Ethereum reached its all-time high of $4,864.40 on 10 November last year. Since then, its price has deteriorated by 47.9% as of trade today, which is an enormous erosion of capital. During an interview with Bloomberg, Vitalik Buterin, co-founder of Ethereum blockchain, said, "The people who are deep into crypto, and especially building things, a lot of them welcome a bear market. [This is] because when there are these long periods of prices moving up by huge amounts as it does – it does obviously make a lot of people happy – but it also tend[s] to invite a lot of very short-term speculative attention."
FXCM's cryptocurrency basket, CryptoMajor, which includes Bitcoin, Ethereum, Litecoin, and Bitcoin Cash, is down 52.4% over the same period. As an asset class, cryptocurrencies are out of favour. In the Bloomberg interview, Buterin stated that "the winters are the time when a lot of...applications fall away, and you can see which projects are long-term sustainable." In other words, there is now a potential for streamlining and consolidation as the industry continues to grow and move into a shakeout phase.
The market regards Ethereum as slow and expensive and, to this end, Buterin has shifted focus to scaling the cryptocurrency. However, the key is if market participants buy into this. Prices on the longer-term weekly chart below remain weak between the lower blue and red bands. A good first step will be if the price can move into the neutral area between the blue bands. This action may signal that the market is starting to revalue Ethereum. Until then, and if weakness is maintained, Ethereum is likely to continue under pressure.
Senior Market Specialist
Russell Shor joined FXCM in October 2017 as a Senior Market Specialist. He is a certified FMVA® and has an Honours Degree in Economics from the University of South Africa. Russell is a full member of the Society of Technical Analysts in the United Kingdom. With over 20 years of financial markets experience, his analysis is of a high standard and quality.