Ethereum (ETHUSD) Rebounds to Near 38.2% Fib Retrace of Mar20-May21 Rally
ETHUSD Weekly Chart Technical Analysis
ETHUSD Daily Chart Technical Analysis
Ethereum (ETHUSD) has completed a major bottom, gaining in the past 12 days and is suddenly back above the psychologically key 2.5k whole figure level. Significantly, ETHUSD is quickly approaching the 38.2% Fib retrace of the March 2020 to May 2021 rally. The turnaround began with the successful July 3rd week bounce off the May and June lows, invalidating the Head & Shoulders-like pattern (seen more easily on the daily chart) that until about a week ago was still arguably in late stages. After such a strong rebound, the odds of healthy profit taking by early this week is high, but unlikely to see ETHUSD return below 2k in August. ETHUSD's correlation to BTCUSD (on a weekly chart) continues its bounce from around zero and the lowest level since September 2019. Congratulations to those who heeded the warning May 16th of the major top forming, and to longer term bulls who remained long ETHUSD or initiated ETHUSD longs after the March 2020 crash, with bullish developments profiled in the March 29th, 2020 analysis and increasing upwards momentum cited April 26th, 2020. I went long in June in the 2310-2600 range, and am targeting 2600-2800 for August. The weekly and daily RSI, Stochastics and MACD are bottomish, rallying or consolidating recent gains, with the daily Stochastics overbought.
Ethereum Fundamentals
Ethereum (ETH) is firming in its market dominance % relative to other alts going into August.
Source: https://tradingview.com
The London hard fork that was expected August 4th may be delayed due to security concerns. This widely anticipated incorporation of EIP-1559, an Ethereum Improvement Proposal, would split the gas fee into a base amount and a tip by senders, where gas fees effectively see a reduced volatility (due to the automatic setting of the base portion of the gas fee depending on how full a block is). Further, although there is no limit on the supply of Ether that can be created (unlike with BTC), the growth in the supply of Ether will be curbed by the burning of the base portion of the gas fees.
The Ethereum hash rate is beginning to recover as the Chinese miners who relocated to other jurisdictions are coming back online, and resuming production. Ethereum's hash rate had seen a dramatic pullback after topping in late June at roughly double the prior high in 2018, due to the escalated crackdown since June on Chinese miners and exchanges by the Chinese government.
Source: https://bitinfocharts.com
NFT (Non Fungible Tokens) has been white hot in 2021, with most NFTs launched on one of 2 Ethereum token standards (ERC-721 & ERC-1155). NFTs on digital art, collectibles, and in-game purchases have been auctioning at tremendous values, suggesting a bubble in the NFT space, but drawing more investor attention into Ethereum/Ether and the numerous use cases for NFTs nevertheless.
Meanwhile, demand for Ether exposure through Grayscale's ETHE (ETH Trust) appears to remain soft with the ETHE discount on NAV at near -7%, reflecting a combination of institutional investors taking profits (after expiry on lock-up periods) as well as the realization by retail investors that Grayscale is under no obligation to ensure the trusts trade at NAV. While ETHE traded at a premium, retail investors were turning to ETFs available in Canada, Switzerland and elsewhere where premiums are arbed away. With the Grayscale closed-end fund products, there is a limited secondary market period for retail investors to buy from institutional investors who have the advantage (while ETHE traded at a premium) of being able to subscribe to the Grayscale products at the NAV. Three ETH ETFs (issued by CI, Purpose and Evolve) went live on Canadian markets April 20th, adding to the 3 BTC ETFs already available through the TSX and placing pressure on the SEC to finally approve ETF applications pending on BTC.
Source: https://ycharts.com
Since March 2019, the growth in ETH wallet addresses has tracked fairly closely, BTC wallet address growth.
Source: https://bitinfocharts.com
Industry Fundamentals
The crypto universe is sitting just shy of USD 1.7T in market cap as of Aug 1st. The crypto industry retail market euphoria is likely to soon accelerate as hinted by Coinbase (COIN) going through a
bottoming phase after its 50% plus drop from its opening day peak April 14th to its lowest level May 19th. Watch for retail FOMO to return through Robinhood metrics now that Robinhood is publicly listed and obliged to disclose more details around client crypto trading activity. In Q1, Robinhood had 9.5M clients trading crypto, a more than 5.5x increase from Q4.
Market sentiment is recovering after Musk hinted that Tesla owns 42k BTC, valued at roughly USD 1.47B as of Jun 30, 2021. With a large portion of the dirtier coal-fueled China-based crypto mining having migrated to cleaner sources in other jurisdictions in June and July, fresh crypto investments can be expected from corporates up until now on the sidelines due to BTC's energy consumption. Sentiment began rebounding with Musk mentioning in his Jul 22nd YouTube stream with Ark Invest's Cathie Wood and Jack Dorsey, that Tesla may soon begin accepting BTC for payment again, and that SpaceX already holds BTC. The Chinese government crackdown on crypto mining and crypto exchanges in China appears to be easing.
The DeFi market cap is just above USD 94B as of Aug 1st (as per CoinGecko), with DeFi representing just above 5% of the entire crypto market and 30% of Ethereum's market cap.
Source: https://coingecko.com
The number of DeFi users (as defined by unique wallet addresses) is just above 3M as of Aug 1st (as compared to the 50M or so total blockchain addresses). A key factor behind the surge in activity on decentralized exchanges (DEXs) like Uniswap is the ability to participate on DeFi project tokens before they list on centralized exchanges. For DeFi to continue to grow, DeFi projects'll need to become more user-friendly for the mainstream masses and collaborate more with the more popular centralized exchange (CEX) partners in packaging and distribution. Regulators will eventually sweep in as well on this space, as much of what's available to trade in DeFi are arguably securities.
Source: https://www.theblockcrypto.com
With the recent crypto market bubble burst, Coinbase's volumes have fallen to just above that of the leading decentralized exchange Uniswap's.