February 22, 2022
Cryptocurrencies: Weekly Update
First and foremost, we would like to address the delay of this edition of the CryptoPulse Weekly Report. Our head cryptocurrency analyst, Holden Milstein, fell ill with a pretty nasty case of food poisoning, but is recovering and will be back for this week’s CryptoPulse Live Coaching session on Thursday!
With that said, let's address the state of the cryptocurrency market as of Tuesday morning 2/22/22.
Last week we were watching both Bitcoin (BTC) and Ethereum (ETH) for the potential to complete an inverse head and shoulders bottom, with support on the downside at $39,600. Unfortunately, this pattern was not able to confirm above the neckline for either coin, and we saw a sharp selloff throughout the weekend that brought BTC below local support.
Thanks to major global economic stress from the Ukraine, the entire cryptocurrency market continues its stress-test as a potential geopolitical hedge. This is important to consider, as every weekend when traditional global equity markets are closed, the crypto market is still susceptible to price swings based on global news events.
Fortunately, BTC has managed to find lower support on the 4-hour timeframe at the $36,350 level for the time being.
We can see two downtrends on the 4-hour chart that need to be taken out for any possibility of a recovery. Price has closed at oversold levels three times in the past week, we’re waiting for a breakout above the 10-period moving average, with the $39,600 level being our next target for higher resistance..
The shorter-term 10/50-period Real Motion indicator has been in a descending channel since BTC became overbought on February 7th.
Even if we do see a recovery in price back towards $40,000, we will wait for momentum confirmation from RM 10/50 to break out of this descending channel before we’re ready to buy.
The Real Motion indicator can be powerful in this situation, as it measures underlying momentum. Bitcoin’s price appeared to be bouncing on February 14th, but Real Motion marked lower lows and confirmed that the coin was not ready to bounce.
If BTC fails $36,350 support, a drop to $35,500 in the short-term will be imminent. The next level to defend below that would be $33,000, which has to remain intact or risk an even further selloff to the $29,000 area last seen in July 2021.
As much as we love to try and identify discretionary trading opportunities in the cryptocurrency market, our confidence in the altcoin market hinges on Bitcoin’s action. For that reason, we will only identify one potential market outlier for this week.
Cardano (ADA) is one of the largest cryptocurrency/blockchain platforms in existence, but has never been able to compete with more sophisticated decentralized finance networks like Ethereum (ETH) or Solana (SOL) when it comes to smart contract deployment.
This isn’t to say that ADA is a total lame duck, but the project run by Ethereum co-founder Charles Hoskinson has consistently been a laggard in terms of technological development for at least the past 2 years.
However, the project continues to retain a cult-like following, and that cult appears to be hyperactive right now.
Bitcoin is consistently the leader in daily volume transacted, typically followed by Ethereum. However, it was reported that over $17 billion of volume was transacted on the Cardano blockchain on 2/21, compared to only $5.25 billion on the Ethereum network. The only blockchain with a higher 24-hour transaction volume was Bitcoin with $18.85 billion transacted.
So far this potentially bullish sentiment has not been reflected on price, as ADA marked its lowest price in 364 days this morning at $0.814
Even worse, ADA is nowhere near testing resistance of its long-term downtrend that has remained intact since making a $3.01 all-time high in September of 2021. Without taking out this trend, ADA does not seem tradable.
The fact that ADA is still a top-10 coin by market cap despite 6 months of continued selling is absolutely mind-blowing. Could the recent spikes in volume be a signal of underlying bullish sentiment? At this point only time will tell.
Click here to read more about Cardano’s recent activity.
With all of that said, we are sitting on the sidelines in our CryptoPulse Quant until the smoke clears in the crypto market.
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