Ethereum Dropped Below $100. What’s Next?
We predicted in September that the price of Ether would fall to USD$140 in the near future. Due to the weak performance of Bitcoin and continued selloffs in the market, ETH's price reached $140 in November, and quickly fell further. On December 6th, the price fell to $83, the lowest yet this year. This most recent decline was mainly caused by the weak performance of BTC. According to LongHash’s long time tracking, however, some of the problems we raised in our previous article remain unresolved, and we don’t except to see a significant price increase anytime soon. Here’s why.
Genesis block transfer
Last time we said that the plunges in February and September might have something to do with the transfer of ETH from the genesis block. Through constant monitoring of Ethereum's genesis addresses by LongHash, we found that on November 20, 2018, three Ethereum addresses that participated in crowdfunding in 2014 transferred 360,000 ETH (more than US$50 million) to the same address. There is no further action yet. The massive transfer of Ether in genesis addresses could mean that some early investors have lost faith in Ethereum. It’s worth noting that these investors have experienced plenty of ups and downs over the past few years. They remained unmoved by the price of over $1,000 at the beginning of this year, but are selling Ethers now. We believe that it is not panic selling but concerns about the future.
ICOs in trouble
The ICO situation is not good. According to data from RatingToken, out of 196 projects with a market capitalization of more than $10 million, 82 projects had no Github updates in 30 days. If a project doesn’t update its Github for a long time, it is highly possible that the team is about to give up. According to LongHash analysis of these kind of projects, while some early projects accepted BTC in their crowdfunding, most accepted ETH. In the case of a project suspending development or even running off, the team would sell the ETH raised during crowdfunding and cash out their own project tokens, which causes a double shock on the price of ETH.
On November 8, the US Securities and Exchange Commission (SEC) announced settled charges against EtherDelta founder Zachary Coburn for running an unregistered exchange. Later in November, the SEC announced that it had reached a settlement with two ICO companies Airfox and Paragon. On November 29, the SEC announced settled charges against boxer Floyd Mayweather Jr. for not revealing payments they received for promoting ICOs. Mayweather had to pay a $600,000 fine.
Currently, the main application of ETH is still the distribution of tokens by smart contracts. The SEC’s stricter regulation of SEC towards blockchain will have a negative impact on ETH prices in the short term.
Continuous break of supporting positions
According to the daily ETH/USDT K-line chart from Tradingview.com this round of declines led to a large trading volume when ETH fell below $140 on November 20. This indicates that $140 was once a support, and a panic sell off happened when this position was broken through. After the following three-day correction, there was a new round of resistance testing, panic selling and bottom fishing. In the bear market, every large fall in volume means less purchasing power in the near term, because investors have less money to spend. So we believe that the rally on the 28th was a desperate resistance. After that, when the price fell below $100 on December 6th, there was hardly any change in volume.
After analyzing the possible reasons of the decline, let’s estimate when the price will bottom out. According to LongHash technical monitoring of our market and funds, we see $85 as the next resistance level. Combined with our monitoring data and the negative news above, we now see $85-90 as the bottom range. There is the possibility of a drop to $80, before returning to this range.