Ethereum - Next run towards $10k?
Dear investors,
Welcome back to Thursday’s free newsletter, where we discuss investable assets by their history, current and future outlook with technical analysis.
In this newsletter we will focus on the second biggest cryptocurrency by market cap, Ethereum. With its market cap back at almost $500 billion, Ethereum is trading near all-time highs. We will provide technical analysis to see if buying near all-time highs is the right decision to make.
Topics we will discuss:
Ethereum explained
Technical Analysis
Conclusion
Ethereum explained
Vitalik Buterin, a programmer and co-founder of Bitcoin Magazine, argued in late 2013 with the bitcoin core developers that Bitcoin and blockchain technology could benefit from other applications besides money and needed a more robust language for application development that could lead to attaching real-world assets, such as stocks and property, to the blockchain.
Two years later in 2015 a new cryptocurrency named Ethereum was released, Ethereum is an open-source, decentralised blockchain and features smart contract functionality that can be used for endless configurations.
Comparison to Bitcoin
Bitcoin's primary use case is that it is a store of value and a digital currency. Ether can also be used as a digital currency and store of value, but the Ethereum network makes it also possible to create and run decentralized applications and smart contracts. Ethereum blocks are validated approximately every 12 seconds on Ethereum as opposed to approximately every 10 minutes on Bitcoin. Additionally, Bitcoin has a fixed supply of 21,000,000 coins, whereas Ethereum has no supply cap.
Ethereum 2.0 will convert its proof of work (PoW) protocol towards a prove of stake (PoS) protocol. The main purpose for converting is to increase the 15 transactions per second into the thousands per second. Fixing the scaling issues Ethereum currently faces. The last phase to fully convert towards proof of stake is expected to release in 2022.
Note: Ethereum is the platform and Ether is the price of the cryptocurrency.
Technical Analysis
Ether - Daily Chart
At the time of writing, Ether is trading around $3800 and is trading sideways for the last couple of days.
Ether’s price is trading for over 1,5 year in an ascending channel. With two recent reactions on the lower trend line (in a relatively short period of time), we can conclude that the strength of the lower trend line is weakening and if a third reaction is taking place in a even shorter time period, the likelihood of breaking below will be increasing.
In the run up around July, Ether increased from $1700 to $3300 in a short period of time. This pushed the RSI to overbought levels and is making divergences ever since. (If divergences occurs between the price and the RSI, it can indicate a possible reversal in trend) In addition, the MACD is indicating a loss in momentum and is slowly curling back down.
If Ether wants to continue trading in this ascending channel, it has to breach its all-time high and moves closer towards the upper trend line.
Ether - Weekly Chart
If we zoom out to an even longer term view. We can see that the RSI is making a divergence between its last peak touching the overbought level and current price.
While the indicators are predicting downside, we have seen in the past that crypto can have aggressive uptrends after breaking all-time highs thanks to FOMO (Fear Of Missing Out).
Conclusion
Ethereum, a second generation cryptocurrency and already the second biggest by market cap. A new popular form of investments named NFT’s and its Ethereum 2.0 update next year. We believe Ether is a long-term (HODL) play with a lot of growth still to come.
But if we wanted to invest short-term on current prices, we would wait for better market conditions where our indicators are back at lower levels for a next swing to the upside.
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