Cryptocurrencies Showing Signs of Life

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Image source: Gerd Altmann / Pixabay

Cryptocurrencies are a libertarian means of exchange as they trade without the influence of central banks and governments. Fiat currencies derive value from the full faith and credit of the governments that issue legal tender. Central banks, monetary authorities and governments can increase or decrease the money supply to their hearts' content to impact economic and political agendas.

Cryptocurrency values, in contrast, are a function of bids to buy and offers to sell. When buyers are more aggressive, prices move to the upside, and when sellers overwhelm buyers, they move lower. The explosive move in the leading cryptocurrency, Bitcoin, took the price from five cents per token in 2010 to a high of nearly $69,000 in mid-November 2021. While the appreciation has been unprecedented, it has been a bumpy road for the leading crypto and the other over 18,770 cryptos trading in the asset class. Meanwhile, whether crypto prices move up or down, the number of new tokens coming to market each day continues to rise.

Cryptocurrencies remain a burgeoning asset class. The appreciation over the past years created a speculative frenzy, leading to boom and bust price action. The wild price swings are a paradise of opportunities for traders with their fingers on the pulse of the markets. However, the price variance can be a nightmare for passive investors looking for stable returns.

After the latest price implosion, cryptocurrencies look ready to take off again.

The leading cryptos more than halved in value from November 10 through January 24

  • Nearby Bitcoin futures fell from $69,355 on November 10, 2021, to $32,855 on January 24, a 52.6% decline.

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  • Nearby Ethereum futures dropped from $4,902.75 on November 10, 2021, to $2,158 on January 24, correcting 56% to the downside.
  • On November 10, the two leading cryptos put in bearish key reversal patterns on the daily charts and followed through on the downside until reaching bottoms on January 24.

A wedge pattern developed

  • Through the week of March 21, Bitcoin and Ethereum continued to make lower highs, but they have made higher lows since January 24.
  • The wedge pattern caused the trading ranges to narrow.
  • During the week of March 28, Bitcoin and Ethereum futures eclipsed the technical resistance levels at the highs from the week of February 7.

Ethereum underperformed Bitcoin in Q1, but that seems to have reversed

  • In Q1, Bitcoin edged 0.73% lower, while Ethereum dropped 9.94%.
  • Since the January 24 low, Bitcoin futures recovered by 30.2% at the $42,785 level.
  • Over the same period, Ethereum futures moved 50.4% higher at the $3,246.50 level.

Proof of Stake over Proof of Work — Micro Options increase liquidity

  • Bitcoin remains the leading cryptocurrency with an over $809 billion market cap at the $42,785 level.
  • Ethereum is second with a value of nearly $390 billion at $3,246.50 per token.
  • Ethereum is rolling out Ethereum 2.0, which replaces the Proof of Work with a Proof of Stake protocol. Bitcoin operates with a Proof of Work protocol.
  • Proof of Stake is far more energy-efficient than Proof of Work as it requires less computing power.
  • The CME rolled out put and call options on Bitcoin and Ethereum micro futures contracts. The derivatives are likely to increase liquidity in the futures arena.

The recent price implosion could be a prelude to the next explosion

  • The long-term trends in the leading cryptocurrencies remain bullish.
  • Bitcoin traded at five cents in 2010, and Ethereum at $11.13 in 2016.
  • Price explosions have led to implosions and back to explosions over the past years.
  • Buying cryptos on price weakness has been the optimal approach.
  • A growing number of stocks, ETF and ETN products, including BITQ, BITO, RIOT, MARA, COIN, and others, move higher and lower with the asset class.
  • The break above the technical resistance level could signify that the price implosion ended on January 24, and another explosion is on the horizon.

Thanks for reading, and stay tuned for the next edition of the Tradier Rundown!

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Equities News Contributor: Tradier Inc.

Source: Equities News

Stock price data is provided by IEX Cloud on a 15-minute delayed basis. Chart price data is provided by TradingView on a 15-minute delayed basis.

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