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Week 34: August 16 - August 23, 2019

Ethereum price this past week has outperformed that of Bitcoin (1.2%), EOS (-.9%) and Litecoin (-1.4%). Every ETH report is a week closer to ETH 2.0 launch and a potential major inflection point for the Ethereum community. In the meanwhile, we issue a HOLD of ETH this week because:

Developments in the Istanbul Part 1 upgrade are reinvigorating conversation about the future potential for ETH 2.0

Price is trending sideways and it’s best to wait for directional confirmation before placing a trade

Amid declining network demand and use, transaction fees hit a 50 day low

Rating: HOLD

Ethereum Market Cap: $20.3B

Ethereum Price: 2.3% ($185.44 to $189.71)

ETH Active Addresses: -3.8% (325.2k to 312.7k)

ETH On-chain Transactions: 2% (718.9k to 733.3k)

Technical & Sentiment:

Analysis shows price can increase to $213 or decrease to $165 in the near term

Sentiment suggests speculators may be looking to find the bottom of the market, but not just yet

Positive Price Drivers:

Istanbul Part 1 addresses transaction fee pricing concerns, network security, and network interoperability, boosting the potential utility of the Ethereum protocol

Vitalik remains adamant about ETH 2.0 launch successfully addressing the markets concerns + much more

Negative Price Drivers:

Declining transactions fees, suggest Ethereum is losing its user base and potentially losing network securuity

Bitcoin dominance remains near 70% suppressing the potential return of altcoins in the near term

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ETH Price Analysis: BUY if ETH crosses $197 or SELL if ETH crosses $183.

Learn more about this trade: http://bit.ly/Aug23ETHTrade

On a macro level:

IF this happens, then we buy:

Istanbul 1 network upgrade in October reinvigorates speculators positive sentiment

EOS community join ETH due to China block producer centralization concerns

IF this happens, then we sell:

ETH 1.0 fails to successfully scale into ETH 2.0, i.e launch goes poorly, or developers lack excitement over increased speeds

Bitcoin dominance crosses and stays above 70%, outperforming altcoins like ETH in both up and down markets

ETH Sentiment: Less interest, less demand & lower price

Movements in ETH price to the downside has failed to produce a positive trend in speculative sentiment

Sentiment is likely to continue driving prices lower, as less speculation typically means less market demand

When sentiment increases over the trend (1), ETH price may increase and begin a positive trend

Price Drivers This Week:

ETH Starts Its Upgrade

ETH 1.0 will be getting several upgrades before the major ETH 2.0 launch in January. These changes are an attempt to fix the scalability issues of the current ETH blockchain. The latter half of the Istanbul upgrade will take several months of further verification, so we shouldn’t expect them till ETH 2.0. Moving the network from a proof of work to a proof of stake network will save energy for the environment, and increase throughput on the network.

This upgrade is the eighth to occur on the Ethereum blockchain. It focuses on improving interoperability with Zcash, increasing security again network attacks, and enhancing the overall operating efficiency of the network. While this upgrade is unable to modify much of the core blockchain, it may still help the speed. Many smart contract platforms like TRX, EOS, NEO and ADA all boast about their massive transaction per second scalability compared to Ethereum, making ETH seem like very outdated software. While this wont fix most of the communities concern, it may be just enough to patch sentiment for now.

The anticipated launch of the Istanbul testnet marks the start of a new phase of ETH before the final mainnet activation. The development foundation has been taking tiny steps forward in the launch of the network. Should miners continue to mine on the old blockchain, they can create a fork of Ethereum on their own and create trouble for the community. A smooth launch to ETH 2.0 will be demanded by Vitalik, as the whole crypto community is watching.

Transaction Fees Hit a 50 Day Low

Transaction fees for the ETH blockchain bottomed out this week hitting a 50 day low of $0.11 per transaction. With declining transaction fees to miners, the network becomes increasingly prone to 51% attacks. Miners may choose to not process transactions for the network, effectively freezing the chain, if the rewards stays so low.

Founder, Vitalik Buterin, believes the switch to a new proof of stake algorithm in ETH 2.0 will fix both network security and the balance between transaction pricing. He thinks that the switch will drop transaction prices by a factor of 100. Currently, transaction pricing is based on open market bidding based on how fast you want your own transaction to be executed. With that model, developers on the network can congest the network with high fees, blocking out many from using the network for cheap payments. As Ethereum seeks to be a very public blockchain, the usability of the network is only as high as the network allows.

The rumored creation of ETH 2.0 has been circulating since 2017. As new technologies have successfully scaled, and ensured security, the ETH 2.0 upgrade may not just be nice to have, but a necessity to compete. Going forward, it will be important to read how the news outlets headline coverage of ETH 2.0 launch as well as investor sentiment, effects the price before and after the launch.

Additional ETH Sentiment Drivers:

What the top personalities on Twitter are saying:

@CredibleCrypto with 47.5k followers believes ETH will decline to $165 before moving higher.

@cburniske with 120.7 followers believes now is the time to invest in ETH for the long term.

@cryptodude999 with 6,423 followers believes ETH is currently is in a no trade. He is waiting for a break of $180 or $200.

That’s it for the Ethereum weekly report from Aug 16 - August 23, 2019. Make sure to upgrade to get Mondays premium XLM report.