Ethereum (ETH) has essentially held steady in February. The market cap now stands at US$89.55 billion, with US$1.58 billion traded on exchange over the past 24 hours. While daily traded volume is down sharply from late December and early January, the Ethereum platform continues to be adopted by an array of startups and is now being used at-large, reducing traditional banking friction, increasing payment speed, and removing intermediaries.
The World Food Programme, a United Nation organization that feeds as many as 100 million people across 80 countries, expects to cut millions of dollars in bank transfer fees by switching to a system using the Ethereum network, according to Bloomberg. “We felt we could replace the services offered by banks with blockchain,” said Robert Opp, who manages innovations that help the organization better spend its annual $6 billion budget. “Blockchain helps promote collaboration by providing enormous amounts of data.”
Consensys and Amalto Technologies recently announced a joint venture, Ondiflo, a company which will also be using the Ethereum blockchain. Amalto Technologies provides innovative enterprise-level solutions enabling B2B integration and electronic document exchange services to various markets including the Oil & Gas industry.
The Houston, Texas-based company would assist with supply chain management through “improved scheduling and dispatching, accurate measurement of discharged fluid volume, precise invoicing, significantly reduced revenue leakage, and zero to very few coding errors”. The service also promises to greatly reduce cash-flow problems by decreasing time to payment.
Joseph Lubin, Founder of ConsenSys and co-founder of Ethereum, previously discussed the future goals and openness of Ethereum in an AMA on January 4th. The discussion was heavily focused on scalability, remaining decentralized, and fostering a community of development through relationships and hackathons.
The ETH Denver conference was subsequently held from February 16th to 18th. The conference focused on hackathons and workshops, and discussions were based less on price and more on Research and Development. The HODL mantra was replaced with a BUIDL mentality according to one developer in attendance. Upcoming conferences include the Ethereum community conference from March 8th-10th in Paris and the Ethereal Summit in New York City on May 11th and 12th.
On the network side, transactions per day and transaction fees are both down sharply from the peak in late December and early January. This pattern largely follows the price of ETH itself.
According to CoinSchedule, ICOs raised over US$1 billion in December, the highest month on record. Less was raised in January, but with Telegram’s expected US$2 billion raise, including a US$850 million pre-sale, and Venezuela’s Petro ICO raising a reported US$735 million in pre-sale, February 2018 will surpass December 2017.
The record-setting ICOs will likely bring increased transactions and fees throughout Q1 2018, as well as increasing interest in the ICO as a funding model. For comparison, Google raised US$1.9 billion during its IPO, while Twitter raised US$2.1 billion.
The ETH network value to transactions ratio (NVT) is currently among the lowest 25% of all crypto assets. Because NVT only accounts for on-chain transactions, a metric analyzing the number of active wallets may better illuminate the network use, such as the metric proposed by Dmitry Kalichkin of Cryptolab Capital. Second layer off-chain transactions like the Raiden Network will continue to compound this issue.
The Raiden Network is analogous to the Bitcoin Lightning Network, in that it offers off-chain bidirectional payment channels allowing for free and fast token transfers. Unlike the Bitcoin Lightning Network, the Raiden Network was brought to market via ICO, where RDN was sold. RDN was offered with a supply of 50 million tokens and a final price of 0.0021906 ETH/RDN. Another 50 million tokens were subsequently generated, which were split between the project lead, Brainbot Labs (34%), and the External Development Fund (16%). RDN currently has a US$365 million market cap and is mainly traded on Binance.
Hash rate continues to push record highs, despite the hard fork in October decreasing the block reward from 5ETH to 3ETH. Difficulty has returned to the record levels established prior to the fork and will likely set a new all-time high over the next month. Mining profitability is currently only 37% of the peaks established in both June 2017 and January 2018. Both of these time periods were influenced by record price levels and peaks in transaction fees.
Exchange traded volume is led by the Bitcoin (BTC), Tether (USDT), and U.S. Dollar (USD) pairs. The majority of trading has been conducted on OKEX, Binance, Bitfinex, and GDAX. The Korean Won (KRW) trading pair holds a premium of almost 10%.
ETH has been essentially trendless on high time frames, since posting a record high in January. The overarching trend continues to bullish, and a return to this trend can be confirmed using Ichimoku Cloud, Moving Averages, and Pitchforks. Further background information on the technical analysis discussed below can be found here.
The Ichimoku Cloud metrics on the daily chart are all bearish, with singled settings (10/30/60/30) for quicker signals. The Tenkan (T) and Kinjun (K) lines have failed to recross bullishly, suggesting continued bearish momentum based on Cloud probability. Should bullish momentum exist on or near March 9th, price will likely move bullishly through the Kumo twist.
The Ichimoku Cloud metrics on the daily chart are all bearish to neutral, with doubled settings (20/60/120/30) for more accurate signals. The T and K lines have crossed bearishly, price is in the Cloud, and the Cloud will likely flip bearish (red) for the first time since March 2017. A short entry opportunity would be indicated by the price falling below the Cloud, when the Cloud itself is bearish. The 200EMA, near US$630, would be the next support test should that occur.
A potential Pitchfork, drawn using anchor points in July and December, shows price again nearing the 1.618 level on the recent drop. The 1.618 level is borrowed from Fibonacci extensions. Price is expected to return to the mean of the trend (red), should this zone hold, as is expected when buying extreme lows or selling extreme highs.
Lastly, ETH/BTC on the daily chart continues to pull back towards the 200EMA. A likely bearish cross from the T and K lines would indicate a long exit signal. However, a long exit was suggested when price breached the fractal stop near 0.098. This illustrates the importance of using a secondary stop loss system other than TK crosses when taking Cloud trades.
Real-world applications for Ethereum continue to drive headlines outside of the cryptosphere. Network metrics, pending ICO sales, and dApp development are forecasting an increase in transactions and fees over the next few months. Scalability continues to remain a concern as the blockchain expands by leaps and bounds.
In the near term, technicals suggest neutral to bearish momentum, with a buy zone around US$650. As price remains above the 200EMA, the macro bull trend is in no threat of being challenged.