Dissecting ETH's Rout

Two Ways of Looking at Yesterday's Ether Selloff

Aug 28, 2024

IN TODAY’S REPORT

What we cover: STATS EDITION. Two ways of defining Ether’s recent rout. This average is deceptive. What September will bring.

TODAY’S STATS

Another Rout

As Ether continues to underperform Bitcoin and its current cycle rival Solana, it’s a damn rough time to be an Ethereum maximalist. Happily, I don’t believe in maximalism of any kind, at least in the crypto market.

Yesterday’s crypto rout was arguably led by Ether’s early decline which grew increasingly heavy into the evening, dragging nearly all other digital assets down with it as sentiment soured once again.

While dismal in market terms, this is the type of price action which begs for analysis, so let’s get into it.

`ETHER (ETH/USD). Daily Chart with 365-Day MA.`

To take a closer look at the future implications of yesterday’s action, I’ve run two tests over all of Ether’s history from inception to the present. The simpler the “query conditions” the more data points we get to consider (three conditions is the typical max, though occasionally I include more when required).

Today’s TWO query conditions with a 30-day hold:

//QUERY #1// "Closes at 15-Day Low but not 30-Day Low"
CONDITION 1: Ether closes at 15-day low but NOT at a 30-day low
EXIT CONDITION: Exit ("sell") 30-days later

//QUERY #2// "Down 8% and below rising 365ma"
CONDITION 1: Ether closes down 8% on the day
CONDITION 2: Ether closes below its 365-day moving average
CONDITION 3: Ether's 365-day moving average is rising
EXIT CONDITION: Exit ("sell") 30-days later

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Here are all the hypothetical trade results produced for the combined queries.

`ETHER (ETH/USD). Today’s Queries: All Trades w/ 30-day Hold. Inception-Now.`

The largest gain under current conditions occurred in 2017 — the relatively early outlier of +106.96% (“Closes at 15-Day Low but not 30-Day Low”) — while the largest loss of -41.24% occurred in 2020 and resulted from the same query.

Remember, these are historical results using just a 30-day hold time. Reflecting on that fact, it’s clear that Ether is capable of delivering profound gains or extreme heartache in a highly condensed period of time. Love ETH or hate ETH, this asset demands respect.

Taking all trades from both queries together, the average trade result is a meager +3% over 30 days. That said, the average here is especially deceptive, with few trades — even in this compressed window of time — ending up landing around the +3% level.

In the States where I currently reside, September will bring cooler weather and changing leaves. It will also bring a long-awaited rate cut, post-Labor Day portfolio shuffling, and — while I could easily be wrong — I suspect it will bring newfound ETH volatility.

Until next time…

peace_love_crypto

-DB

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