The entire cryptocurrency market is in the red today, as both market leaders lost ground at key support levels. Is this another brief correction or, perhaps, a longer cooling-off period?
• Bitcoin (BTC, Tech/Adoption Grade “A-”) fell through support levels before bouncing off $50,000 earlier today.
• Ethereum (ETH, Tech/Adoption Grade “A-”) has continued its downward pattern this week and is sitting at key support levels on both the USD and BTC charts.
• Litecoin (LTC, Tech/Adoption Grade “B-”) is showing signs of technical weakness.
Bitcoin is down more than 10% today from the highs it hit just yesterday. It’s fallen below its 21-day moving average and broken through support at $52,500. It actually tested and bounced off the significant $50,000 level earlier today and is now trading around $51,500.
BTC is at a critical juncture here; if it fails to hold $50,000, it could slip as far as $45,000. That would mark a 25% drop from the recent all-time high.
Here’s BTC in U.S. dollar terms via Coinbase:
Ethereum hasn’t had a good week so far, breaking through support levels after its fall from $1,800 on Monday.
ETH has fallen through support at $1,700 and is trading at the support alevel of $1,600. A break below this level could take ETH all the way to the February lows around $1,425.
Interestingly enough, Ethereum’s fundamentals suggest it’s severely undervalued right now, especially due to the rise in popularity of decentralized applications (Dapps), specifically decentralized finance (DeFi) projects and non-fungible tokens (NFTs) on the network today.
After two straight months of losing ground to Bitcoin, the ETH/BTC chart is currently sitting at an important support level of 0.03. This raises an important question: “With all the good development on the Ethereum network, why is it undervalued compared to Bitcoin?”
This goes to show that markets are affected by much more than just news, fundamentals and price trends.
Here’s ETH in U.S. dollar terms via Coinbase:
Litecoin hit a high above $240 on Feb. 20 but has struggled ever since. After eventually making up ground all the way back to $230 on Mar. 13, LTC has slipped back to $170.
Litecoin is in a similar situation to Ethereum in the sense that it wasn’t able to top its February highs this month, setting a pattern of lower highs.
LTC has fallen below its 21-day moving average, and it’s right near the recent lows it set at the end of February. If the Litecoin price falls beneath last month’s low of $153, a fall to $130 is possible.
Here’s LTC in U.S. dollar terms via Coinbase:
Notable News, Notes and Tweets
• Bitcoin mining continues to grow in popularity, and the hashrate for its network has grown to all-time highs.
• Your move, Securities and Exchange Commission: Financial services giant Fidelity Investments has now filed for a Bitcoin exchange-traded fund.
• Anthony Pompliano shares the “favorite conversation” he’s ever had with someone about Bitcoin.
What’s Next
We’ve stated this week that the fundamentals of most digital currencies have only been improving lately. That still holds true today, supported by evidence of growth in computing power of the Bitcoin network and the creation of new Ethereum smart contracts.
Fundamentals are improving.
We’ve also said that the market is overdue for a more sustained correction. While we’re not sure that’s what’s playing out right now, we are sure this price retracement, however long, is necessary for the health of the market.
Now, if funding rates are telling us anything right now, it’s that many investors anticipate lower prices in the near future for most cryptocurrencies. Over the weekend, funding rates plummeted to zero on many exchanges, and even went negative, for sustained periods of time, suggesting that short-term investor sentiment had turned bearish.
So, we suggest exercising patience and caution in dealing with the market right now. We’re still in a neutral zone — things haven’t turned bearish just yet. However, it’s worth noting that we haven’t been neutral on most popular cryptocurrencies since the beginning of the year.
Those of us with bullish long-term outlooks will look for solid opportunities to establish new or add to existing positions as warranted by market action.
Stay tuned for updates on these developments.
Best,
Alex
