Ether - Bitcoin - bubble (Correlation)

KRAKEN:ETHUSD   以太坊 / 美元
The Ethereum blockchain has been released in 2015 and is therefore still very new to the vast majority of the public. However, sharp rises in value recently have caused more and more news stations to pick up on this topic, publishing more and more articles about it. The consequence was that many could in fact see that there is a huge potential behind this technology and the projects based on it, yet, did not really understand how it in its core works or more basic, what it actually represents. This caused what some would call "dumb money" to be invested into cryptocurrencies and other blockchain tokens, pushing their prices even higher and causing more people to invest in them in a wave of excitement about blockchains and their seemingly unlimited possibilities. On the other hand, the last few bubbles were not too far in the past and therefore everyone knew that it was a bubble. The reason they still invested was simply that they thought the bubble was still at its beginning and not about to burst yet. Everyone, especially the "dumb money", was thinking they were being smarter than everyone else and saw themselves as the "smart money" (no-one likes to be seen as dumb) and in order to be the "smart money" they had to be out before the bubble would burst.
On Monday the 12th of June, immediately after the end of the Bancor ICO which raised ether worth roughly $153 million, this wave of excitement finally reached an end. Since, unfortunately, Bancor can neither use ether to pay any kind of employees nor use them to rent premises or something like that which leaves them no other choice than selling at least some parts of their ether holdings in order to ensure that they will be able to cover their expenses. The drop briefly broke the excitement and caused more people to sell their holdings, yet, the price mostly recovered after the news leaked out that the ICO raised about $153 million in just a few hours, recreating the believe that there is still more upside potential. Though, what the actual "smart money" realised at this point or already had realised before was that due to the increasing amount of money flowing into ICO's (e.g. EOS), even bigger amounts of ether will be sold at one time and, thus, after a certain amount of time, entirely breaking the current excitement and causing the bubble to finally burst. Additionally, almost simultaneously, there appeared some fake news about Ethereum's co-founders Vitalik Buterin, having died in a car accident, making prices drop even more.
On Sunday the 17th of July, just after the price hitted its low at $137, it seemed for many investors low enough to get back in the game and buy some ether. Also, now that the bubble seems to be gone, investors are again considering ether as an investment with "guaranteed returns". However, all the news which created this abnormal excitement around the blockchain blockchain have been leaked now, meaning that there is nothing to get excited about anymore which is why we are still in a bear market with ethereum and other cryptocurrencies.

As the chart above shows, there is a significant correlation between the current ether price chart and the bitcoin bubble in 2013/2014 which is only logical since the situations in both cases are quite similar:

1. A huge wave of news, causing more and more people to get excited.
2. Excitement breaks (no "new" news, "smart money getting out", ...)
3. Price is now low enough for investor to get back in.
4. No new excitement is created: slow depreciation in value.

Since the price is likely to keep rising for the next couple of days, I suggest now to buy some ether and to set your take profit at the resistance level at $316.
評論: Slightly increase your stake in ether in case the price again hits the descending trendline below and bounces back towards the resistance level at $219 during the next couple of days.
評論: Place a buy order at 202.1$ and increase your stake in ether by roughly 1/5 of your initial position.
評論: The recent uncertainties in bitcoin -splitting the bitcoin blockchain into two blockchains and thereby creating a new cryptocurrency called bitcoin cash (on August 1st)- made investors reduce their holdings in ether, expecting higher volatility during that time. This caused a brief price drop which was not included in the initial forecast. However, this opportunity could have been used to buy more ether at a lower price in order to increasing profits.

Once the price noticeably breaks the resistance level at $249, its further behaviour is probably going to conform to the prediction, marking its high during the next two weeks close to $316 and then slowly declining, down to approximately $120. I recommend to start selling your positions bit by bit as the value of one ether moves above $290.
評論: You should have now closed all of your long positions and go short on ether with 50% of your target position size.
評論: Open a new short position with 25% of your targeted position size.
評論: Now open your last short position, charging it with the outstanding 25% of your target position size.
評論: Price is soaring, driven by enthusiastic trading in China and South Korea. I suggest setting your stop loss at $380 in case there is a 2nd bubble forming in order to prevent further losses.
評論: Prices are dropping again, giving us the opportunity to make a quick short trade on ETHUSD with our first TP set at 240 where I suggest reducing the size of the position by 20% in order to take away some profits. Additionaly, to support that claim, my cryptocurrency-indicator is also reading a short in compliance with my other indicator.
評論: The price just hit our first target at 240 where we closed out 20% of our position and is now experiencing a minor pull-back to the resistance level at 272 or maybe even a bit higher. However, I consider a pull-back up to the descending trendline above as rather unlikely.

Also, there is forming a head & shoulders pattern supporting the idea of a price turn.

Trading: Set a sell-order at 272, charged with 15% of your initial position size and another order at 275 with the remaining 5%.
評論: Closeout 50% of your position in order to reduce risk.
評論: Close the remaining 50% of the short position as the risk of a breakout above the resistance level at 316 has become too big.
Ethereum and Bitcoin have more differences then similarties. Ethereum is already backed and used by highly respected companies worth trillions of dollars aka the people who need to back it to make it mainstream to masses. Furtherm ETH is development platform its not simply a means of exchange. Ethereum is light years ahead of Bitcoin after 2 years of existence and price action will continue to reflect it. Just my opinion.
@NoCode326, Thank you!
I completely agree with you and the fact that Bitcoin and Ether are both having completely different purposes. However, many investors do not really differ between different cryptocurrencies. A suitable example to back this is the recent significant appreciation in value of Ethereum Classic’s cryptocurrency even though this blockchain cannot stand a chance against Ethereum. What I think is similar, is the current market sentiment and the one during the Bitcoin bubble in 2013/2014.
+1 回覆
Thanks for this amazing analysis.
But to my mind, you forgot something essential. First, there is no "silkroad" on Ethereum, and the purpose of the network is not to "hide" money or to trade in the darknet... Which makes a huge difference between bitcoin 2013 crash and what Ethereum is currently experiencing.
And a crucial point is to keep in mind that Ethereum network is full of news and exitation at this moment. There are a lot of ICO, and huge companies and banks made up via the Ethereum Community.
I don't think this gonna happend the same way it happened for bitcoin...

Let's see what happens on the August 1st.
@jravouna, Thanks for your comment!
Basically, ICO's are not new to investors anymore, however, there are many investors who do not even really know what an ICO or a token is... Since they are just getting excited about what sounds exciting to them, from their point of view, new ICO's would not be any different from old ICO's and Financial institutions contributing to blockchain projects would not be new either.
(Example: comp. blockchain projects cashing in raised ether - mining pools.)
This comment was posted on Reddit by the end of 2014, reflecting events and sentiment in the Bitcoin market back during the bubble.

As you refer to “silk road”, I suppose you are talking about the bubble which occurred in April 2013, whereas my analysis is based on the following bubble, starting in November 2013.

Nevertheless, the eventual split of the Bitcoin blockchain will probably have a major influence on the ether price, therefore, thank you for reminding me!
As far as I am informed, however, a split of the Bitcoin blockchain seems rather unlikely to me since the vast majority of the miners know that a split would come along with significant losses for all parties, thus, they will definitely try to prevent it from happening.
(Please correct me if I am overlooking something here.)
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