January 17, 2023
Cryptocurrencies: Weekly Update
You’re probably pretty happy right now If you tuned in to our most recent CryptoPulse report and decided to take a position in any of the top altcoins that we highlighted for a potential breakout. We pointed out the significant technical breakout between the ETH / BTC ratio that has time and time again been one of the most reliable indicators for recognizing short-term breakouts in the altcoin market, especially in terms of relative strength against the Bitcoin benchmark. Even better, is that typically when altcoins have a breakout across the board, it is an indication of a revitalized positive sentiment toward the cryptocurrency market as a whole.
The ETH / BTC ratio broke out of its long-term wedge pattern and took out the 50-day moving average in one strong daily candle that led to a continual crypto market rally over the past week or so, even including a major BTC rally. Now, it appears that this ratio has already put in a healthy retest of its trendline and is bouncing… hopefully leading to an extended breakout for weeks to come!
As we expected with such a strong move to break out from a long-term consolidation pattern, we’ve seen Ethereum outperforming Bitcoin and even more speculative altcoins outperforming ETH. Our discretionary call on Solana looks to have been the best possible choice for the large-cap altcoins, with SOL going on to be the top-performing token over the past several weeks as it is up over 91% over the past 30-days and up 77% since we called it out at $13.25 in our most recent report (currently trading around $23.50).
Our CryptoPulse Quant strategy entered 2 new positions in the last week!
Our CryptoPulse Quant strategy entered 2 new positions in Litecoin (LTC) and Avalanche (AVAX) over the past week, showing that even our relatively conservative trading system seems to be excited about the current breakout across the crypto market.
Some will say that we’re currently just getting a bit of a rebound from drastically oversold levels, while others are already proclaiming that this is the long-term market bottom that we’ve all been waiting for. Whichever one it may be, there definitely are some significant shifts taking place right now that encourages a continued rally in the markets.
The first and possibly most important feat of the current rally has been the total cryptocurrency market cap reapproaching the $1 trillion level for the first time since early November, and even more significantly it has already reclaimed the 200-day moving average for the first time since January 2022. The last time this happened the crypto market cap went on to rally by more than 90% in the span of just 3 months.
This breakout has been heavily driven by altcoins rebounding from their FTX collapse, but more importantly by both Bitcoin and Ethereum reclaiming their 200-day moving averages as well.
Bitcoin has reclaimed its $18,800-$21,500 trading range after a swift and clean breakout above the $20,000 level, while ETH has rallied even stronger on a relative basis with both now also clearing their long-term downtrends. Right now the next levels to beat for each coin look to be $21,500 for BTC which it looks to currently be taking a pause at to digest the runup, and around $1,700 for ETH which has yet to put in a red candle for the past 9 straight days.
Given the context behind the crypto market's most recent breakdown at the end of 2022, it is really no big surprise to see several other altcoins such as SOL rallying by 200% since their lows in the last few days of December. Although it remains one of the most popular blockchains amongst retail users (especially NFT traders), SOL had been heavily involved with FTX since the Solana blockchain was launched and as such was one of the biggest losers when FTX collapsed. Now that it seems most of the selling pressure from the FTX debacle seems to have subsided, SOL has been able to have a healthy rebound from deeply oversold levels.
AVAX has been up there with SOL as the top-performing altcoins this past week or so. Although we expected altcoins to outperform BTC, we couldn’t have anticipated AVAX being #2 of the alts, and that is because its current breakout is thanks to a significant news announcement that will drastically bolster the Avalanche blockchain…
As we’ve stated repeatedly in the past, cryptocurrencies and blockchain aren’t going anywhere even when it has seemed like all hope was lost over the past year, and that is thanks to the constantly growing institutional involvement in the growing crypto space. Whether it be adopting NFTs for their retail customers or major investments by blue chip names, we’ve continually seen some of the biggest and most well-known global brands sinking their teeth deeper into this industry.
While we’re still hesitant to proclaim the long-term bottom for cryptocurrencies, things are looking up and at the current pace, we may see a continued rally throughout Q1 of this year. Make sure to take profits if you followed us on our most recent discretionary call, and make sure to not get too greedy because we all know that the crypto market always has the ability to break down just as quickly as it has rallied. Stay tuned for our next CryptoPulse report where we’ll be reevaluating the historical 4-year cycle of the crypto market and discussing the next Bitcoin halving!