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Chart of the Day: Ethereum to $1,000 - and Lower

Published 21/12/2022, 01:37 am
Updated 09/07/2023, 08:31 pm
  • Visa is working on a solution to allow Ethereum holders to set up automatic payments from self-custodial wallets through smart contracts called "delegable accounts" (EIP-86)
  • Macroeconomics expert Raoul Pal believes that BTC and ETH are at crucial support levels, indicating a potential for a new bullish run
  • Here's why I disagree with the above cited

Ethereum is a decentralized, open-source platform that enables the creation and deployment of smart contracts and decentralized applications (dApps). It uses a decentralized virtual machine, the Ethereum Virtual Machine (EVM), to execute smart, self-executing contracts with the terms of the agreement written in code.

Ethereum also has its cryptocurrency, Ether (ETH), with which holders pay for transaction fees and computational services on the network. Ethereum allows for the automation of many processes that would typically require intermediaries. It is often referred to as the "world computer" because it will enable anyone to run programs on the decentralized network.

Visa (NYSE:V) proposes an "account abstraction" solution that would allow Ethereum holders to set up automatic payments from their self-custodial wallets, eliminating the need for banks and centralized third parties.

The objective is to create a smart contract, an intermediary between a user account and a contract account, enabling the result of a self-custodial wallet that can make automatic recurring payments without requiring the user's active participation. The proposal combines user accounts and smart contracts into a single type of account on the Ethereum blockchain, called a "delegable account," which allows for the automation of payments through smart contracts.

This concept, known as EIP-86, was formalized initially by Ethereum creator Vitalik Buterin in 2017 and enables multi-owner accounts, delegable accounts, and public accounts from which anyone can transact. Visa is working with Ethereum developers to increase the capacity to handle large volumes of transactions and provide increased security and interoperability. The company has also filed trademark applications for its crypto wallets and has partnered with JP Morgan to collaborate on private blockchains for international payments.

Macroeconomics expert and former Goldman Sachs executive Raoul Pal believes that the price action of BTC and ETH will create history as both digital assets are at crucial support levels. Pal stated that BTC had reached the peak of its oversold region, creating a long-term opportunity to buy the dip.

He also noted that the adoption rate for Ethereum has reached a critical support level and that ETH's current price lies on the long-term log uptrend of the Metcalfe adoption curve. Pal believes that the crypto market is about to enter a boredom phase, which usually indicates the start of a new bullish run. This phase follows a period of fear and disgust and is a time for investors to come to terms with the market's good and bad news and extract valuable lessons. Pal has also observed that previous episodes of low 30-day realized volatility often coincide with lows in the crypto market, with a magic level for BTC currently at 20% and for ETH at 40%.

I have a different take. Here is my most recent article on Bitcoin, predicting $10K. ETH/USD Daily Chart
Ethereum may have completed a rising flag - a range when fresh bulls take over for tired bulls within a downtrend.

Technicians derive the flag's statistical target based on the invested interest that has driven the preceding sharp move, which is $560 from its $1,230 breakout, aiming at $670, almost half its current $1,212.67 price.

I say "may have completed a flag" because the price dipped below the flag on Nov 21, and the continuation pattern is typically 1-3 weeks. This one was five. So, the price may not follow through with the trigger reaction after the flag. Here's why I still think the crypto still completed a flag.ETH/USD Daily Chart
The flagpole that setup for the flag's body was, in fact, the followthrough of a previous bearish pattern from the reversal variety, an H&S top. The price tested the top's neckline, then plunged by a third in two days (!). The flag follows through the falling channel - the downtrend's boundary.

The H&S height implies a repeated $550 move from the $1,465 breakout, implying the $915 target. To clarify, this is a higher target than the flag, but it nevertheless indicates that the price will keep falling, as it would after a flag's completion.

Trading Strategies - Short Position Setup

Conservative traders should wait for the price to make another low, rebound, and find resistance under the flag.

Moderate traders would wait for the price to find resistance at the flag from its current levels.

Aggressive traders could short at will, according to their strategy. Here is a generic example:

Trade Sample - Aggressive Short Position

  • Entry: $1,250
  • Stop-Loss: $1,300
  • Risk: $50
  • Target: $1,000
  • Reward: $250
  • Risk-Reward Ratio: 1:5
 
Disclosure: The author does not own any of the securities mentioned in this article.

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