Weekly update: Ether price continue to tumble. Is the shorts for ether over?

Hi Folks, this has been another bear week. We saw the slow gains that was built up in last few weeks of August was wiped out by on 5th Sep when btc fell 15% from 7300 to 6200 levels and ethereum fell 30% from 280 to 190. Is this the lowest we will reach? This remains a question mark. There’s a lot of fear in the market right now and the negative news revolving crypto seems endless. In this article , I seek to examine some of these news and give my 2 cents worth to re-examine our trading strategy.

 

These are the important news to note and the negative news around ether:

News 1: Crypto growth near ceiling

In a recent conference, Vitalik mentin that there is ceiling for crypto growth.

If you talk to the average educated person at this point, they probably have heard of blockchain at least once. There isn’t an opportunity for yet another 1,000-times growth in anything in the space anymore. Growth in Bitcoin and other cryptocurrencies in the blockchain community through its first six or seven years was dependent on marketing and trying to get wider adoption. That strategy is getting close to hitting a dead end. The next step will be getting people who are already interested in cryptocurrencies to be involved in a more in-depth way

Viewpoint: Honestly, I think this is a known statement and vitalik re-affirm it. It simply telling people that blockchain growth has reached a plateau unless, the market see more real-life applications. I do agree with the statement, finding a 1000x coin is no longer feasible this year; we are unlikely to see another coin based on blockchain technology jumping 1000x like ether or btc.

 

News 2: Collapse of ether is inevitable

On 2nd Sep, Jeremy rubin contributed that ether the asset and not ethereum will go to zero. This is a really interesting read. He commented that

If all the applications and their transactions can run without ETH, there’s no reason for ETH to be valuable unless the miners enforce some sort of racket to require users to pay in ETH. But if miners are uncoordinated, mutually disinterested, and rational, they would prefer to be paid in assets of their own choosing rather than in something like ETH. Thus, in a stateless ecosystem, replacing ETH is a Pareto Improvement (i.e., all parties are better off). The only party disadvantaged is existing ETH holders.

Interestingly after his article, Vitalik actually agreed with his conclusion that if ether is not switched to POS it has no value. This trigger huge selldown in ether on 5th  Sep that moved the market.

 

News 3: Ethereum and EOS have few active users

Viewpoint: This is another interesting read, I think it correctly points out that is a lack of active users. In fact, I do agree most of the blockchain community are more interested in price movement rather than actual users of blockchain. Me included 🙂 Notwithstanding, I think much rely on the externalities factors. Let’s say if all your friends are not using this dapp, you being a user on the platform serve no purpose. Overall, there need to be a better proposition for people to switch from centralized platforms to decentralized platform and there need to be an incentive to encourage this switch.

 

News 4: Bet against ether price reaches all time high

Viewpoint: I like the last and final part of this news on its analysis of the over abundance of shorts on ether and there’s a possibility of a “short squeeze.” When short positions are stacked so high, a small increase in price could cause those shorting to close positions in order to avoid a losing trade. Since the only way to close a short is to buy back the cryptocurrency, it’s possible ETH could see a rapid price increase, also known as a “squeeze.” I think this is an interesting idea and we expect prices to rebound back fast and furious if price were to rebound

 

Trading Idea: There may be a short term trading opportunity for ether.

I think a strong price support for ether is reaching soon. At the current price point of less than USD200, there is really little incentives for ICO particpants to dump their ether anymore. The surge in ether price started from May18 when ICO fever craze hits in thereafter the craze ended in Mar18.

Ether price chart

 

Interesting from May18, we see that ether price fell from USD800 to USD190. This  correspondent to a one year lock in period as most ICO participants’ tokens are released and they swap ether for fiat. Current price of USD190 is correspondent to May17 ether price. If a project has only raised funds in Sep18 where ether is around USD300, there’s little incentive for them to sell ether now at USD190 unless they have urgent fund shortages. In view of that, I think ether price dump by ICO participants may not continue.

Moverover, if some positive news which include ether listing on CBOE futures were to actualize,  this may trigger a price recovery. Coupled with short squeeze factor mentioned above, the pace of  recovery will be fast.  Based on the price chart, I would go short term bullish on ether with buy at USD150-USD170 levels and sell at USD280-USD300 level.

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