The cryptocurrency market got a headstart on the stock market this week, with a major Labor Day flash-crash setting a negative pace for cryptos for the remainder of the week.
Is it time to panic? Run for the hills? Absolutely not.
Despite the over 20% drawdown from local highs experienced by large cap cryptocurrencies, the macro trend of the crypto market remains intact. If anything, there are several buying opportunities that have become available, especially in anticipation of tapering by the Fed and continued weakness in the US Dollar that could lead to even more capital flowing into the crypto market.
Areas to focus on from this week...
Biggest Winners: Solana (SOL), Polkadot (DOT), Shiba Inu (SHIB), Algorand (ALGO)
Biggest Losers: Bitcoin (BTC), Ethereum (ETH), the NFT Market (Non-Fungible Tokens)
What to watch: BTC & ETH accumulation, Ripple (XRP), Gensler/SEC vs. Coinbase
Watching Bitcoin and Ethereum crash 11% in a single day can be a scary sight, but there are plenty of technical levels that should reassure you about the health of the crypto market.
BTC suffered a drawdown from nearly $53,000 to a daily low of $42,380 on Tuesday, but saw a short term bounce from its 50-dma signaling support at long-term levels despite short-term weakness. Another positive is that with Bitcoin looking like it will see a Bullish moving average cross in the coming week, expect the emotional and biased flames of retail traders to be stoked with the first golden cross in BTC since June 19th.
Ethereum has seen a quicker recovery than Bitcoin, with ETH having a golden cross occur a full month ago and price staying above the 50-dma since then. Even with the flash-crash and high volatility this week, Ethereum has had major support at its 50-dma and has stayed above 30-day lows.
There is no need to be concerned unless ETH either breaks below its 50-dma or the $3,000 key support level. BTC is looking a little more volatile, but should be fine as long as the market doesn’t see a daily close below $44,750 support. What we’re seeing is a healthy reset, expect 1-3 weeks of accumulation in these top two cryptocurrencies before any major move to the upside.
With weakness in the top cryptocurrencies, there is more excitement and attention being paid to the top altcoins like Solana (SOL) and Cardano (ADA). Interestingly enough, Ethereum holders should be more concerned than Bitcoin bulls, with SOL and ADA being hailed as ‘Ethereum Killers’ due to them being decentralized finance platforms that tout higher transaction speeds and lower fees than ETH.
Solana has been surprising the whole crypto market over the past month with price increasing over 330% to all-time highs. SOL and other large cap de-fi projects undoubtedly piggybacked on Ethereum’s rally of this crucial subsector, but when ETH crashed on Tuesday SOL barely budged.
While other key large cap cryptocurrencies are finding support at their 50 and 200 daily moving averages, SOL never even broke below its 10-dma. If you’re looking for a long crypto play that is actually affordable, consider buying SOL under $200 while you still can.
In smaller altcoin news, Algorand (ALGO) saw a 67% 7-day gain on the news that the Algorand Foundation would launch a $300 Million fund to support developers that want to create applications to function in the Algorand platform.
The most successful cryptocurrencies are less concerned with acquiring capital, but are rather focused on encouraging adoption of their network; the best way to encourage adoption is to incentivize innovation.
Finally, the SEC continues to exist as a dark cloud over the entire US cryptocurrency industry. The SEC lawsuit vs. Ripple Labs (XRP) has been ongoing since December, 2020 and has seen the court continually shift in Ripple’s favor as the SEC still cannot seem to make their mind up as to what is and is not considered a ‘security’ in the cryptocurrency market.
The SEC doubled down on their stance as the overlords of the US crypto market by threatening to file suit against Coinbase this week, the most reputable US based crypto exchange. Coinbase was preparing to launch a lending and staking service for their clients which caught the attention of the SEC, even though several other major exchanges already offer services like this.
Despite the tough week for cryptocurrencies, look for buying opportunities as large cap cryptocurrencies accumulate at higher levels. Finally, I implore you to remember that the volatility of the crypto market can make short-term trends look dreary, but when you zoom out you’ll remember that just 365 days ago you could’ve bought BTC at $10,200.