September 7, 2022
Cryptocurrencies: Weekly Update
Despite a choppy September so far for both stocks and cryptocurrencies, ETH has steadily gained about 4.5% since the beginning of the month. Ethereum and Polygon (MATIC) are the only two coins in our list that have positive TSI’s, indicating that the overall trend strength of the broader crypto market is weak.
The reason we’re seeing these two coins still maintaining positive trend strength is that Ethereum will finally transition to Proof-of-Stake in the coming week, the more energy-friendly and efficient mechanism for validating transactions than Proof-of-Work. As we approach this event which is anticipated to take place on September 13, we need to figure out whether we want to take a risk on an ETH position or wait it out in cash.
There’s plenty to look at with Ethereum right now, but our main focus is a bullish divergence in momentum according to our RealMotion indicator.
The long-term RealMotion indicator (50/200 MovingAverages) made a Golden Cross just last week, the first time that momentum has been in a bullish condition since January of this year. This may be an early indication of price action to come, as Ethereum’s price definitely has been improving over the past several days.
ETH has clear resistance at the 50-day moving average as well as at $1,727 but looks to have more room to run as we get closer to the actual merge date. Many believe that this is going to be a buy the rumor sell the news event, and if that does turn out to be the case then we’d likely see Ethereum find support around $1,242.
ETH has been significantly outperforming Bitcoin since early June, and is actually looking to potentially make multi-year highs in its relationship against BTC if the ETH/BTC trading pair closes this week at current levels.
Depending on whether or not the ETH/BTC trading pair manages to close this week above 0.084954 will potentially provide more clarity on whether or not we can expect crypto to wake back up in the second half of September.
One thing to keep in mind is that the last time Ethereum’s outperformance of Bitcoin was at these levels, it directly preceded the crypto market crash in December 2021.
As Ethereum’s merge gets closer, it makes sense that one of the most successful scaling solutions for the blockchain outperforms the rest of the market. MATIC has a stronger TSI than ETH which is no surprise given that Polygon is up nearly 150% from its lows on June 19.
Although MATIC recently lost its 50-day moving average, it still hasn’t fully broken down below its short-term trading range. Another encouraging factor for MATIC is its momentum, which has sustained a bullish phase since July 5. If Polygon does breakdown from here, you’d expect it to find support at its range low of around $0.765.
With all of that being said, MATIC is definitely one of the best-looking cryptocurrencies other than Ethereum as things stand, likely being one of the only altcoins that we would consider trading for the foreseeable future.
We are not nearly as optimistic when it comes to Bitcoin, which has been lagging behind altcoins for a majority of the crypto market’s recent rally.
Bitcoin is in a bearish phase for both price and momentum and has now made new closing lows for the year as of September 6th. If Bitcoin were to make any sort of a comeback then we’d expect resistance at the psychological $20,000 price level as well as around $20,800.
What looks more likely for BTC is a further breakdown in the short-term. Bitcoin doesn’t have any strong technical support right now other than the spike low to $17,622. If BTC can’t sustain above that level, there may be room for a further crash down to $13,888.
As the global macroeconomic situation continues to worsen it is hard to expect any kind of meaningful bounce in cryptocurrency markets. As we get closer to the end of this month and into October and then the Mid-term elections in November, we’re anticipating that cryptocurrencies and blockchain technology will remain a hot topic in the news, but we will have to wait and see if it will be enough to sustain the market at its current levels.
Check out our new CryptoPulse Twitter account @MGCryptoPulse for daily tweets and updates about the crypto space!