Ethereum’s Intermediate-term Elliott Wave Review

Previous Ethereum Elliott Wave Analyses

In my previous update, see here, I reviewed the shorter-term Elliott Wave Principle (EWP)-count for Ethereum (ETHUSD). I found,

“The Bullish count is preferred if ETH can stay above ~$1050 and rally back above $1250. However, if ETH closes below $1050, it opens up the door to $900, and from there, ~$850 is the most likely ideal downside target. ”

ETH did not stay above $1050 and dropped to $997. It then rallied back to $1275 but never closed for the day above $1250 and, as such, fell back to $1005 yesterday. It is now trading at around the $1130s. Thus, it failed to rally and stay above $1250 but has found buyers at the $1000 level each time. Ethereum is now stuck between a rock and a hard place: see here.

However, is it possible ETH can still go lower? The weekly chart I last shared in May, see here, has been updated. The ideal path pointed to a low in the $1500+/-100 zone, but the final waves decided to subdivide/extend. As always, all we can do is “anticipate the ideal path,” then we “monitor to see if price follows it or not,” and if not, then we must “adjust.” Why? Because we are dealing with a stochastic, probabilist environment and not something that is set in stone.

Figure 1. Ethereum weekly chart with detailed EWP count and technical indicators.

$870 Cannot Be Excluded Just Yet

Given ETH already dropped to $880 on June 18, it is certainly possible for the cryptocurrency to have bottomed already. The classic, ideal, standard c=a extension (See Figure 1 above) targets $870. But, the cryptocurrency will have to close above that pesky $1250 level without falling back below $1000 to suggest the low is indeed in place, and the run to ~$10K has begun.

Money Flow Indicator

I want to focus on the currently oversold Money Flow Indicator (MFI14) in this update. See Figure 2 below.

Figure 2. Ethereum weekly chart with MFI14. Note the log scale.

It currently sits at 9.7. It means almost everyone has sold, and soon only buying is left, matching public sentiment because most retail traders are bearish on cryptocurrencies thinking they will all go to $0. Meanwhile, ETH and other currencies are still trading at healthy levels. Indeed, retail predominantly buys high and sells low because such traders are primarily emotional, i.e., following hypes. Instead, objective analyses like these should be taken into one’s trading and investment decisions.

The last time this indicator was below 20 was in February (orange box). Back then, ETH rallied for a few weeks into November 2014, gaining over 60%, only to drop another 60% to the recent lows. There are only two more similar occasions for Ethereum: August 2018 and December 2016. Red and black boxes, respectively. In the former case, ETH dropped ~60% and then rallied >6000%. In the latter case, ETH rallied rather directly >21800%.

Bottom Line

Thus, although past performance is no guarantee for future results, if history is of any guide, then the downside risk vs. upside reward is very favorable for those who want to play the longer-term game. Besides, if ETH is going to claim the $10K level, the upside reward from current levels is around 1000%. Such gains fit well with the known “law of diminishing returns” cryptocurrencies face for each new Bull run due to their logarithmic growth curve, i.e., 21800%->6000%->1000%.