend line and rolled over. Initially we can see support was found at the .382 Fibonacci Retracement priced at 0.07348 during May. This is a Fibonacci Retracement measured from the entire bullish run highlighted above.
The market continued to fall during June, falling below the 100 day moving average to find support at the .5 Fibonacci Retracement priced at 0.069688. However, the market could not hold above this level and fell further during July. It eventually completed a 100% retracement, recently completing at the lows seen during April. This completion has caused the market to form a descending wedge/triangle. We can see that price action has seen a rebound from this low.
If the bullish pressure can build and continue, we expect immediate resistance to be located at the long term .618 Fibonacci Retracement (drawn in red) priced at 0.061644 followed by the short term .618 Fibonacci Retracement priced at 0.067896. Resistance above this area will be located at the 100 day moving average followed by the downward slope of the falling wedge.
The RSI is currently trading at the 50 handle indicating the indecision currently within the market. For the market to continue to rise we need to see the RSI stay above the 50 handle and continue to rise.