Volatility Leads to Choppy Trading After Recent Gains

•  Bitcoin (BTC, Tech/Adoption Grade “A-”) is up 3% today so far after bouncing back from yesterday’s $2,000 dip.

•  Ethereum (ETH, Tech/Adoption Grade “A”) is up 4%, and it’s been trading back and forth between $3,000 and $3,400.

•  Bitcoin’s crypto market dominance remained totally unchanged this week, holding steady at 44.1%.

Bitcoin is bouncing higher after yesterday’s brief pullback to trade around $48,000 today.

It’s a welcomed sign, but it doesn’t rule out a potential correction. The crypto market is volatile, and we already saw the King of Crypto rally over 60% from its July lows.

Bitcoin is still digesting its recent gains after soaring past the upper end of its previous sideways trading range. It may decide to continue its “two steps forward, one step back” approach that we’ve seen so far since July.

Bitcoin briefly dipped below its 21-day moving average, but it quickly bounced higher after finding temporary support. With its significant price appreciation since late-July, Bitcoin easily overtook its 200-day exponential moving average (EMA) and 21-week EMA, which are currently at about $40,000 and $42,000 respectively.

Here’s Bitcoin’s price in U.S. dollars via Coinbase (Nasdaq: COIN):

Ethereum is also rebounding today with a solid push. The second largest cryptocurrency by market capitalization dipped further below its 21-day moving average than Bitcoin, but it’s making a slightly bigger move today.

Just like with Bitcoin, though, another short-term pullback can’t be ruled out. For now, it’s trading above that 21-day moving average, but it hasn’t found solid short-term support when it dipped below.

A lot of the bullish momentum for ETH can be traced back to the EIP-1559 upgrade. To date, over 100,000 ETH have been burned since the upgrade rolled out on Aug. 5. This translates to over $320 million burned, which could lead to higher prices due to smaller supply.

Here’s Ethereum’s price in U.S. dollars via Coinbase:

Index Roundup

The broader crypto market snapped its four-week streak of consecutive gains. However, the damage was minimal, and many projects managed to extend their recent rallies.

The volatility we’re seeing now is due to cryptos digesting their recent gains.

The Weiss 50 Crypto Index (W50) lost 2.21%, which means very little considering the volatility of the asset class.

The Weiss 50 Crypto Ex-BTC Index (W50X) fell 3.64%, illustrating Bitcoin’s performance was largely in line with the altcoins.

Breaking down this week’s performance by market capitalization, we see that the small-caps led the way again. Larger and mid-sized cryptocurrencies still performed decently, and each of the three saw modest gains.

The Weiss Large-Cap Crypto Index (WLC) increased 5.62% as many of the established altcoins continued their strong recent performance.

The mid-caps performed very closely in line with the largest cryptocurrencies, as the Weiss Mid-Cap Crypto Index (WMC) gained 5.94%.

Once again, the smaller altcoins were the biggest gainers as the Weiss Small-Cap Crypto Index (WSC) rose 9.64%.

This week’s trading was largely uneventful, with much of the total gains delivered by altcoins before volatility crept in as the week closed.

Bitcoin and Ethereum are holding their ground, but they’ll need to start building momentum if the altcoins hope to sustain their outperformance. If they can’t maintain this current pace, a short-term pullback may be in the cards.

Remember, it’s healthy to see brief pullbacks accompany positive price actions so long as support holds.

Notable News, Notes and Tweets

•  Pomp highlights how inflation disproportionately impacts low-income Americans and widens income inequality.

•  This week, MicroStrategy (Nasdaq: MSTR) CEO Michael Saylor announced the company purchased over 3,900 Bitcoins for $117 million.

•  Cuba embraces crypto by endorsing it for payments and allowing usage for “reasons of socio-economic interest.”

What’s Next

It makes sense that the crypto market is digesting its recent gains considering how significant the price movements have been over past five weeks.

Nothing goes up in a straight line, and it is possible we see a deeper correction soon to consolidate after the big recent moves.

In macro news, crypto notched another win in its quest to achieve mainstream adoption yesterday. Cuba — following El Salvador’s lead — will be recognizing the use of Bitcoin for payments. The government and central bank will be establishing regulations for the crypto landscape.

At the Federal Reserve’s Jackson Hole Symposium, all eyes will be on how the committee members approach the decision to taper its current bond purchase plan of $120 billion per month.

The Fed’s balance sheet doubled since the beginning of the pandemic to over $8 trillion, and its current policies are unsustainable.

Extreme government spending has accentuated our future financial predicament, but cryptocurrencies provide a hedge against the traditional system. Institutional adoption is soaring already. It’ll only continue to increase given the Fed and U.S. government’s decisions to kick the can down the road.

Best,

Sam

About the Investment Analyst

Sam graduated from The Weiss School, interned at Weiss Research while attending Babson College, and now dedicates his time at Weiss Ratings to in-depth analysis of natural resource stocks and cryptocurrency markets. He regularly contributes to the research and news posted daily to the Weiss website.

Crypto
See All »
A
B
ZRX $0.929031
B
B
B
ETH $3,514.05
B
B
SOL $189.30
B
AAVE $129.16
B
B
ADA $0.667798
B
CRO $0.157759
B
B
MKR $3,560.00
B
XLM $0.146902
B
UNI $12.73
Crypto Ratings
Loading...
Weiss Ratings