Can Crypto Keep its Recent Gains?
April came in with a great boost for the crypto markets, as Bitcoin (BTC) spiked and prompted general gains in the blockchain currency ecosystem. The jump up came after Bitcoin has been essentially flat, since late December, trading in a range roughly between $3,350 and $4,000 during that time.
Since BTC makes up almost 55% of crypto’s total market cap ($91.91 billion out of the $168.62 billion total), the general crypto market follows Bitcoin’s moves. BTC’s three-month chart shows that it remains elevated, with today’s $5,200 trading price smack in the middle of the April trading range. Bitcoin remains 25% higher than it was on April 1, when the spike began, and for the past several weeks has shown a strong tendency toward range-bound trading. It’s this strength in the crypto giant that has kept the overall cryptocurrency market elevated through the month.
A quick look at Coinwatch.com’s six-month chart of the crypto market’s moves shows the rest of the story: the drop in November, the doldrums from December through March, and the modest rise in April to a new plateau.
Through the first half of April, most of the crypto market followed Bitcoin’s lead. The other two large-cap coins, Ripple (XRP) and Ethereum (ETH) both showed strong gain, along the same magnitude as Bitcoin’s, and many of the smaller alt coins followed suit to varying degrees.
Interpreting the Coins
There are some indications that the upward momentum is slowing down, but not necessarily that it is turning around. Ripple, the second largest blockchain coin by market cap, has lost its April gains, and at 29 cents is now trading 2 cents below its April 1 value. This could be significant, as XRP holds 17% of the total cryptocurrency market cap.
Ethereum, the smallest of the large-cap cryptos, is doing better holding on to its gains, with a trading price of $153 early on April 29. This puts ETH $28 below its peak value (from April 8), but still 8.5% above it’s April 1 price. Since ETH holds almost 10% of the total crypto market cap, this nearly balances the losses in XRP. Litecoin (LTC), with a market cap of $4.1 billion (2.5% of crypto’s total), is one of the larger alt coins, and also remains 10% above its April 1 values. Litecoin’s trajectory, however, is sliding in a decidedly negative direction, as the chart shows.
While all of these coins show a slightly different trading pattern through April, there is one important commonality that might help us to divine the immediate future for crypto. That is the trading volume, shown by the green and red bar graph below the price line. In each chart, for BTC, LTC, and XRP, there is a sharp drop-off in trading volume in the last three sessions.
This recent drop in volume is more pronounced than previous dips, especially for BTC and XRP, and may be important because as trading volumes decrease, sudden market moves become less likely – notice that for all three charts, the largest price movements (up or down) occur in sessions with the highest trading volumes. If volumes are returning to their normal, lower, levels, we may see crypto keep these gains out of pure inertia.
Checking in with a Famous Bull
Fundstrat Head of Research, and long-time crypto bull, Tom Lee brings his enthusiasm for Bitcoin to a serious analysis of the cryptocurrency. Acknowledging the obvious – that Bitcoin was in a bear market for well over a year – he looks at both the technical indicators and the overall environment and lays out 11 factors which, in his words, “…historically only take place in a bull market and I think the evidence is now saying that there is a bull market.”
Lee notes, among other factors, that BTC’s daily value is now above the 200 day moving average, as well as the 50 day moving average (the ‘golden cross’); that in some countries, traders are using BTC as a replacement for unreliable local currencies; that over-the-counter brokers are seeing a surge in clients; that supply is shrinking; and that long-time traders are in agreement that the bottom has already been hit.
In Lee’s belief, “I think you’re seeing signs that fundamentals are improving, technicals are improving, and now there’s real activity by, essentially, crypto hodlers.” In industry terms, a ‘hodler’ is a buyer who simply hangs on to crypto coins rather than trading them. That they are showing signs of active trading indicates that crypto’s profit potential is now stronger than the hodlers’ holding impulse – a bullish sign.
Lee sees potential for Bitcoin to reach $14,000 this year, and to hit new record peaks some time next year. In effect, he is doubling down on his prediction from last month, that Bitcoin would enter a bull market. “Crypto winter is over,” Lee says, “and Spring has officially sprung.” It’s an apt metaphor at this time of year, and Lee is beginning to look like less of an outlier.
Agreement from eToro
Simon Peters, cryptocurrency expert at the social trading site eToro, takes a similar view of Bitcoin, even to suggesting the same $14K potential high-point. Peters does see a possible obstacle, as he believes that $6,000 is the next key resistance point for BTC. If the coin breaks that, however, then Peters sees nothing in the cards to stop it from reaching deep into five-figure values.
Echoing some of Lee’s technical analysis points, Peters says, “The stars are aligning for a bitcoin bull run. The short-term moving average for the price of bitcoin has finally moved above the longer-term average, which is often referred to as a golden cross, so investors are starting to believe that we might just be approaching a new phase for the price of Bitcoin.”
So what we have here is a confluence of factors: from technical analysis of BTC’s moving averages to a fundamental look at the cryptocoin market as a whole, which are lining up in agreement: Bitcoin is poised to move higher, and by its sheer size it will likely take the cryptocurrency market with it. Such a move includes a distinct possibility that ETH and LTC may show gain as well, although it is not likely that all of the alt coins will join a general advance. Of course, as Yogi Berra warned us, “It’s tough to make predictions, especially about the future.”
Hold on to your hats, folks; it looks like the crypto roller coaster is getting started again.
Author: Michael Marcus
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.