Analysis: Ethereum Classic Traveling Down an Alternate Path in a Bikini

Journalist:
July 12, 2017

The selloff in most digital currencies raised eyebrows for many, but I noticed that the Ethereum Classic Coin (ETC) was trading in its own world and rallied 14% this week while Bitcoin, Ethereum and Ripple all got smashed giving back between 7% and 25% respectively.

This widened the spread between these active digital currencies and any pair trading (Long one DC and Short the other) strategies with ETC as the long anchor leg is killing it.  I think these gaps in the pair trade spreads may be telling us a subtle story about the long-term value of these individual coins and we should be paying attention.

I’m sure there is a reason for this variance, but fundamental explanations for any digital currency is murky at best.  I think many underestimate the advantages of having multiple digital currencies to pick from.  Currently, there are 810 digital currencies to choose from, and not all or liquid, or easy to understand why they exist, which is why I try to focus on pricing and valuation, understanding why one would trade Potcoin (POT) versus Zcash (ZEC) would flummox any rational thinker.

For whatever reasons investors and traders speculate in these 810 digital asset classes is not for me to contemplate.  I only look at prices and volume, and I have been expanding my thinking to pair trading and tracking the changes in spreads between the top 25 DC’s, and the reaction in the Ethereum Classic Coin makes me think I should be long a larger percentage of ETC versus having Ethereum (ETH) dominate my portfolio.  Often assets (stocks, options, currency) give you subtle clues about their pedigree, and ETC looks like supermodel in a bikini to me today.  I love her and I can’t stop thinking about having her.

I have owned Bitcoin (BTC) since 2015, and swapped into Ethereum (ETH) during the Winklevoss selloff in May of this year, and i have been digging into the nuance of the top 50 DC’s and following the movements.  Markets give us clues in times of fear, and also in times of euphoria, and they show their real colors much like humans do in times of strife or elation.  I believe these digital currencies all have unique personalities like our own children and have subtle traits that always tell us who they are.

Ethereum Classic (ETC) is telling me I need to pay attention here and listen to the sound of her beacon as she wails in the fog of the recent sell off, once the volatility clears she comes into focus as an important coin to watch.  Her 24 hour move shows a 36% rally, and if the DC sector starts to retrace the week’s sell-off (and I expect this) my guess is that ETC over performs all others.  I think much of this rally has to do with a roll down from Bitcoin and Ethereum into lower priced DC’s, it only makes sense when investors get nervous they sell high-flying leaders like Bitcoin ($2394) and Ethereum ($208) and roll down to a $20 coin like ETC, it is logical.

Ethereum Classic is currently number 5 in the rankings of market cap (total size) behind Bitcoin, Ethereum, Ripple and Litecoin, and sits ahead of Dash, but I see a bright future for ETC and this weeks selloff made me stand and take notice that I need to do some portfolio adjusting, and go talk to the girl in the bikini.

I am long Bitcoin and Ethereum and have a small position in Monero, and primarily trade these from the long side and consider myself a long term investor in digital currency.

Featured image from Shutterstock.

Steve Kanaval

Steve began his career at the Chicago Mercantile Exchange in 1980 and ran Morgan Stanley Derivative Prop Trading for the firm. He continued his career as a Trader/Portfolio Manager for multiple Hedge Funds during the Internet Boom of the 90's. Steve is known as an expert in trading stocks and digital currency and has published thousands of articles and archived video with important market participants related to US Equities, private shares and crypto currency. He offers a humorous, unique insight related to volatile stocks and the related back stories and drivers.