The Ethereum Foundation, led by Vitalik Buterin, was on of the first projects introducing the concept of a decentralised protocol with smart contracts, leading the way to a whole ecosystem of decentralised applications (DApps) being developed on top of the platform. It was arguably also the first successful undertaking aimed at moving away from crypto being perceived merely as either a currency or an asset for speculative purposes, though these features are still very much present to this day, and competition is fierce.

Long-Term Outlook

Given the available long-term data and the relatively high volume in Ether, it is easier to identify an Elliott Wave pattern in the price compared to smaller and younger coins in the market. Please note that I am using the ETHUSDT chart as it’s the only one with the full historical data on TradingView. While there is a small difference between USD and Tether, it is negligible for the sake of this analysis and can be taken for real US dollars.

After an exponential rise from $6 to over $1,400 in 2017, Ether has been in correction mode throughout the year and is looking for a bottom before the resumption of the rally. The corrective move this year shows a clear 3-wave pattern as an ABC move down, with wave C looking to complete in the coming weeks.

Elliott Wave analysis ETHUSD – October 22nd 2018

Rule of Alternation

In my previous post DASH Long-Term Analysis: The Future is Bright, I listed a number of patterns that are typical of a wave 4, including the rule of alternation, which describes an inverse correlation between wave 2 and wave 4. When the move of the former is deep and short, the latter will inversely be shallow and extend time-wise, and viceversa.

Looking at Ether, we note that wave (2), which usually ends at or near the 61.8% retracement, is very shallow having barely hit the 38.2% retracement. We should therefore expect a deeper correction in the 4th wave than is typical of this wave. The recent low of $167 hit just $5 below the 38.2% retracement of the full wave (3) of $173. While this could be taken as the correction having completed, caution should be taken as the probability of further downside is still very strong.

Short-Term Outlook

Analysing more in detail the short-term view, we are currently in the final move of the ongoing correction driven by Bitcoin, which has been dragging all cryptos along with it. The recent spike earlier this month is clearly corrective in nature, and suggests that a triangle is most likely taking shape in this last leg down of the full wave (4) move. This also reduces the probability of the overall correction having already completed.

While my primary expectation has the price move a little higher to complete the triangle as an e of 4, there is the possibility of wave 4 having already completed and we should then expect a more immediate move to the downside in the next couple of days. 

Elliott Wave analysis ETHUSD – October 27th 2018

Price Forecast

My ideal target is for wave (v) to bottom around $120. This would correspond to the 0.764 extension of the full wave (1) move from the first chart, three fibonacci levels lower than the $1,400 top at the 1.382 extension (the DASH post referenced above explains this in more detail).

There is room for a deeper correction all the way to $90, matching the 50% logarithmic retracement of the full wave (3) length. This would also conform with the alternation rule mentioned above. Once a bottom is in place, Ether should start the last leg of the full move since its inception, targeting as a minimum the 1.764 fib extension of circa $6,350, yielding a nice 50-60x gain for those willing to buy near this bottom.

If the price were to break below the $90 level, marked by the dashed line in the first chart, I will have to rethink my long term count, with Ether having already completely a full 5 wave move up and having started a longer and deeper correction that could take it to low double digit levels. However, this is a very low probability count that I am keeping in the closet for the “unexpected” to happen.

Related Articles

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    1. Matthias Post author

      Sounds like a sound strategy Peter. I focus on the price action as it’s hard to estimate the time for this analysis to play out, so please take the timeframe provided as a rough guide.