Ethereum Signals Exhaustion After Steep Rally

Ethereum Signals Exhaustion After Steep Rally
November 29, 2017

 
In our November 2nd report, we had predicted a huge rally in Ethereum (ETH) coin. We had also mentioned our intention to purchase a call option in the binary market. The ETHUSD pair was trading at about $290 when the report was published. As anticipated, the ETHUSD pair hit a level of $323 in a week. That left our option trade in a profit. The ETHUSD pair rallied further to reach a level of $468 on Monday. We hereby present our arguments for a price correction in the ETHUSD pair.

The advantage of Ethereum network is that it can process more transactions than all of the major crypto currencies combined, including Bitcoin Cash, Ripple, Litecoin, and Bitcoin. As of date, the number of daily transactions in the Ethereum network has increased to 550,000, almost double than that of Bitcoin network. It was made possible by the introduction of scaling solutions such as Sharding, Plasma, and Casper by the Ethereum Foundation and open-source development community.

The community is in the process of introducing second-layer solutions that will facilitate both on-chain and off-chain scaling. Recently, the speed of transactions was also increased by a hard fork, known as Byzantium, which bypassed unnecessary information from Ether transactions. The Ether network has also provisions for the integration of ZK-SNARKs (Zero-Knowledge Succinct Non-Interactive Argument of Knowledge) technology, which will facilitate anonymous transaction and private payment facility in the future. On the basis of the above mentioned advantages and upcoming developments, the value of Ether appreciated sharply.

However, earlier this month, around $280 million worth of Ether, which represents about 1% of the outstanding value of Ethereum, got frozen due to a vulnerability in crypto currency wallet provider Parity. The bug allowed users to modify the code and become the owners of wallets belonging to somebody else. The suicide or kill provision (an OPCODE), which allows a user to destroy a contract, was deliberately activated by an anonymous user. The bug has created concerns among investors. Another hard fork may be required to release the crypto currency and it is unclear when there will be a solution. Since sentiments drive a crypto currency more often, we can expect a short-term unwinding of positions in the week ahead.

The ETHUSD pair is facing resistance at 475 levels. Further, the RSI indicator is declining from the overbought zone. The crypto currency pair has also moved far above the 50-period moving average. Thus, we can expect a correction to begin soon.

ETHUSD - Technical Analysis - 29th November 2017

Through one of the Forex brokers listed here, we may establish a short position in the ETHUSD pair near $470. A stop loss order will be compulsorily placed above $528. If the pair declines as expected, then the short position will be covered near $367.

Disclaimer: The trading analysis offered here is our opinion. It is not provided as trading advice, merely an indication of our trading plan. We cannot guarantee success and we encourage traders to incorporate a strong money management strategy to limit losses. Please use this article as part of your own research before formulating strategies prior to trading.

Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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