February 3, 2023
Cryptocurrencies: Weekly Update
We survived another FOMC meeting and the markets are loving the results. Some of the most downtrodden names in the stock market are flying on Thursday, especially those that sold off harder than the rest towards the end of 2022 due to their exposure to the crypto space. Obviously, the cryptocurrency market has outpaced stocks since the beginning of 2023, and the growingly positive sentiment surrounding cryptocurrencies appears to be rubbing off on crypto-related stocks as well.
The 3 crypto stocks that are leading today's rally are Coinbase (COIN), Meta (META), and Cipher Mining (CIFR) which are each up substantially and embolden the idea of improving sentiment towards the entire crypto space. Aside from each of these companies' direct ties to the crypto sector, there is a more technical aspect to each of these stocks that may explain why they are the ones leading today’s rally… the 200-day moving average.
As you can see in each of the 3 charts above, these stocks were all running right into resistance at their respective 200-day moving averages until they exploded today after the looming threat of the Fed tanking the markets seems to have subsided for the time being.
These stocks were forced down throughout 2022 with the rest of the stock market, but then made strides even lower than the rest of the pack due to the perceived notion that any company striving to break into the crypto realm was setting itself up for failure.
Now that the crypto market has closed the first month of the year with its strongest January since 2020 and looks to have plenty more room to run, it appears that the best opportunities for outsized returns in the stock market may be the same ones that got hit the worst last year.
You may not want to buy COIN, META, or CIFR now that each of them has already had its big breakout day above the 200-dma, but there are plenty of other names that you can keep an eye on for similar breakouts using our CryptoPulse Sectors Radar. Here are a handful of stocks from our radar that are sitting precariously at/around their 200-day moving averages that you may want to keep an eye out for in the coming week:
It appears that another catalyst for the major move in more speculative stocks today may have also been driven by the nearly +3.5% move in the Nasdaq 100 which put the S&P 500’s +1.5% day to shame. This is a strong indication that any continued follow-through on the current rally is likely to favor growth stocks over value stocks as they are perceived to have more upside potential.
However, the same theme does not appear to be true within the cryptocurrency market. In fact, Bitcoin has outperformed Ethereum since the beginning of 2023, which is historically an indication that crypto traders are favoring value (BTC) rather than growth (ETH).
Bitcoin looks like a bit of a mixed bag at the moment. The positives for Bitcoin right now are simple, including the fact that it is currently attempting to break through resistance around $24,500, which was the peak of the July/August 2022 rally and has a Golden Cross ready to form on its key 50 and 200-day moving averages. However, our RealMotion indicator is suggesting that the short-term momentum of BTC is beginning to lose steam despite the positive price action over the past 2 weeks.
$24,500 is a clear make or break point for not just Bitcoin but the rest of the crypto market as well, because if BTC rejects this level, it is likely to see a quick retest of range lows around $21,500 or roughly -9% move from current prices. On the other hand, if BTC can sustain its current price action, then a takeover of $24.5k resistance would likely result in a continued rally up to the $28k-29k area.
If you watched our CryptoPulse monthly coaching session for January ($), you will also recognize that we believe that the crypto market is currently in its accumulation phase of the broader 4-year cycle. This means that the following months may involve a lot of chop for crypto traders, especially within the established $18,800 to $24,500 range for BTC.
Seeing that BTC has reached the top of its current range leaves us with the gut instinct that a pause may be in order in the coming weeks so that the crypto market can digest the hot start to 2023. This means that it might be a good idea to consider taking profits on any positions you may currently have rather than crossing your fingers and hoping for another +30% move higher. Our CryptoPulse Quant locked in its first +40% profit target of 2023 on the model’s current AVAX position and has instructed our followers to use a breakeven stop to protect the remainder of the position in the meantime.
Unfortunately, it appears that stocks have sold off by a good amount during the after-hours session on Thursday as a result of a series of earnings misses across the large-cap tech sector. This could result in a red day to end the week on Friday, which would leave the crypto market in an awkward position over the weekend as many of the largest tokens are looking for another push to flip long-term resistance levels back into support.