Digital Asset Insights

Digital Asset Insights #104

This report identifies a common price pattern among the top digital assets. Understanding past consolidations and making careful predictions about plausible futures can provide an edge to make informed decisions. That is precisely what this report accomplishes.


Bitcoin (BTC)

At the beginning of last week, Bitcoin's price had been hovering around $23,000 for two weeks. Initially, it tried to breach the $22,800 hurdle posed by the Momentum Reversal Indicator's state trend resistance level, and in the second half, it breached it but failed to confirm a successful flip.

On Tuesday, Bitcoin's price briefly lost support from the $23,000 price zone but rose 1% afterward. The 21-day simple moving average provided support, marking the first time it engaged with the SMA since it traded at $16,000 in January's first week. Bitcoin traded at $23,082. Experts predict that these factors suggest Bitcoin's price will continue to move towards higher price zones, creating the potential for an additional 20% rally.

On Wednesday, Bitcoin's price continued to consolidate above the Momentum Reversal Indicator's state trend resistance level at $22,838, playing a pivotal role in where BTC heads next since the level coincides with the breakout line.

On Thursday, Bitcoin's price was down 2%, with the digital currency being rejected from the $23,000 zone, trading at $22,509. Throughout the winter, as the price ascended back into the $20,000 zone, the RSI breached overbought conditions, suggesting that any pullback could be viewed as a buying opportunity.

Bitcoin's price had a correction on Friday near the US closing bell as US equities tanked. It became clear to more and more traders that the Federal Reserve would not halt rate hikes anytime soon, and any trading plan relying on a Goldilocks scenario needed to be shelved.

At the week's close, a bounce could occur as traders look to pick up some Bitcoins at a discount. The $21,969 level is likely to attract many traders to be active around this area if BTC price pushes back above that level. A daily close this evening could see some recovery follow-through over the weekend towards $23,878.


Ethereum (ETH)

Ethereum price has been following in Bitcoin’s bullish footsteps, but there are speculations that if the bearish regime begins, ETH could decline. If there is rejection at the monthly resistance level of $1,677, followed by a correction, the smart contract token could find support at $1,429.

Ethereum's price has been confined to a mid-$1,550 consolidation zone but is ready to surge, having found support from the recently tested 21-day simple moving average, creating a higher low at the $1,600 level.

On Wednesday, Ethereum's price traded at $1,665, with a conservative target of $1,800 and potentially the psychological $2,000 barrier. Unless Bitcoin's price takes a bullish step, Ethereum's price was due for a correction to the $1,329 support level. Despite previous selling pressure, Ethereum's price was down 1.5% on February 9 but maintained bullish strength, continuously finding support at higher levels within the $1,600 range. Ethereum's weak spot was defined at the $1,688 level, triggering another firm rejection for bulls. ETH is getting headwinds from the geopolitical side, and a better price tag to match the market narrative is around $1,441.


Ripple (XRP)

The Ripple price revisited the $0.400 to $0.381 support zone after declining on January 6. XRP price did not follow the same trend as Bitcoin and Ethereum, causing confusion, remaining suppressed near $0.40. XRP traded at $0.399 on Tuesday, and both the 8-day exponential moving average, and 21-day simple moving average showed a bearish cross.

On the following day, Ripple price rebounded off the $0.380 to $0.400 support zone to revive its bullish outlook. During midweek, XRP price established a new low within the three-week consolidation. The bears briefly touched the 0.385 level, breaching liquidity below the prior week's swing low at $0.3860.

XRP price traded at $0.3965, and the market structure seemed to be stair-stepping south, indicating a potential 1-2-1-2 pattern to the downside. At the end of the week, Ripple (XRP) price appears to be the most tradeable crypto of the top 3 digital assets. Traders who want to be bullish can enter easily and place their stops below either the 55-day Simple Moving Average (SMA) or the monthly pivot. A rally could be granted on the back of technical forces as two key support levels have been salvaged after the nosedive move from Thursday, indicating the possibility of more recovery.


Cardano (ADA)

In January 2023, the price of Cardano rallied to almost $0.421, but since the start of February, the trend has reversed due to the central bank's announcement of high inflation. Although ADA has slightly recovered, it is being limited by the February 1 support level.

On January 8, Cardano, a competitor to Ethereum and a smart contract blockchain network, saw a surge in large volume transactions on its blockchain, which historically has caused a spike in ADA's price, such as the local top it hit in June 2022. The price trend of Cardano is influenced by its large wallet investors, as indicated by data from Santiment, showing that a spike in large volume transactions in May 2022 resulted in a local top and a 36% price rally in June. Since the beginning of 2023, Cardano's large volume transactions have hit their highest point since the week of May 11 to 17, 2022, and have yielded 59% gains for ADA holders.

As of January 9, Cardano's price action over the last six months showed a bearish divergence formation, in which the asset's price produces higher highs, but the momentum indicator produces lower highs. This signal has extended for more than three weeks, and Cardano's price has formed the longest bearish divergence to date.

Cardano's price has been at risk of continuing its decline since last week, with February being a challenging month for ADA bulls to close in the green due to the big central banks pushing for higher rates and issuing warnings about the need for more tightening to control inflation. ADA is expected to continue its decline towards the 55-day Simple Moving Average near $0.327 on the weekly chart, which worked well as support in January. If the 55-day SMA fails to hold, a thin support at $0.296 could provide some stability.


Solana (SOL)

The Solana price consolidated between $25.6 and $22.9 for almost three weeks at the beginning of the week. However, it failed to maintain early January's bullishness and was trading at $23.22, just at the immediate support level of $22.77.

On Wednesday, Solana's price was able to jump back above $24 after Fed Chairman Jerome Powell said one word, "Disinflationary." It seems traders were selectively listening to the words they wanted to hear instead of the whole speech.

Last week, SOL saw losses as it received a firm rejection against the 200-day Simple Moving Average (SMA) and awaited support from the 55-day SMA. Currently, SOL is in a dead cross trade, with bears having the upper hand and the momentum to build further pressure. With tailwinds from harsh central bank messages, geopolitics in Ukraine and Russia, and increasing energy prices, the overall outlook does not look positive.

SOL traders need to keep an eye on the historic pivotal level of $19.04 and the 55-day SMA area, which should provide ample support. However, any one of these elements could trigger a break to the downside, resulting in a significant downward move towards $5.1.

Despite the risk premium already being priced in and the double belt of support, a bounce and jump higher may be possible. The war around its first anniversary may lead to war fatigue, and traders can expect a swing back up to the 200-day SMA at any moment. However, another external catalyst is needed to break through it to the upside.