October 1, 2023
Cryptocurrencies: Weekly Update
Despite continued Wall Street interest in the cryptocurrency industry including a long list of Bitcoin and Ethereum ETF applications still pending approval, the interest from retail traders has remained too weak to keep cryptocurrency prices propped up for the past several months.
Obviously, with prices continuing to slump across the market we know that demand for cryptocurrencies in general has remained in a lull, and this is emphasized by the relative performance of some of the top altcoins compared to Bitcoin.
The most popular and largest altcoins by market cap Cardano (ADA) and Solana (SOL) have both been consistently underperforming relative to Bitcoin (BTC) since the beginning of the prolonged bear market back in late 2021. Even Ethereum (ETH) has been in a consistent downtrend since last October and doesn’t look likely to recover relative to BTC anytime soon.
Unfortunately, the underwhelming performance of top altcoins compared to Bitcoin speaks to the lack of confidence in more speculative opportunities in the cryptocurrency market. If you dig down into the charts you’ll note that almost every top altcoin has been virtually untradable due to a lack of bullish price action since January. It may seem like coins like ETH and SOL are still having good years due to the fact that Ethereum is up 40% and Solana is up 102%, but if you look at their charts as a whole you’ll realize that there hasn’t been any tradable bullish action in the altcoin market since the beginning of the year.
January saw a conveniently timed rally across the cryptocurrency market that was more than anything else just a recovery rally after the absolute destruction that was caused just 2 months earlier by the collapse of the FTX exchange. Aside from January, the only rallies in the crypto market this year have been brief weekly spikes in March, April, and June.
If the calendar year were to have started on February 1 instead of January 1 then the total cryptocurrency market capitalization would currently be up about 4.8% Year-to-Date rather than the deceiving 39% YTD. This is all to say that the first 3 quarters of the 2023 calendar year have been extremely choppy and difficult to trade.
With the benefit of hindsight, we can now confirm that our in-house analysis of Bitcoin’s 4-year halving cycle from earlier this year was accurate when we assumed that 2023 would likely see long-term consolidation before the next crypto bull market.
As a refresher, we break down each of Bitcoin’s historical 4-year market cycles into 4 further market phases which are Bull, Bear, Accumulation, and Expansion.
For the current accumulation phase of the Bitcoin market cycle to come to an end and enter the expansion phase, we’re looking for a rally to take the price of BTC back above the 2023 high of around $31,500. The $31,500 level was also a key inflection point that market the bottom of Bitcoin’s trading range during its prolonged Bull market back in 2020-2021.
Currently, BTC looks ready for what may be its second major breakout of the year, with the long-term downtrend on Bitcoin potentially having been flipped to support in the same move that saw the 50-day moving average regained.
Bitcoin’s rally back in June came after a breakout above a roughly 95-day descending trading range which led to new 2023 highs within 4 days of breaking out. Currently, Bitcoin is breaking out of what was a roughly 97-day descending trading range and has not yet started to go parabolic. This could indicate that this weekend will be an exciting one for Bitcoin and the rest of the crypto market and that if you’re considering entering a position before the start of Q4 then you may want to think fast.
Another exciting historical tendency for Bitcoin is that each time BTC has closed the month of September with a positive return it has gone on to finish out the year with positive returns in October, November, and December. This occurred previously in both 2015 and 2016.
This all goes to show that thus far 2023 has not been an ideal year for the active crypto traders out there, and that the best performing Bitcoin strategies have been some combination of Buy-and-Hold and Dollar-Cost Averaging. Q4 has the potential to bring some bullish volatility to make up for the lackluster price action that has left most traders sitting on their hands so far this year.
One extremely positive development over the past two weeks has been the significant outperformance of a select few of the top Altcoins, with one of the top performers in the market being Chainlink (LINK).
Chainlink Labs has been on a constant mission even throughout the bear market to continue expanding their network and their partnerships, with some highlights from recent months including a collaboration with Swift as well as the Chainlink Network reaching new highs for network activity numbers. This is a clear indication that LINK is a popular choice for both developers as well as traditional financial institutions.
From a technical standpoint LINK is on the brink of a potentially significant breakout in its relationship with Bitcoin, as the LINK/BTC trading pair looks likely to confirm a weekly breakout above its muli-year downtrend.
Chainlink itself is breaking out of a multi-year downtrend on a weekly timeframe as it already closed back above the 50-week moving average last week and is now confirming the breakout by completely blowing through the trendline that has been intact since May 2021.
Our CryptoPulse Quant model has been in a LINK position for almost 2 weeks now and is currently up about 18%, with hopefully more returns to come.
Another major altcoin that is on the brink of its own breakout is Solana (SOL) which has reclaimed both its 50-day and 200-day moving averages in the past 24-hours.
SOL has the potential to also invalidate the downtrend that has been providing resistance since July, which would leave $25 as an immediate short-term target before potentially looking to set new 2023 highs after that.
Another positive note for SOL at the moment is that it is in the process of recovering from earlier in September in which both price and momentum according to the RealMotion indicator both became oversold.
When both price and momentum become oversold together it is historically a reliable indicator of a local bottom, which you can see happened 3 previous times in 2023 and led to sustained breakouts.
It is extremely promising to see improved interest in altcoins as September comes to an end, especially as this is typically a leading indicator of improved sentiment in the crypto market when more speculative coins begin to outperform the stalwarts like BTC and ETH. Lets hope to see this trend continue and for the beginning of Q4 to bring more bullish price action along with it.
If you’re not yet subscribed to either our CryptoPulse Quant model or the new CryptoPulse Sprint trading strategies and would like to learn more about our products then you can talk to our Chief Strategy Consultant, Rob Quinn, here.