Ethereum: A sleeping giant? Understanding Supply & Demand
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We are almost at the end of 2020, and what a crazy year it has been, especially for the Cryptocurrency markets with Bitcoin soaring past 27,000$ USD!
But what about Ethereum (ETH)? Earlier in the year we saw this cryptocurrency actually lead the market, breaking out of its Wyckoff Reaccumilation Range when Bitcoin and Ethereum were both consolidating around July, Ethereum actually broke out first due to the pre-hype of the ETH 2.0 Staking + the popularity of Uniswap & other ETH based Defi projects at the current time.
(You can click the above image and press play to see the breakout of Ethereum)
(The Wyckoff Reaccumulation Range is a term used to describe the formation of a trading range Whales use to trick retail traders into generating liquidity to fill their positions)
Now that the Ethereum 2.0 hype has started to die down, what are the possibilities for Ethereum here? We have just seen Bitcoin smash through the $28,000 region, normally ETH has quite a strong correlation to Bitcoin following it almost 1:1 but at the current moment it seems to be lagging behind, so what are the possibilities here? In this idea I am going to show you the important areas I am looking out for and what type of Price Action I am watching for at the mentioned areas.
( Price Action is the term used to describe the way the Candlesticks react to certain areas marked on the chart )
First of all, for me the most important thing when analyzing Cryptocurrencies is Supply & Demand, when I refer to the term Supply & Demand in this idea I covering two different ideologies so to speak:
1. Supply & Demand, physical
When I am talking about "physical"; I am referring to the Supply (Total Supply of the asset available for purchase) and Demand (Current demand from buyers to purchase said asset). When the Demand of buyers outweighs the amount of the asset available on the market to sell (Supply) we can expect to see a increase in price.
2. Supply & Demand, historical
When I am talking about "historical"; I am referring to the areas marked on the price chart as blue Zones (Supply & Demand Zones) marked as blue zones, a Demand Zone is a area on the chart where significant historical buy orders occurred preceding market reversal upwards, and a Supply Zone (Supply - Influx of sellers) is a area on the chart where significant historical sell orders occurred preceding downwards market reversal (Supply - Influx of sellers).
1. Supply & Demand, physical
Total Supply
Looking at the Physical Supply of Ethereum there is a estimated total of 112,429,827 Ethereum created on the Blockchain.
decrypt.co/38271/so-what-is-the-ethereum-eth-total-supply
Market Cap
Looking at the current estimated Market Cap there is a estimated total of $72,618,844,103 USD.
coinmarketcap.com/currencies/ethereum/
The current price of Ethereum is 635$.
Market Cap % Total Supply = Current Price
72,618,844,103 % 112,429,827 = 645$
So as you can see, by taking the current Market Cap of $72 Billion and dividing it by the estimated Total Supply of 112,429,000 Ethereum we get the current price, using this we can get a ROUGH estimate of potential prices if the market cap were to increase... if you're still not catching on, this means that by referencing the market cap calculation we can see how viable it is for Ethereum to reach higher prices if the demand of buyers were to outweigh the available Supply of Ethereum on exchanges.
So if Ethereum can see its market cap double, prices of 1000$ or more are not unquestionable, but is there demand for this Cryptocurrency token?
What is Grayscale?
Grayscale, is the world's largest bitcoin and cryptocurrency asset manager, and has had a major influence in propelling Bitcoin onto Wall Street.
New York-based Grayscale, owned by Barry Silbert's expanding Digital Currency Group, currently boasts over $18 billion in assets under management, and one IMPORTNT THING TO NOTE, is that this month during Bitcoins crazy Bull Run we saw Grayscale add over 74849 Bitcoins to its portfolio... what does that mean?
Well above i explained the importance of Supply & Demand in both respects, in Bitcoins instance the Demand (of Grayscale & other institutions) outweighed the Supply (Amount of Bitcoin available to purchase & being created (mined) and as a result we seen Bitcoin reach the price of $28,000.
So looking at the below data image, we can see that Grayscale currently holds a total of 2,940,000 ETH valued at $1.8 billion USD. The Total Supply of Ethereum as mentioned above is 112,429,827 ETH, so its only around 2.6% of the Total Supply, which is nothing crazy, Grayscale has added a total of
+303434 ETH to its holdings in the last 30 days. If we can start to see Grayscale adding to its holdings once again then we have a potential sign of a price increase on its way.
Data Credit: bybt.com/Grayscale
Some other important news relating to Grayscale supporting Ethereum in the long run:
1. On December 14, Grayscale split the shares of the Ethereum Trust, which holds $1.6 billion assets under management, by 9 to 1. Anyone who owned shares in Grayscale received 8 extra shares, not to mention that this trust is now more affordable to the average investor.
decrypt.co/50188/grayscale-splits-ethereum-stock
2. Grayscale mentioned in a Bloomberg interview that Ethereum is showing increased interest from Institutional Investors ( remember, Supply & Demand ! )
bloomberg.com/news/articles/2020-12-04/ethereum-becoming-more-than-crypto-coder-darling-grayscale-says
So the point is that not much big things happen in this space without Grayscale having its hands inside the bucket, so pay attention to the holdings of the Grayscale Ethereum Trust as the rules of Supply & Demand tell us that large additions to their holdings usually precede a influx of retail demand.
2. Supply & Demand, historical
Now that we have gone over the concept of PHYSICAL Supply & Demand, lets go over the latter on the chart; on the left you can see the transparent blue areas I have marked, each one is a Supply & Demand Zone, and when price revisits these areas it has a high probability of a strong reaction occurring. As a trader or investor we want to mark these areas on our chart as potential buy & sell areas.
On this particular Ethereum chart (bottom left) we can see how the price is coming up to the top of one of these transparent zones, the zone was drawn from the left from the previous point where the price of Ethereum reversed downwards. This particular zone is called a Orderblock & you can click the below image for more information on how to use this technique in your analysis.
Just like how large amounts of a asset being bought up (Demand) can be a potential sign of a increase in value coming, a Demand Zone drawn on a Technical Analysis chart can show a POTENTIAL AREA where a increase in value can occur from. So the idea is to wait for the price to either; 1. come back to a Demand Zone for a buy opportunity, or 2. break through a current Supply Zone and then "flip" that area into a Demand Zone before moving towards the next Supply Area, this is a form of Price Action and can be referred to as a "Support & Resistance Flip".
We also have a clear Bump & Run Bottom Pattern (BARR Bottom) which is described in the top left, the BARR Bottom is one of the most reliable Chart Patterns out there and signifies a fast moving reversal after a strong sell off.
The price has a small lead in phase referred to as the "bump" then a strong sell off, which leads into a almost hook shaped or J shaped reversal upwards, the price should create a downwards sloping angle of 30-50 degrees, this pattern usually precedes fast moving bullish trends, and the mirror of the pattern the Bump & Run Top (BARR TOP) usually precedes fast moving bear trends.
The appearance of this pattern gives us a sign that there is strong buying momentum on Ethereum currently which can lead us to the upper Orderblock at 683$ for a potential breakout. We are looking for the price to "flip" this area as a confirmation of strength of buyers with other potential signs such as Grayscale adding ETH to their holdings backing up the momentum.
If we can confirm 683$ as a support area, then the next likely area according to our Supply Zones price can reach is 840$ followed by 1100$. So the current Supply Zone may be one of the last good buy chances on Ethereum if it is flipped to a Demand Zone, and worst case scenario if we lose this area the next demand area is the key $400 level.
If you found the information insightful show your appreciation by liking & commenting, thank you traders!
We are almost at the end of 2020, and what a crazy year it has been, especially for the Cryptocurrency markets with Bitcoin soaring past 27,000$ USD!
But what about Ethereum (ETH)? Earlier in the year we saw this cryptocurrency actually lead the market, breaking out of its Wyckoff Reaccumilation Range when Bitcoin and Ethereum were both consolidating around July, Ethereum actually broke out first due to the pre-hype of the ETH 2.0 Staking + the popularity of Uniswap & other ETH based Defi projects at the current time.
(You can click the above image and press play to see the breakout of Ethereum)
(The Wyckoff Reaccumulation Range is a term used to describe the formation of a trading range Whales use to trick retail traders into generating liquidity to fill their positions)
Now that the Ethereum 2.0 hype has started to die down, what are the possibilities for Ethereum here? We have just seen Bitcoin smash through the $28,000 region, normally ETH has quite a strong correlation to Bitcoin following it almost 1:1 but at the current moment it seems to be lagging behind, so what are the possibilities here? In this idea I am going to show you the important areas I am looking out for and what type of Price Action I am watching for at the mentioned areas.
( Price Action is the term used to describe the way the Candlesticks react to certain areas marked on the chart )
First of all, for me the most important thing when analyzing Cryptocurrencies is Supply & Demand, when I refer to the term Supply & Demand in this idea I covering two different ideologies so to speak:
1. Supply & Demand, physical
When I am talking about "physical"; I am referring to the Supply (Total Supply of the asset available for purchase) and Demand (Current demand from buyers to purchase said asset). When the Demand of buyers outweighs the amount of the asset available on the market to sell (Supply) we can expect to see a increase in price.
2. Supply & Demand, historical
When I am talking about "historical"; I am referring to the areas marked on the price chart as blue Zones (Supply & Demand Zones) marked as blue zones, a Demand Zone is a area on the chart where significant historical buy orders occurred preceding market reversal upwards, and a Supply Zone (Supply - Influx of sellers) is a area on the chart where significant historical sell orders occurred preceding downwards market reversal (Supply - Influx of sellers).
1. Supply & Demand, physical
Total Supply
Looking at the Physical Supply of Ethereum there is a estimated total of 112,429,827 Ethereum created on the Blockchain.
decrypt.co/38271/so-what-is-the-ethereum-eth-total-supply
Market Cap
Looking at the current estimated Market Cap there is a estimated total of $72,618,844,103 USD.
coinmarketcap.com/currencies/ethereum/
The current price of Ethereum is 635$.
Market Cap % Total Supply = Current Price
72,618,844,103 % 112,429,827 = 645$
So as you can see, by taking the current Market Cap of $72 Billion and dividing it by the estimated Total Supply of 112,429,000 Ethereum we get the current price, using this we can get a ROUGH estimate of potential prices if the market cap were to increase... if you're still not catching on, this means that by referencing the market cap calculation we can see how viable it is for Ethereum to reach higher prices if the demand of buyers were to outweigh the available Supply of Ethereum on exchanges.
So if Ethereum can see its market cap double, prices of 1000$ or more are not unquestionable, but is there demand for this Cryptocurrency token?
What is Grayscale?
Grayscale, is the world's largest bitcoin and cryptocurrency asset manager, and has had a major influence in propelling Bitcoin onto Wall Street.
New York-based Grayscale, owned by Barry Silbert's expanding Digital Currency Group, currently boasts over $18 billion in assets under management, and one IMPORTNT THING TO NOTE, is that this month during Bitcoins crazy Bull Run we saw Grayscale add over 74849 Bitcoins to its portfolio... what does that mean?
Well above i explained the importance of Supply & Demand in both respects, in Bitcoins instance the Demand (of Grayscale & other institutions) outweighed the Supply (Amount of Bitcoin available to purchase & being created (mined) and as a result we seen Bitcoin reach the price of $28,000.
So looking at the below data image, we can see that Grayscale currently holds a total of 2,940,000 ETH valued at $1.8 billion USD. The Total Supply of Ethereum as mentioned above is 112,429,827 ETH, so its only around 2.6% of the Total Supply, which is nothing crazy, Grayscale has added a total of
+303434 ETH to its holdings in the last 30 days. If we can start to see Grayscale adding to its holdings once again then we have a potential sign of a price increase on its way.
Data Credit: bybt.com/Grayscale
Some other important news relating to Grayscale supporting Ethereum in the long run:
1. On December 14, Grayscale split the shares of the Ethereum Trust, which holds $1.6 billion assets under management, by 9 to 1. Anyone who owned shares in Grayscale received 8 extra shares, not to mention that this trust is now more affordable to the average investor.
decrypt.co/50188/grayscale-splits-ethereum-stock
2. Grayscale mentioned in a Bloomberg interview that Ethereum is showing increased interest from Institutional Investors ( remember, Supply & Demand ! )
bloomberg.com/news/articles/2020-12-04/ethereum-becoming-more-than-crypto-coder-darling-grayscale-says
So the point is that not much big things happen in this space without Grayscale having its hands inside the bucket, so pay attention to the holdings of the Grayscale Ethereum Trust as the rules of Supply & Demand tell us that large additions to their holdings usually precede a influx of retail demand.
2. Supply & Demand, historical
Now that we have gone over the concept of PHYSICAL Supply & Demand, lets go over the latter on the chart; on the left you can see the transparent blue areas I have marked, each one is a Supply & Demand Zone, and when price revisits these areas it has a high probability of a strong reaction occurring. As a trader or investor we want to mark these areas on our chart as potential buy & sell areas.
On this particular Ethereum chart (bottom left) we can see how the price is coming up to the top of one of these transparent zones, the zone was drawn from the left from the previous point where the price of Ethereum reversed downwards. This particular zone is called a Orderblock & you can click the below image for more information on how to use this technique in your analysis.
Just like how large amounts of a asset being bought up (Demand) can be a potential sign of a increase in value coming, a Demand Zone drawn on a Technical Analysis chart can show a POTENTIAL AREA where a increase in value can occur from. So the idea is to wait for the price to either; 1. come back to a Demand Zone for a buy opportunity, or 2. break through a current Supply Zone and then "flip" that area into a Demand Zone before moving towards the next Supply Area, this is a form of Price Action and can be referred to as a "Support & Resistance Flip".
We also have a clear Bump & Run Bottom Pattern (BARR Bottom) which is described in the top left, the BARR Bottom is one of the most reliable Chart Patterns out there and signifies a fast moving reversal after a strong sell off.
The price has a small lead in phase referred to as the "bump" then a strong sell off, which leads into a almost hook shaped or J shaped reversal upwards, the price should create a downwards sloping angle of 30-50 degrees, this pattern usually precedes fast moving bullish trends, and the mirror of the pattern the Bump & Run Top (BARR TOP) usually precedes fast moving bear trends.
The appearance of this pattern gives us a sign that there is strong buying momentum on Ethereum currently which can lead us to the upper Orderblock at 683$ for a potential breakout. We are looking for the price to "flip" this area as a confirmation of strength of buyers with other potential signs such as Grayscale adding ETH to their holdings backing up the momentum.
If we can confirm 683$ as a support area, then the next likely area according to our Supply Zones price can reach is 840$ followed by 1100$. So the current Supply Zone may be one of the last good buy chances on Ethereum if it is flipped to a Demand Zone, and worst case scenario if we lose this area the next demand area is the key $400 level.
If you found the information insightful show your appreciation by liking & commenting, thank you traders!
Note
Ethereum moving as expect so far with the perfect PRICE ACTION i described in the idea.Note
Note
Ethereum approaching the next area of interest. (Different chart, but approaching potential resistance on both)
Note
Note
All 3 targets nearly reached, We need to find support in tbis area to continue upwards.Note
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