Weekly Forecast: Cryptocurrencies – Stable Recovery or Dead Cat Bounce?
After a volatile couple of weeks, the cryptocurrency market is showing signs of revival. Bitcoin and Ethereum have been the main catalysts for the recovery, though for entirely different reasons. Bitcoin is regaining its stability – a recently acquired status – while Ethereum appears to have stemmed a massive decline that was driven almost entirely by sentiment. Ethereum’s return from the abyss has been especially noteworthy, with the second-largest coin by market cap pushing toward a key resistance barrier.
That said, the recent recovery only qualifies as a minor counter-trend to the bearishness that has gripped the market since early August. In terms of market capitalization, cryptocurrencies are down a third from the peak of late July. The market is also 16% lower than it was at the beginning of September.
Bitcoin has returned to a stable trading range over the past week, a sign that the worst of the downtrend had passed. As Hacked reported Saturday, bitcoin’s sharp and sudden reversal earlier this month was likely initiated by a prominent whale liquidating a portion of his holdings. A prominent bitcoin holder had moved 110,000 units of BTC and BCH from multiple wallets prior to the price collapse. It is believed that 14% of that fortune was transferred to Bitfinex and Binance.
Absent any new whale spottings, bitcoin is likely to continue higher this week. BTC has crossed the 50-period moving average, according to the 4-hour chart, and is now testing the $6,600 resistance. Bitcoin must overcome this level to avoid a double-top formation, which is normally viewed as a bearish indicator.
The rollercoaster that is Ethereum shifted into higher gear last week, with prices surging 30% from their bear market lows. The developer’s cryptocurrency not only returned above $200, it set its sights on a key technical resistance that could pave the way for bigger short-term rallies.
Since peaking around $227, ether’s price has returned to the $220 region. The first major resistance test is located at $235, followed by a stronger barrier near $260.
Concern over scalability, economic abstraction and the long-awaited ICO extinction event have all curbed appetite for ether in recent weeks. Vitalik Buterin, Ethereum’s co-founder, has also indicated that cryptos have likely neared their ‘ceiling‘ in terms of growth. Ether co-founder Joseph Lubin recently countered Buterin’s assertion by claiming that we are only at the start of an exponential growth curve.
The Week Ahead
The following is a high-level review of this week’s major major market-moving events.
The Block Seoul Global Crypto Investor Summit formally begins on Monday, attracting 1,500 people and 500 media outlets from around the world. Wikipedia founder Jimmy Wales and former CIA director Michael Hayden are scheduled to speak.
Digital currency Tezos will launch its long-awaited mainnet on Monday. The $1 billion blockchain has catapulted into the top-30 cryptocurrencies by market cap, partly in anticipation of the mainnet launch.
BitRewards, the first blockchain-based loyalty platform, will roll out support for Amazon on Monday.
The people behind Lisk will hold a live “Ask Me Anything” session on Reddit between 4-6 p.m. CEST. Meanwhile, the University Congress Center in Istanbul, Turkey will host a blockchain competition involving Binance Coin, Stellar and five others.
In cryptocurrencies, the expiration of the CBOE XBT bitcoin futures contract will occur on Wednesday. Waves’ CEO Sasha Ivanov will also hold a Q&A session on smart contracts, which could get picked up by crypto media sources.
In traditional markets, European Central Bank (ECB) President Mario Draghi will hold a speech at 13:00 GMT. Central-bank speakers are closely watched by investors for clues about future monetary policy.
In the blockchain world, BitRewards will suport BIT token payments Shopify and WordPress beginning on Thursday.
On the policy front, the Swiss National Bank is expected to deliver an interest rate verdict. No change in monetary policy is expected at this time.
Data watchers will be keeping close tabs on U.K. retail sales and U.S. existing home sales.
The BitShares Blockchain Foundation will host BitFest Amsterdam on Friday, a three-day event that brings community members together.
On the data front, IHS Markit will release a pair of PMI reports covering U.S. service and manufacturing industries. The Composite purchasing managers’ index will give a holistic account of the broader economy.
Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.
Featured image courtesy of Shutterstock.