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Past performance is no guarantee of future results, but when history repeats it may be difficult to ignore potential implications.
This is the case of the price chart of ether, the native cryptocurrency of the ethereum network.
Since September 2018, the world's second largest cryptocurrency price chart has imitated the bitcoin bearish bottom market structure in 2015.
In the world of technical analysis and trade, similar and repeated market structures are known as fractals, similar to recurring patterns found in art, nature and mathematics.
The two emotions of fear and greed are what drive price action in a market, so repeated investor behavior that produces similar results may not be so far-fetched, especially when those emotions create fractals in the cryptocurrency market.
Comparison between BTC / USD and ETH / BTC
The similarities
The graph above shows the disturbing fractal from the BTC fund in 2015 (upper box) that is played on the ETH / BTC chart (lower box).
Needless to say, the structure of the two graphs is almost identical, with only small discrepancies.
As you can see, going from left to right, both activities have printed a "V" bottom followed by a minor rally and the consequent breaking of the bearish trend line. After the breakdown of the trend line, both markets endured a period of abnormally low volatility compared to their typically erratic nature.
As the old saying in investments says: "Never a boring market short". These periods are commonly found when markets store – or accumulate – energy before significant progress.
Even the biggest players tend to lose interest in boring markets, leaving only small retailers who, in large part, prefer long over short positions, creating in turn a market that favors bulls.
Following the tedious market, both BTC and ETH produced a minor rally followed by another sell-off, as illustrated by the curving lines down blue.
Both markets rebounded quickly in a curve-like curve, bringing the price to a "V" top, followed by a bullish continuation from the previous rebound.
The differences
In fact, the similarities are surprising, but there are differences between the two that can play a damper on the fractal that is actually taking place.
According to the stock market legend Richard D. Wyckoff, the price graphs respect a law of "cause and effect".
In other words, the longer the trend remains on the side A.K.A. "The cause", the most powerful and lasting next trend, A.K.A. "The effect" – another reason that shortcuts a boring market can be risky.
This is particularly relevant here since the cause for the 2015 BTC fund lasted almost a full year, while the cause of the ETH is so far just over three months.
Taking this into account, it could be argued that a long-term uptrend would be an unlikely result if ETH / BTC continued to advance because its cause is considerably lower than that of BTC.
A bullish effect is still possible, though – only perhaps one that is more proportional to its 3-month cause.
Revelation: The author holds BTC, AST, REQ, OMG, FUEL, 1 ° is AMP at the time of writing.
fusion of the railway image through Shutterstock
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