Consolidation patterns don’t always yield positive results
The cryptocurrency industry has failed to deliver on the positive connotations of its recent run, strongly suggesting that investors should brace themselves for volatility, if not outright take some risk off the table. A steep drop in cryptos saw the blockchain market drop drastically to roughly $1.2 trillion, from around a total market capitalization (cap) of $1.3 trillion.
Of all, Cryptocurrencies have a reputation for extreme volatility, so such losses aren’t surprising. The context, on the other hand, is critical. Cryptos risk wandering in a consolidation pattern if they fail to routinely break over the $1.3 trillion market value threshold. The concern is that the industry had a similar sideways consolidation in late 2018, with the sector failing to break beyond the $200 billion barrier.
The protracted consolidation finally gave way to a dramatic decrease in market value, as you can see from the historical data. While history indicates that cryptos finally made a strong return, this lesson tells us that anything may happen in this space.
Bitcoin (BTC-USD) made a stunning surge over $30,000 on June 5, followed by a climb above $31,000 throughout the most of the June 6 session, giving crypto investors an unpleasant ride. Unfortunately, the rally’s favorable connotations were not to be realized. Bitcoin’s price plummeted in the afternoon, falling below $30,000 for the first time.
BTC is now selling at approximately $29,500, which is about the same as it has been since May 11. On the one hand, the fact that Bitcoin has clung to the $29,000 mark, which is functioning as solid support, is promising. On the other side, I’m worried about the 2018 ghosts. BTC was trading sideways around the $6,400 mark in the later months of that year.
Naturally, many investors expected positive momentum to take hold. Wrong! Before launching on its spectacular climb, BTC plummeted to about $3,200 in December 2018.
Here’s the deal: While Bitcoin may ultimately return to its previous highs, it’s not impossible that it may see a dramatic decline first.
Another disappointing illustration of how cryptos can be immensely cruel, Ethereum (ETH-USD) soared over the $1,800 threshold during the Jan. 5 session, followed by $1,900 the following day. ETH, on the other hand, served as an early warning indication for Bitcoin and other cryptocurrencies. As you can see, the price surged past $1,900 in the morning. ETH quickly started to struggle, then plummeted in the afternoon hours.
Ethereum is now trading at about $1,750, which is a potentially dangerous technical situation. ETH temporarily fell below $1,730 in late May, which is just around a 1% difference from where it is now. If the currency retests the previous low and the support line fails, ETH is likely to see a severe selloff.
To be honest, the overall volatility of cryptos is why I’m concentrating on technical indications. True, Ethereum seems to have a significant upward potential from a basic standpoint. Why would you load the boat at a lot lower price if you can load it for a much lower price?
I’ll be the first to laud the glories of stablecoins like Tether as someone who has traded cryptos significantly more often than equities (USDT-USD). Stablecoins, which are pegged to a physical currency – usually the US dollar – enable you to hedge your bets in the blockchain world. You won’t have to move money from centralized organizations (like your bank) to crypto exchanges as often.
This ease and lightning-fast transaction speed, however, comes at the expense of sleep deprivation. With the spectacular collapse of Terra Classic (LUNA–USD) – which has now been renamed as such – the safety of stablecoins and related assets is far from certain. Tether is now (allegedly) backed by paper reserves rather than an algorithm, making USDT more safe in theory.
But how much will the general public trust Tether’s and other stability-oriented cryptos’ unaudited books? Terra was a tremendous wake-up call for me, prompting me to safeguard myself by reverting to fiat currency.
Cardano (ADA-USD), a well-known alternative crypto or altcoin, has climbed to the number six spot in terms of market capitalization, with a market value of over $22 billion. Cardano is most recognized for inventing the proof-of-stake protocol, a consensus method that prioritizes network activity above sheer CPU power. It has, however, been shown to be weak in technical strength.
At the time of writing, ADA is trading at 58 cents per share. The essential argument here is that the digital asset must begin to make considerable development in order to gain investor trust. Cardano is still trading below its 50-day moving average, a popular gauge of near-term market strength, despite the huffing and puffing.
Cardano, as I have indicated, has to be over $1 at the very least, which is also where its 200 DMA is. Another concern is that dropping volume isn’t correlating with the recent price increase, suggesting that investors should avoid needless overexposure.
XRP (XRP-USD) was not immune to disappointing volatility despite being a public favorite. When it hit a high of over 41 cents in the early hours of Jan. 6, foreign investors were no doubt hopeful that the currency, which is now the subject of a Securities and Exchange Commission lawsuit, was on the verge of a huge surge.
Unfortunately, those aspirations were dashed immediately, and XRP was once again trading at 39 cents. XRP, on the other hand, may provide reassuring tidings. Volume for the XRP-powered cross-border payment service dubbed On-Demand Liquidity surged to $8 billion in the first quarter of 2022, according to Brad Garlinghouse, the chief executive officer of Ripple Labs, which designed the XRP currency.
This figure is much more than the $1 billion reported in the same quarter last year, indicating that XRP’s general momentum is based on more than simply conjecture. If that’s the case, XRP stands apart from other cryptocurrencies.
Even yet, while dealing with Cryptocurrencies, prudence is always advised, particularly at this time.
While most cryptocurrencies have been losing ground since the late overnight hours of June 6, Chainlink (LINK-USD) has gained approximately 2%. That’s a big change from the top ten Cryptocurrencies by market cap, which were all down with the exception of stablecoins. Could LINK be a ray of sunshine in an otherwise bleak landscape for digital assets?
Fundamentally, Chainlink has always been fascinating — it’s one of our experts’ faves. Chainlink’s innovative design allows smart contracts to be more useful by combining off-chain data into decentralized transactions. A LINK-enabled smart contract, for example, may help with transactions concerning the price of coffee beans, which is a “analog” construct.
LINK is also now quite reasonably priced, at roughly $7.60 at the time of writing. In essence, the entry tag represents a once-in-a-lifetime chance for investors who were disappointed to see Chainlink exceed $50 at its peak. Nonetheless, the same cautious concept that applies to other cryptos also applies here.
Helium is the best-performing cryptocurrency in the trailing week as of this writing (HNT-USD). The Helium platform, which is billed as a decentralized blockchain-powered network for the Internet of Things – especially smart gadgets – enables low-power wireless devices to connect with one another and transfer data over a network of nodes.
Helium, via advancing technical equality, should be able to assist solve rising wealth imbalances. Essentially, blockchain technology has the potential to have a huge effect by providing higher networking capacity for historically marginalized groups all over the world.
Coinpaprika.com, for example, shows that Helium has positive liquidity, with the measure leaning 7 percent to the optimistic side. Is this, together with its outperformance relative to other cryptos, reason enough to invest in HNT?