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Ethereum Price: Is the Worst Over?

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Ethereum’s sudden and rapid decline in recent months has raised fundamental concerns over the future of blockchain startups. More specifically, those that rely on the ERC-20 protocol to launch their initial coin offerings (ICOs) were believed to be cashing out their ether holdings to shore up their balance sheets.

However, the latest research from Diar and BitMEX reveal that ERC-20 projects not only hold a significant amount of ether, their balance sheets was relatively unaffected by the recent price collapse. These findings suggest that the worst of Ethereum’s downtrend has passed.

ERC-20s Sitting on Unrealized Gains

Crypto derivatives platform BitMEX has released a study showcasing the impact of ether’s price collapse on ERC-20 projects. The study, which tracked the Ethereum balances of 222 ICOs, found that the projects had already offloaded as much ETH as they raised in U.S. dollar terms. Even assuming an ether price point of around $230 a token, projects that are still holding ETH have unrealized gains rather than losses.

Even when excluding EOS, which raised a disproportionate amount of ETH over its yearlong token sale, the results are the same. ICOs currently hold roughly 3.8 million ETH, which is equivalent to the amount raised in dollar terms.

The findings essentially mean that ICOs are not panicking to offload their Ethereum supplies over fear of collapsing prices. While ICOs have certainly sold a large chunk of their ETH holdings, the recent price collapse wasn’t the trigger.

Researchers at BitMEX conclude with the following:

“Despite the 85% reduction in the Ethereum price from its peak, the projects have realised gains of US$727 million due to profits from Ethereum have they already sold, often selling before the recent price crash. The 3.8m Ethereum still on the balance sheets of these projects may not have that much of an impact on the Ethereum price, as it represents a reasonably small proportion of the 102 million supply of Ethereum. At the same time, on a macro level, the projects may be feeling reasonably confident rather than needing to panic sell.”

ICO Treasuries Hold Significant Amounts of ETH

The BitMEX study confirms that ICOs are not cashing out Ethereum due to the recent price collapse. The next logical question is whether their initial sales of ETH contributed to the price collapse. While the logical answer may be yes, establishing a causal link between the two events proves difficult.

Diar, a weekly cryptocurrency publication, released data last month showing that ERC-20s still hold an average of 38% of their ETH-based funds. While this means that 62% has been moved from their coffers, we can’t assume that this amount was sold. After all, cryptocurrency projects raised ether for a reason – namely, to fund their operations. (One potential downside from this is fewer ICOs utilizing Ethereum’s smart contracts.)

That being said, companies with over-sized holdings of ETH can still impact the cryptocurrency’s future price in a negative way. The ETH burn rate of these companies can place downward pressure on the currency for several years.

ETH/USD Update

Ethereum’s price remains firmly capped below $230, as markets struggle to find momentum. At press time, the ETH/USD exchange rate was $228, give or take, representing no change from 24 hours ago.

Despite recent struggles, Ethereum has rebounded 37% from last month’s low. The $166 price-per-token witnessed last month was the lowest in over a year. The downward pressure, followed by a stalled recovery near $230, has allowed XRP to briefly overtake ETH in market cap on at least three separate occasions.

Ethereum currently retains the no. 2 spot in terms of market cap with a total value of $23.4 billion. Trading volumes over the last 24 hours reached $1.5 billion, according to CoinMarketCap.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 643 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Crypto Update: Coins Fall After a Quiet Weekend

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The cryptocurrency segment stabilized this weekend after a technically important breakdown that shifted the short-term outlook to clearly bearish. While the stability was a small plus for bulls, the lack of bullish momentum and the fact that the majors remained below key resistance levels meant that most of the coins remained on sell signals in our trend model. As for the long-term signals, Monero, Ripple, and Bitcoin are the only majors on neutral signals in the still overwhelmingly bearish market.

XMR/USDT, 4-Hour Chart Analysis

Bitcoin continued to fare better than the largest altcoins, but although the most valuable coin made the most technical progress, briefly reclaiming the $6275 level, it also remained in a bearish short-term setup. The total value of the market is stuck near the $200 billion mark, and with Ethereum still being in a steep long-term downtrend and with Ripple giving back a large chunk of its recent gains, sellers are still clearly in control of the market.

BTC/USD, 4-Hour Chart Analysis

Bitcoin’s relative stability continues to be the most encouraging sign in the segment, but the coin is clearly below the previously dominant broad triangle pattern following last week’s breakdown. The technical deterioration means that a test of the key long-term zone near $5850 is increasingly likely, especially as the weak bounce ran out of steam near the $6275 level.

While a weaker support zone is found near $6000, the short-term sell signal is in place in our trend model, and traders shouldn’t enter new positions here. Further resistance is ahead at $6500, $6750, and $7000, while the next major support zone is found between $5100 and $5100.

Ripple Tests $0.42, Ethereum Capped by the $200 Level

XRP/USDT, 4-Hour Chart Analysis

Ripple got back up to the key $0.42 level after plunging below $0.38, but the resistance level halted the bounce and, and the coin is still close to falling back to the previously dominant broad declining trend. XRP is trading right at the declining trendline of the triangle consolidation pattern that developed after the September rally, and bulls would need a sustained break-out above the pattern for a renewed buy signal.

Support levels are found at $0.375 and $0.35, while resistance is ahead in the $0.42-$0.46 and near $0.51 and $0.54, and traders shouldn’t enter new positions here.

ETH/USD, 4-Hour Chart Analysis

Ethereum is still among the weakest majors, and it couldn’t get back above the $200 level during the weekend. ETH remains on sell signals on both time-frames, since the declining trendlines are clearly intact, despite the recent lengthy consolidation period.

Primary support is found at $180, with further zones near $170 and $160, while resistance above $200 is ahead at $235 and $260, and traders and investors should still stay away from the coin.

LTC/USD, 4-Hour Chart Analysis

Litecoin also only managed a weal bounce after the key breakdown below the $56 support, and although it initially respected the $51 level, another test is very likely, and odds favor a break below support given the strong bearish pressures.

A break below the primary support level would warn of the test of the $47 low from August, with the next level of interest being the $44 support, while further resistance above $56 is found at $59 and $64. The coin is on sell signals on both time-frames and traders and investors shouldn’t enter new positions here.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 374 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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Altcoins

A Few Lessons From Last Week

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There is an adage on Wall Street.  It is quite old. It was passed down to me from my grandfather last Wednesday.  It goes something like this. When the cops raid the brothel, they take everybody including the piano player.  

No matter when the notion originated, it applies directly, and painfully, to last week’s experience with stocks, bonds and crypto assets. Between early Wednesday and Thursdays New York closing, most major US indices dropped a fast five percent.  Friday showed a tepid rebound with the tech heavy NASDAQ posting a 2.3% one day recovery followed by the S&P 500 with a meager 1.2% upward move. Otherwise there wasn’t much good happening.

The story in crypto land wasn’t any better.  In truth it was worse. Taking just the two big guys during the same Wednesday/Thursday time period, things were dismal.  Bitcoin lost 6% in price before staging a weak 1.1% recovery on Friday. Ether dropped 15.6% on Wednesday, then managed a 3.2% Friday bounce.

Nobody escaped untouched unless you were a short seller in which case, congrats! Having lots of company is hardly any consolation for having to deal with investment losses, even if there are only accounting losses.  Nevertheless, everyone who had the ability to read understood the stock market was on a record breaking binge and thus vulnerable.

The only binge connected to crypto prices was a 10 month long hangover from the record levels of late last year.  So should the Wall Street adage be applied here making crypto take on the role of piano player? Or to present the question in a different way, is the piano player merely an innocent victim of being in the wrong place at the wrong time?

The Stock Market Correction Is Not Over

Stock market corrections are never pleasant but many veteran strategist consider them to be a necessary and even healthy part of the investment process.  Last week’s 5% drop was not even pronounced enough to qualify as a bona fide correction. That requires something even more than the 8%+ drop that took place back in February.  

In the very short term, there is little in economic news that is likely to upset the market this coming week but that doesn’t change the fact that interest rates are putting pressure in bond prices and $80 oil prices aren’t helping the inflation picture either.  Finally, there is the uncertainty created by the midterm elections. Making short run market predictions is a fools game, but this one is an exception.

What Does This Say About Crypto Values?

After events of the last week where already depressed crypto values get beaten down even further than stocks and bonds, that is not a good sign.  One of the reasons for this had to be last weeks report from Diar Ltd. showing how Coinbase’s active customers have dropped 80% from record levels of $24 billion in the fourth quarter of last year to $3 billion in the third quarter of 2018.  News of this study was reported by Bloomberg on Wednesday. So this could well have been the fundamental culprit. If so, the timing could not have been better for the short sellers.

No Longer Trending?

The folks at Diar Ltd. are spot on in their analysis but does this mean the end for crypto? Don’t count on it.  In fact there is a positive side to their findings. The most important point is the crypto prices (except for Wednesday) have become increasingly stable.  This stability will serve long term investors well as it will calm the nerves of regulators and merchants inclined to use crypto as a medium of exchange.

The drop off in activity at Coinbase is not surprising.  Speculators have lost interest. Recently we wrote an article about the competition for investor attention between crypto and cannabis.  There is loads of anecdotal evidence suggesting that this is contributing to crypto interest declining.

Here is just two points to remember.  This week on October 17, cannabis becomes legal for the first time throughout Canada. Investors are acutely aware of this bonanza.  During one of the worst weeks in the stock market, US listed cannabis stocks like Medmen Enterprises (MMNFF: $5.84) gained 35% while APHRIA (APHQF: $14.65) added over 13%.  Both stocks experienced greatly accelerated volume. This is an example of just two of many cannabis opportunities that are challenging crypto for investment capital. So the piano player may not be so innocent: he could just be smoking a little ganja.

Featured image courtesy of Shutterstock. 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.4 stars on average, based on 112 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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Analysis

Crypto Update: Altcoins in Trouble Despite Bounce as Bitcoin Holds Above $6000

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While the major cryptocurrencies experienced an oversold bounce in Asian trading today, the key technical breakdowns in the segment are intact. The top altcoins extended their losses before the bounce, but Bitcoin held up relatively well again, avoiding a test of the $6000 level and staying well above the key long-term support zone that might be in focus in the coming week.

ETC/USD, 4-Hour Chart Analysis

Some of the weakest coins, like Ethereum Classic, NEO, and IOTA are already trading below or at their previous bear market lows, but the majority of the largest digital currencies are still above the lows, keeping the hope of a higher swing low or a successful test of the lows alive. That said, the longer-term bearish trends are clearly dominant, and without signs of stability and bullish momentum, traders and investors should still stay away from new positions, since odds favor the continuation of the bear market.

BTC/USD, 4-Hour Chart Analysis

Although Bitcoin showed encouraging stability in the face of the broad selloff, it remained stuck below the primary resistance level at $6275, and it is still on a short-term sell signal in our trend model following the breakdown from the broad triangle pattern.

While the long-term setup is neutral, the coin is likely to test the crucial zone near $5850 in the coming weeks, especially if altcoins hit new bear market lows, and a break below that zone could trigger another round of liquidations in the segment. The next major support zone below $5850 is found between $5000 and $5100, while further resistance is ahead at $6500 and $6750.

Ripple’s Surges Off Support But Break-Out Still in Danger

XRP/USDT, 4-Hour Chart Analysis

Ripple has been the most volatile among the major altcoins in the last couple of days, and yesterday the coin fell all the way to the weak $0.375 support level before bouncing back hard. XRP has been testing the key $0.42-$0.46 zone today in early trading and it got close to the declining trendline that defined the triangle consolidation pattern of the past two weeks.

Despite the wild moves, the technical setup is basically unchanged, and the coin remains on a short-term sell signal and neutral long-term signal in our trend model. Above the primary resistance zone, further levels are ahead at $0.51, $0.54, and $0.57, while the next major support zone is found near the $0.35 price level.

ETH/USD, 4-Hour Chart Analysis

Ethereum remained relatively weak after the recent breakdown, getting very close to hitting the $180 support level yesterday, and although the bear market low near $170 hasn’t been in danger yet, the short-term setup is still shaky.

Given the strongly negative long-term trend, and the lack of bullish momentum traders and investors still shouldn’t enter positions here, with the short- and long-term sell signals being in place in our trend model. The next major support zone is found near the $160 level, while strong resistance is ahead at $200, $235, near $260, and between $275 and $280.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.6 stars on average, based on 374 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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