NEO Price Analysis — Battling the bear

NEO (formerly Antshares), is an all-encompassing smart contract provider, designed for ICOs and Dapps. It also has uniqueness because of its focus on Smart-Economy solutions, such as digital identity registration and asset digitization.

NEO has had something of a meteoric rise based on a successful marketing campaign. From a first listed price of $0.172 (Indexed) in November 2016, it has risen 30,870% since and currently trades at $43.60. On 14/01/2018 NEO was trading as high as $147.48 (Indexed).

NEO price since listing

Exchanges and trading pairs

The most popular pairs for trading NEO are crypto-to-crypto with BTC, Tether and Ethereum trading making up over 90% of the volume in the market. The popular fiat on-ramp is USD/NEO.

The most popular exchange for the NEO/BTC pair is CoinEgg, a UK-based exchange known for listing numerous alt-coin pairs and its low transaction costs. Major exchanges like Binance, OKEX and LBank also handle significant volume.

How does NEO work?

The NEO network is unique from Ethereum and others because it is made up of two tokens, NEO and GAS. NEO is used for voting rights and ownership evidence on the blockchain, while GAS is what is used to interact with smart contracts.

Additionally, NEO uses its own consensus protocol called the Dbft or Delegated Byzantine fault tolerance. It is named as such because NEO believes it solves the Byzantine generals’ problem, an issue where every member of a community needs to come together to solve a problem, but individual members have their own selfish wants, making fair consensus difficult to achieve.

In Dbft the Neo community votes for delegates who are the ‘Big Computer/Nodes’ of the network. Once voted in, delegates become ‘book-keepers’ and run the network on behalf of all others. This means consensus is achieved quickly, cheaply and with relative ease for most of the community.

The decoupled token system adds another layer to the fault tolerance. NEO is the ownership stake, while GAS is distributed to NEO holders who claim GAS by holding NEO in a supported wallet - the tokens will be issued at a 1:1 ratio for the next 20 years. Book-keepers are entitled to charge fees (GAS) for transactions but are incentivized to keep these low. This is because this leads to more users and a happier community, who will keep voting in book-keepers who have maintained low-cost promises.

NEO also has a unique smart contract coding and execution systems. Networks like Ethereum and Cardano use their own built in languages, Solidity and Haskell respectively, whereas NEO supports five different existing languages, and this should lead to more straightforward smart contract adoption for contract implementers.

In terms of execution, NEO uses its own Virtual Machine that organizes smart contract code for the original writer, making it easier to execute in the long run. However, the initial organizing phase can be a time-consuming process, meaning that for several forms of smart contract, Ethereum is faster.

Focus on the smart-economy

NEO has marketed itself as being blockchain that drives solutions in the smart-economy. In the future, assets will become digitized (tracked, monetized based on some digital footprint). To automate and secure the management of these assets, NEO is offering specific solutions on its distributed ledger network.

For example NEO is already working on the development of digital identity solutions to complement its smart-economy roadmap and has announced plans to issue digital identities to users in accordance to the existing PKI X.509 international standard. Book-keepers will also have their own digital identities to maintain their accountability. This will ensure that any enterprises that registers smart contracts on the network can maintain regulatory compliance and KYC standards.

NEO versus Ethereum

Despite what NEO may offer over Ethereum, the latter will always have a first mover advantage and already has an existing operating ecosystem for ICOs and Dapps. However, given projects like Phantasma have picked NEO over others it's clear there is room for multiple smart contract networks within crypto.

Phantasma is a Dapp-content distribution system with a focus on privacy and security. Phantasma will offer an API to developers and operate as a smart contract on the Neo blockchain. It will provide a storage solution via the use of ‘Boxes’ hosted on the NEO blockchain with Phantasma issuing an interface to control data storage, data-piping and access sharing.

Phantasma developers say they choose NEO over Ethereum due to the higher through rate based on the proof-of-stake DBFT algorithm, which facilitates transactions more quickly compared to Ether smart-contracts. Additionally, NEO has already begun to offer off-chain scaling solutions via its Trinity protocol layer while Ethereum’s scaling solution, Raiden, has yet to launch.

The Extended NEO ecosystem

NEO has several extensions and enterprise links designed to make its blockchain solutions more complete and fluid. These ecosystems include Ontology, City of Zion and Neox.

Ontology (ONT) is a token-based solution of Onchain, a business that builds DNA (Decentralized Network Architecture) for private enterprises. Its focus is building private and public blockchains, which can then be integrated into the NEO network. Onchain already has ties to major local clients like Microsoft China.

Ontology is Onchain’s newest development and is focused on building private, encrypted data networks and has piqued market interest with an upcoming mainnet launch, already building a $6 billion market cap.

City of Zion is an independent community of developers, translators and designers who work towards improving NEO. They have received funding and have already built tools like wallets and block scanners, as well as translating documents and setting up a decentralized exchange.

NEOX is NEO’s Atomic swaps (transaction between 2 tokens without using an exchange) platform. In the long-term the NEOX solution is hoped to be key component of the NEO ecosystem to allow swaps between ONT and NEO tokens to occur between users integrated into both networks.

Technical analysis

While the mere notion of being an ‘Ethereum killer’ coupled with hype around its ecosystem is all positive for price, NEO has unfortunately not been immune to the effects of 2018 bear market.

Exponential Moving Averages (EMA) with Long Term Trends

On the daily chart, the bullish EMA recross, or Golden Cross, using the 50/200 day EMA, has recently reversed into a bearish cross, which confirms the existing downtrend. Additionally, the volume flow indicator (VFI) is still well within bearish territory, but is forming a slight uptrend (yellow arrow) which may indicate a trend reversal is approaching. The VFI interpretation is: a value above 0 is bullish and below 0 is bearish, with divergences between price and oscillator being high probability signals.

Lastly, despite the most recent market dip, price volatility for NEO is compressing, visualized by bollinger bands. Volatility compression typically precedes a breakout. The last time NEO experienced a similar declining bollinger band volatility (black arrow) was from October to November 2017, before exploding upwards (black rocket ship). However, despite the seeming divergence between price and VFI, the current market environment makes it conceivable that price may breakout to the downside (orange arrow) before consolidating around the same ~$27 level from October / November 2017 (black support line), before finally resuming an uptrend (red arrow).

Ichimoku Clouds with Slow Wave Trend Oscillator (SWTO)

The Ichimoku Cloud uses four metrics to determine if a trend exists; the current price in relation to the Cloud, the color of the Cloud (red for bearish, green for bullish), the Tenkan (T) and Kijun (K) cross, Lagging Span (Chikou), and Senkou Span (A & B).

The status of the current Cloud metrics on the daily time frame with singled settings (10/30/60/30) for quicker signals is bearish; price is beneath the Cloud, Cloud is bearish, the TK cross is bearish, and the Lagging Span is beneath the Cloud and price.
A traditional long entry would occur with a price break above the Cloud, known as a Kumo breakout, with price holding above the Cloud. From there, the trader would use either the Tenkan or Kijun as their trailing stop.

NEO is currently sitting at the April low of ~$44 and using it as support. Previously, after the “end of tax season bottom,” price attempted to break above the Cloud, but failed after meeting resistance around ~$97. Since then, the positive TK cross has reversed, price has fallen back beneath the Cloud and erased all gains. However, the SWTO, after recently turning bullish to bearish (black circle), is now near oversold territory again, which may help curb a break beneath $40 in the near term. Price would need to reattempt a Kumo breakout and hold above $70 to re-ignite a bull trend with potential price targets of $70 (flat Senkou B) and $97 (previous failed resistance + flat Senkou B). If price fails the Kumo breakout attempt, the key support levels to watch on the downside are $40, $35, $30, and $25 (critical to hold).

The status of the current Cloud metrics on the daily time frame with doubled settings (20/60/120/30) for more accurate signals is bearish; price is beneath the Cloud, Cloud is bearish, TK cross is bearish, and the Lagging Span is below Cloud and price.
Price will need to breakthrough the Cloud and hold above $97 to reignite an upward price trend, while a Kumo breakout failure will result in a likely to retest of the lower support levels. However, if price does achieve a Kumo breakout, then $111 (flat Senkou B) and $125 (flat Senkou B) become price targets.

Conclusion

Whether NEO is a true ETH killer remains to be seen. However, given that its market cap is less than 1/12th that of Ethereum’s, it does have space to grow. NEO is not as community driven as Ethereum, but this means that improvements to the network are developed more quickly, as achieving consensus is more streamlined.

It has already built relationships with major tech firms in China, and if that market ever opens broadly to crypto, then NEO’s ecosystem could expand ten-fold. NEO has not been able to buck the current bear trend in the market, however with projects like the Ontology mainet and the trinity platform launch, there is still optimism for the network’s long term prospects.

The overall technicals for NEO are bearish, but the VFI trend and divergence, coupled with diminishing bollinger band volatility and SWTO levels, might be preparing price for a trend reversal in the future. The prudent short term trader (10/30/60/30 settings) will await a positive TK cross, Kumo breakout, and price hold above $70 before entering a long position. The prudent longer term trader (20/60/120/30 settings) will await a positive TK cross, Kumo breakout, and price hold above $97 before entering a long position.

More adventurous traders may view the current support levels around $40, VFI divergence, SWTO levels, and bollinger band compression as a “good enough” indicator to begin scaling into a long position at better prices while the bear trend remains intact. Those adventurous traders should use tight stops, but expect price targets of $70 and $97 over the coming months, if their gamble proves correct. However, awaiting a successful Kumo breakout will provide a more reliable signal and mitigate downside risk of $35, $30, and $25 (critical to hold).

Disclaimer: This analysis has been designed for informational and educational purposes only. Readers are advised to conduct their own independent research into individual assets before making a purchase decision.

About the authors

Christopher Brookins
Christopher Brookins is the founder and CEO of Pugilist Ventures, a quantitative investment firm focused on digital assets and blockchain technology. Chris has a deep knowledge and unique perspective on digital assets formed by his polymath experience in equity trading, credit investing, and business development at two West Coast startups (one acquired). He has been involved in the blockchain community since 2014. Follow @chris__brookins

Aditya Das
Aditya Das is Brave New Coin's in-house market analyst. Raised in Dubai, UAE, he holds a post-graduate honors degree in Economics from the University of Auckland and a BA in Economics from the University of Sussex. Prior to joining BNC his most recent roles were as a researcher and Economics tutor at the University of Auckland. Follow @Quartlifecrypto

‏Source bravenewcoin.com

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