Markets
How high will Ethereum (ETH) go?
Saturday May 25, 2024 ▪ 10 min reading ▪ by Thomas A.
Cryptocurrency bull markets generally benefit altcoins as a second step. In May, Ethereum (ETH) performed more than 15%, and almost 65% since the start of the year. This resurgence of Ethereum comes after the SEC approved the creation of ETFs on the world’s second largest cryptocurrency. While the correlation between Bitcoin and Ethereum remains high, the cyclicality of Ethereum’s price appears to be acting just as precisely in the structure of this bull market. Decoding Ethereum price indicators and dynamics.
Soon an ETF to boost the market?
As with Bitcoin (BTC), the United States Securities and Exchange Commission has approved the creation of an ETF on Ethereum. Thus, this decision will allow large global managers to expand the offer of cryptocurrencies to their clients. However, the SEC must still approve its marketing…
“The move follows the successful introduction of Bitcoin ETFs in January, which quickly attracted $13.3 billion in net inflows., setting performance records for ETFs upon launch. The arrival of Ethereum ETFs could see similar success, attracting a new influx of capital to the second-largest cryptocurrency.
This same announcement for Bitcoin had particularly favored the rise in prices towards historic highs. The arrival of an ETF on Ethereum thus leaves the possibility of a return to the highs of November 2021 at $4,868. In May 2024, ETH represents nearly 17.7% of the market capitalization. This market share is still far behind Bitcoin, with a dominance close to 53%.
The approval of Ethereum ETFs could thus cause a catch-up effect compared to Bitcoin. Additionally, these ETFs could also be used to create ETFs representing a basket of cryptocurrencies in the future.
A look at fractals: the rise persists
The use of fractals is a major indicator for measuring the viability of the trend on ETH. Indeed, the Hurst exponent (Learn more) makes it possible to measure the degree of persistence of a trend from one time scale to another. Additionally, the Hurst exponent is ideally limited between 0 and 1. With Ethereum, a Hurst exponent close to 1 indicates significant upside potential, and therefore good symmetry with major lows. Conversely, a Hurst exponent close to 0 will indicate that the trend is anti-persistent and is likely to reverse downward.
Graphically, we see that ETH gained significant upside potential in mid-2022 and reconfirmed it in early 2023. The ensuing bull market, consistent with theory, was accompanied by a decrease in the Hurst exponent, signaling the loss of upside potential. As of March 2024, Hurst’s exponent was below 30%, indicating downside risk, or at least, lack of upside potential. Nevertheless, Ethereum’s recent rebound appears to reaffirm renewed upside potential, thus limiting the downside risks observed in spring 2024.
Despite everything, this approach encourages us to be more cautious about the nature of the bull market compared to 2023. Indeed, it is clear that the bull market has exhausted a significant part of its overall potential.
Cycles acting on ETH
In several papers, we have had the opportunity to highlight a cycle close to 3.6 years on Ethereum. Additionally, this dominant cycle corresponds to the same dominant cycle as Bitcoin (BTC). The timing of this cycle thus makes it possible to judge and compare the different bullish or bearish markets. For exampleThe bull market observed in Bitcoin since 2023 is highly symmetrical to previous bull markets.
“Indeed, we know that two cycles of 4 months and 22 months synchronized in February 2018. We now seek to determine the time frame required to achieve the next constructive interference. By calculating the LCM(4.22), we are 44 months old (3.6 years old)which is strongly correlated with the cyclicality of stocks and Bitcoin (Cyclicity of Bitcoin (BTC) – Cointribune).”
Technical indicators: Constructive interference and destructive interference – Cointribune
Thus, a little more than 3.6 years separate the major peak of 2018 from that of 2021 on Ethereum. Likewise, 3.6 years separate the major low of early 2019 from that of mid-2022, etc. Here we are witnessing a clear cyclical dynamic, mainly fueled by the correlation of Ethereum with Bitcoin. From this perspective, which certainly remains theoretical, we could expect Ethereum to peak around mid-2025. Finally, we will mention the good symmetry observed so far between the current bull market and the previous bull market.
ETH remains correlated with Bitcoin
In our previous article, we highlighted the importance of the correlation between Ethereum and Bitcoin. The lows and major lows of the cryptocurrency market are in fact linked to the relationship that exists between the two main cryptocurrencies.
“We notice in our case that a high correlation coefficient between Bitcoin and Ethereum is conducive to translating major lows on Bitcoin. Conversely, a low correlation coefficient (low coefficient) is likely to reflect a strong weakening of market strength, or even significant peaks. A major explanation would be that during bull markets, altcoins’ dependence on Bitcoin decreases.
Bitcoin (BTC) is uncorrelated from other assets – Cointribune
Graphically we can verify that the major lows of ETH are linked by a very strong correlation with Bitcoin. However, before major bull markets on ETH, we notice that the BTC/ETH correlation is minimal. In March 2024, the 6-month correlation between Bitcoin and Ethereum thus reached a low of around 70%. By symmetry, this indeed signaled the probable arrival of an intense bull market on ETH. However, studying the correlation between the two assets does not allow us to effectively judge the probable highs on Ethereum.
Despite everything, we see that the correlation between the two assets remains generally high. It is mostly above 80%, which is significant.
Around $6,000?
Technical Analysis of the Ethereum price can provide us with additional information. Indeed, we note that the consolidation of March/April 2024 does not call into question the upward trend started since 2023. On the contrary, the recent bullish breakout allows us to set an initial target (almost reached) towards the recent highs around $4,000.
Then, as we have pointed out, it would be consistent, given the correlation with Bitcoin, to reach all-time highs at $4,800. Continuing this theoretical bullish move, the next consolidation model stretch target (flag, log scale) would be near $6,000. This level does not seem graphically and statistically impossible. Conversely, continued difficulty surpassing recent highs, or a prolonged decline below $3,000, would signal a likely exit from the uptrend.
We also talked about the good timing of this dynamic, similar to that of Bitcoin. Nonetheless, we see that a continued upward trend would be less grounded than the rise in 2023 and early 2024. This necessarily encourages greater attention to market strength indicators.
In conclusion
The approval of Ethereum ETFs appears to have triggered a break in consolidation since March. The bullish trend on Ethereum continues as follows:
- With an extension of demand towards ETFs and the rebound in the price of Bitcoin.
- A weakening of the bullish force in terms of fractals. Nevertheless, the upside potential seems to be maintained in April/May regarding the rebound in prices.
- Additionally, market timing and cyclicality still seem relevant. So far, some symmetry persists between the current bull market and the previous one. The upward dynamic is thus accompanied by structural market cycles.
- The correlation with Bitcoin is holding despite a decorrelation in March 2024. This signal indicates that the bull market on ETH is likely to continue in line with Bitcoin.
- Finally, technical analysis clearly shows continuation potential. Targeting prior highs and then all-time highs would therefore be likely in a bull market. If the bullish strength continues, there are some stretch targets around $6,000, and beyond by extension.
Maximize your Cointribune experience with our “Read to Earn” program! Earn points for every article you read and access exclusive rewards. Sign up now and start earning benefits.
Click here to join “Read to Earn” and turn your passion for crypto into rewards!
Thomas A.
Author of various works, financial and economic editor for numerous websites, I have developed a real passion for the analysis and study of markets and the economy.
DISCLAIMER
The views, thoughts and opinions expressed in this article belong solely to the author and should not be considered investment advice. Do your own research before making any investment decisions.