Although you may have been trading traditional forex pairs for quite a period of time, there is a new asset class and asset that now deserves most of your attention. That is the asset of a cryptocurrency and more particularly Ehthereum.
When most people think of cryptocurrency trading the first thing that usually comes to mind is that of Bitcoin. While this was indeed the pioneering technology behind decentralized currency, there are now a number of other currencies that are trying to compete for it.
One of those is Ethereum. It is currently the second most valuable cryptocurrency according to coinmarketcap. There was a stage at which the marketcap of Ethereum was fast approaching on that of Bitcoin.
What is Ethereum
Like Bitcoin, Etheruem is a decentralized network that is spread across a whole host of nodes in the network. There is also a cryptocurrency that is built onto the network which is used across the network. These are Ethereum tokens (ETH) which are sent from person to person.
However, the underlying reason for the creation of the Ethereum protocol was not to be a decentralized cryptocurrency (like Bitcoin) but mostly to facilitate the creation of decentralized applications on that blockchain.
They would provide the means by which developers could use smart contract technology to develop these applications to run on the Ethereum network. These ETH tokens are sent to the developers to reward them for the work that they have done on the project.
In order to run the contracts on the Ethereum network costs bandwidth. This means that the developers have to pay for the use of the network. Currently this is done through the use of GAS which is another transference of value.
Building applications on the Ethereum network and raising funds from it is something that has already been done by a number of startups through something called Initital Coin Offerings (ICOs). They will sell their own tokens in return for a number of these Ethereum tokens. It has been a really effective way for early stage blockchain startups to raise their funding.
The Use Case for ETH
The reason that so many people are bullish on Ethereum is because of the promise it has. They don’t want to just be a decentralized coin but they want to develop something called the “Ethereum Virtual Machine”.
This has many benefits for the world including that we do not have to rely on the current way of running systems. This is the “client server” architecture that has plagued technology for a number of years. Users will have to connect to some centralized server with their browser (client) if they want to get information from this centralized server.
This is anything but decentralsied and places a great deal of trust into the centralized party to make sure that the server is maintained well and that there will be no outages on the network.
Ethereum Price Analysis
Many people were surprised to see that there was not a rally in the price of Ethereum after the clearing of the Ethereum hardfork earlier this month. This was supposed to clear a great deal of the uncertainty and leave room for a price rally. However, that did not really happen and the price has been hovering around $300.
Yet, yesterday was the start of a new downside wave in the price of Ehtereuem. We should look for the important level of $286 as a key level on the downside. It did touch this level yesterday but managed to bounce away from it and recover. This can be seen from the below chat.
As one can see from this 2 hour USD/ETH chart, you can see a perfect failure at the $288 region of the chart. This was a strong rejection and a sign that the pair had succeeded in breaking the bearish trendline at $305.
ETH/USD traded close to the previous support levels at $320. Yet, buyers were struggling to life the price above the $318 level which was the 50% Fibonacci retracement level. There appears to be a correction that is ongoing with the price towards the $302 level.
We can see that the short term support in ETH/USD to be at the $300 level and a break below it would expose the $286 level. On the other end, to the upside we can look at the level of $320 as a clear resistance level.
How do You trade Ethereum
Physical Ethereum is held in a digital wallet. You can either keep this on your account at an exchange such as Coinbase or you can send it to one on your PC. The latter choice is obviously the safer option.
Another option that you can embark on is trading them on margin with derivatives such CFDs with a CFD broker. This will allow you the leverage that you desire and you don’t have to deal with physically holding the asset. Also, you can place execution as quickly as you want as there are no physical assets involved.
It is just worth mentioning that you should always make sure that your trades are covered by stops and sound risk management practices. It would also be preferable if these stops were guaranteed. Cryptocurrencies are known for being incredibly volatile and it is very easy for a trader to lose a great deal of money if they did not have the proper stops.
There are a number of brokers that you can use and we have a recommended Forex broker section at Online Forex Tradingg. Most will not only have Bitcoin and Ethereuem but also a whole host of other cryptos to trade such as Dash, Monero and Zcash.