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| By Alex Benfield |
In the past, crypto prices have risen and fallen by as much as 20% or more in a single day.
If you think that’s quite a jump for just one day, you would be shocked at how much prices have previously fluctuated over the course of a week or month.
These moves are the reason why cryptos have the reputation of being a high-risk, high-volatility asset class.
Over the past month or so, prices have bounced around in an uncharacteristically tight trading range. After market leaders finally broke out of the bear market slump, they were off to the races to start the year as they rose to new trading ranges.
Since that point, there have been two small “fake out” breakdowns. But prices remain extremely close to where they were in mid-January, almost 40 days ago.
This kind of price action is certainly not typical for this highly volatile asset class.
But the decrease in volatility is not the only reason why this price action has been unusual.
As you may know, the crypto market is cyclical and has tended to follow similar patterns since its inception.
After periods of upward price action like we saw at the beginning of the year, there is almost always some sort of price correction that immediately follows.
So far, we have not really seen any substantial dip in prices after the early January rally.
As I said, there is almost always a downward correction that follows. However, sometimes big rallies are followed by what we call sideways corrections — periods where volatility cools off, assets trade within tight trading ranges and neither support nor resistance levels are broken.
We may just be in one of those sideways correction periods right now.
It’s certainly too early to call, but if you are waiting on a dip to buy into the market, you may not get your opportunity anytime soon. The market may just break higher from these levels in due time, so the key indicators to watch are the overhead resistance levels on the charts.
Looking at Bitcoin (BTC, Tech/Adoption Grade “A-”), it is currently tightly hugging an upward trendline. This will be an important level for it to hold if the market is to stay away from an ensuing price correction.
Currently, BTC is up 2% on the day and trading just under $24,000. Bitcoin’s upward resistance level lies around its 200-week moving average at approximately $25,250.
Should BTC break above that level, it is game on, with $30,000 likely being the next target. However, should the orange uptrend line break, Bitcoin could test support somewhere in the $21,000–$21,500 range.
Click here to view full-sized image.
Meanwhile, Ethereum (ETH, Tech/Adoption Grade “B”) is trading at almost the exact same level as it was on Jan. 20, just after the major rally in crypto prices.
The bears and bulls are still battling for control around the $1,650 level, which, at this point, appears as a definite inflection point on Ethereum’s chart.
If the bears take control, expect ETH to test support near its 200-week moving average, which currently sits just below $1,450. If the bulls get their way, ETH’s next upward resistance is at the $2,000 level.
For now, Ethereum is also tightly hugging its orange uptrend line. So, expect the top two cryptos to move in lockstep over the course of the next week or so.
Click here to view full-sized image.
What’s Next
Many investors do not enjoy times of sideways trading, as it can be boring and/or frustrating. And it can be even more irritating when assets are moving within important trading ranges.
However, during periods of low volatility like this, many traders will seek out volatility in altcoin markets when opportunities dry up in larger-cap cryptos.
That means you can still find trading opportunities and volatility if you know where to look.
Should this sideways trading continue, we may be looking deeper into the altcoin market for some new potential.
However, for now, we are keeping our eyes peeled on these important support levels, and we suggest you do the same.
Best,
Alex
