In a previous posting titled “Goldman Plays with Numbers,” we did a side-by-side comparison between Bitcoin and Ethereum in two different periods. The periods in question happens to have the same percentage change, approximately +13,400%.
As with the same percentage increase, it is reasonable to expect the same percentage decreased that followed. For the price of Bitcoin, it plunged –93.07% from June 8, 2011 to November 18, 2011. Below is our charting of three scenarios for downside risk to Ethereum.
Based on the work of Edson Gould, the conservative downside target for Ethereum is at $617.09 (blue line). However, due to the extremely volatile nature of cryptocurrencies, we have to expect that the extreme downside target is more than likely. The purpose of putting the conservative downside target at all is to demonstrate that it will be achieved after a given peak in price is established and the trend is clearly to the downside.
In addition to the conservative downside target, we have indicated the level Ethereum would be at if it lost –93% (red line) as Bitcoin did in the period from June 2011 to November 2011 (yeah, it took only five months). Such a decline in Ethereum would bring the price to $96.95. We don’t expect this but must be realistic about the prospects regardless of our own personal expectations.
Finally, we have included our own worst case scenario (green line) based on one half the difference between Gould’s extreme downside target at $461 and the –93% experienced by Bitcoin in 2011. This would bring the price of Ethereum to $279.31. Although this seems like a dire call for Ethereum, in reality it is not unusual to see an –80% decline in price from such extreme parabolic moves. Additionally, we don’t expect Ethereum to succumb to the same amount of pressure that Bitcoin did as the concept of blockchain technology is more salient to the general public today than it was in 2011.