Ethereum Classic Price Analysis – Entering the mainstream with Coinbase » Brave New Coin


Following the announcement that Coinbase would begin offering Ethereum Classic pairings in the coming months, the price of ETC has risen by 18.8% (index price) since the 11th of June. Conversely Ethereum (ETH), has fallen by 15.17% over the same period. ETC is currently the 16th largest crypto in the world by market capitalization and currently trades at $14.60 (indexed).

Ethereum Classic has had a turbulent history (check this earlier TA for more on that), and a fair number of vocal naysayers who still doubt its legitimacy. The news of the listing was met with surprise from a number of influencers within digital markets.

Additionally, it beat out projects with strong institutional backing and popularity within the crypto community like XRP, Cardano and Iota, which to most, appeared to be more obvious choices for Coinbase to trade.

 Salty ETC

Pairs and exchanges

 ETC pairs 3

The most popular trading pairs for ETC are the crypto-to-crypto ETC/USDT and ETC/BTC pairs with fiat pairings (US dollar and Korean Won) following. Once Coinbase begins listing fiat options for ETC on GDAX, we may see an increase in the popularity of fiat to ETC options.

 ETC X2

Currently, the most popular exchange for trading ETC/USDT is OKEX. Based in Malta, OKEX is the world’s most popular exchange by trading volume. The ETC/USDT pairing is currently the platform’s 5th most popular exchange. These figures should to be taken with a pinch of salt, however, as OKEX it has previously been suspected of deliberately releasing overinflated trading numbers.

Why did Coinbase choose Ethereum Classic?

Coinbases’ trading platform, GDAX (soon to be known as Coinbase pro), is currently the 15th largest cryptographic exchange in the world. GDAX is unique because it only currently offers investment options for four different cryptocurrencies, Bitcoin (BTC), Ethereum (LTC), Litecoin (LTC) and Bitcoincash (BCH).

The primary criteria for a listing on GDAX, is an asset’s ability to align with the exchange’s Digital Asset Framework (DAF). The framework lays out the standard that tokens must meet to be considered for listing. Included in the framework are;

  • Decentralization — the ability of a token to be open and available to everyone and not controlled by a single entity.
  • Meeting assessment standards for engineering and product quality.
  • The ability to meet US Security & Exchange Commission (SEC) standards, so as to not be listable as a security
  • The availability of liquidity.
  • The functionality of its network capabilities.

Given this, Coinbase deciding that Ethereum Classic met the minimum standard for each of the DAF’s key metrics, could be considered an institutional vote of confidence. Without doubt it has been the key factor in ETC’s recent bull run and surges in trading volume. One would expect to see a similar effect once the ETC token begins officially trading on the platform.

 ETC price since CB

 ETC price since coinbase announcement

There are questions, however, as to what extent ETC actually meets all the DAF standards. For example,  there is a clause on governance in the DAF, which specifies that tokens must meet an “assessment of long-term expectations and decision making.” Given Ethereum Classic’s tumultuous past and the nature of the split of the original Ethereum network, exactly how the GDAX applied this assessment criteria to ETC would be interesting to know.

Most of the core development team behind the original Ethereum product (Ethereum foundation) shifted to the new ETH network after the DAO hacks. This included the key mind behind the Ethereum ‘world computer’ idea and original code writer (the bulk of which is still used by ETC), Vitalik Buterin.

In the wake of the split, some of the key figures behind ETC attacked Ethereum as a network, describing the decision to refund hacked DAO users “as the worst decision possible”. This was followed with an aggressive manifesto targeting decision making made by the Ethereum foundation.

The animosity with which Ethereum Classic developers and supporters spoke about the post-fork ETH team, left questions regarding the maturity of the new custodians of ETC. However, it has been two years since the split, and Ethereum Classic has had a number of recent developments that have helped add legitimacy to the project.

Recent developments

On May 29th Ethereum Classic initiated a hardfork to remove a ‘difficulty bomb’ in its code. Mining becomes twice as difficult every 100,000th block on Ethereum blockchains. At which point mining become unprofitable — potentially pulling users away from the Ethereum networks.

ETH decided to upgrade the network to PoS style model, called Caspar and fork the network with a new consensus protocol that would be more scalable. ETC however decided to retain PoW, retaining decentralization, opting for a less abrasive ‘network upgrade’ style hard fork .

ETC was able to move past the block, and since the end of May has seen a big increase in its Hash rate.

 ETC hashrate

Ethereum Classic hashrate since the 30th of May  (blockchain.info)

Additionally ETC is building a niche for itself as an issuer of ERC-223 tokens, an upgraded version of the universally used ERC-20 protocol standard. Among other things the ERC-223 token addresses issues of lost tokens and excessive power usage existing within the ERC-20 standard

The Callisto token, which was airdropped to ETC holders earlier this year, exists on the Ethereum classic network under the ERC-223 standard.

Another Token, Genevieve (GXVC),  seeks to facilitate foreign investment between governments, and also exists as an ERC-223 token that can be hosted on the Ethereum Classic network.

Technical analysis

ETC has not been immune from the 2018 bear market, but has quietly been adding functionality, diffusing problems, and growing its community. Although the Coinbase listing has added additional litigitacy, price has since fallen back to near prior-announcement levels.

Bollinger Bands and Volume Flow Indicator

On the daily chart, price volatility for ETC is slowly compressing, visualized by bollinger bands. Volatility compression typically precedes a price breakout.The last time ETC experienced compressing bollinger bands after a slow bleed (slow declining price on light volume) was from June to November 2017. Afterwards, price experienced a breakout higher (black rocket ship) before getting chopped up in the current bear market. If history repeats itself, then price could slowly decline over the coming months before shooting higher.

Additionally, the volume flow indicator (VFI) was approaching 0, but recently reversed following the overall bearish market movements. The VFI interpretation is: a value above 0 is bullish and below 0 is bearish, with divergences between price and oscillator being high probability signals.

ETC TA6

Ichimoku Clouds with Slow Wave Trend Oscillator (SWTO)

The Ichimoku Cloud uses four metrics to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, Lagging Span (Chikou), and Senkou Span (A & B).

The status of the current Cloud metrics on the daily time frame with singled settings (10/30/60/30) for quicker signals is mixed; price is beneath the Cloud, Cloud is bearish, the TK cross is bullish, and the Lagging Span is below the Cloud and touching price.

A traditional long entry would occur with a price break above the Cloud, known as a Kumo breakout, with price holding above the Cloud. From there, the trader would use either the Tenkan or Kijun as their trailing stop.

After the Coinbase announcement, price lept higher but did not come close to completing a successful Kumo breakout. Price has since retreated to support between $14 and $15. Additionally, the SWTO is not near oversold levels, which does not seem likely to provide a buffer to short term selling pressure from the overall market. A new Kumo breakout will need to breach and hold above ~$18.86 (flat Senkou B) with a future price target of ~$24.41 (previous resistance top). If price continues to decline or fails a Kumo retest, then support levels of $13.30 and $10 become likely.

 ETC TA2

The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30) for more accurate signals is bearish; price is beneath the Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is below Cloud and touching price.

A new Kumo breakout will need to breach and hold above ~$24 (flat Senkou B and prior resistance top) with a future price target of ~$27.69 (flat Senkou B). If price continues to decline or fails a Kumo retest, then support levels of $13.30 and $10 become likely with a possible retest of ~$7.45 also possible.

ETC TA3

Ethereum Classic Versus Ethereum

The ETC/ETH trading pair is useful to gauge sentiment between the communities and price action. Obviously, ETH has been the winner to date, but the technicals show that price and sentiment might be tipping in favor of ETC for now. On both the fast (10/30/60/30) and slow (20/60/120/30) Ichimoku Cloud settings, price has completed a successful Kumo breakout, which denotes a positive price trend vis a vis Ethereum.

ETC TA5

Conclusion

Coinbase introducing ETC to its trading platform has invigorated the Ethereum Classic network. That the token has met the GDAX’s digital asset listing criteria sends positive messages to the market around network quality, liquidity, regulatory safety and decentralization. But it is not just the new listing, as ETC itself has continued to improve the network’s scalability and mining difficulty, while also trying to offer new options to potential ICOs and Dapps looking for alternative blockchains.

Ethereum Classic will always have to live with the tag of being Ethereum main’s smaller, less sophisticated facsimile. However, it is quietly building a reputation based on its own merits.

Technicals are currently bearish despite the positive, long term signal sent to the market by the Coinbase listing. The prudent, short term trader (10/30/60/30 settings) will await a positive TK cross and Kumo breakout above ~$19 before entering a long position. Whereas, the prudent, longer term trader (20/60/120/30 settings) will await a positive TK cross and Kumo breakout above ~$24 before entering a long position. Bottom fishing traders may look to ETC’s long term support levels of ~$13, $10, and $8 as spots to begin accumulating long positions at a lower cost average while maintaining appropriate stops and risk management.

Disclaimer: This analysis has been designed for informational and educational purposes only. Readers are advised to conduct their own independent research into individual assets before making a purchase decision.

About the authors

BNC Christopher Brookins headshot pic4Christopher Brookins
Christopher Brookins is the founder and CEO of Pugilist Ventures, a quantitative investment firm focused on digital assets and blockchain technology. Chris has a deep knowledge and unique perspective on digital assets formed by his polymath experience in equity trading, credit investing, and business development at two West Coast startups (one acquired). He has been involved in the blockchain community since 2014. Follow @chris__brookins

 

Aditya Author Profile

Aditya Das
Aditya Das is Brave New Coin’s in-house market analyst. Raised in Dubai, UAE, he holds a post-graduate honors degree in Economics from the University of Auckland and a BA in Economics from the University of Sussex. Prior to joining BNC his most recent roles were as a researcher and Economics tutor at the University of Auckland. Follow @Quartlifecrypto

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