Ethereum, Litecoin, Compound on The Verge of a Rally?
In this edition, we take a deep dive into potential counter-trade setups amidst a sea of bearish sentiment exacerbated by the Russia-Ukraine conflict.
Meanwhile, Trudeau’s decision to sanction Canadians hasn’t gone down well with neither Romanian MEP Christian Terhes, nor crypto exchange CEOs who have openly advocated for user to control their own private wallets.
Let’s dig in.
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Russia-Ukraine Crisis Sparks Market Wipe Amidst Expectations of an Imminent Reversal
Global markets took a major beating as words turned into action in Eastern Ukraine. Bitcoin and crypto markets wiped out $109 billion in 24 hours as the crisis peaked, giving rise to the notion that Bitcoin is under-valued.
Bitcoin fell to lows of $36,370 per coin overnight before rebounding slightly. Ethereum dropped to $2,500 and Litecoin also retreated to $100, falling sharply as the crises unfolded.
Read the full article here.
The purpose of this newsletter analysis is to provide context to current events and cryptocurrency markets. It is released every Monday and Wednesday. I am not perfect and this is not a science — nor is this newsletter a signals service. While I cannot promise perfection I do my best to be honest and transparent.
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ETH Shows Relative Strength
Ethereum/Dollar trades at $2,730 at the time of writing, down 12% since last Wednesday.
ETH/USD reacted to $2,500 support and inched 9% higher in the last 48 hours. The coin has shown relative strength compared to Bitcoin, with the daily-super trend (ST) holding on the close. Provided BTC/USD doesn’t roll over, there’s room for expansion into overhead resistance.
Technically, the first trouble area for ETH/USD rests at $2,900 on low-time-frames (H4). If a swing-failure pattern (SFP) emerges around this level, then it’s prudent to expect another test of the daily ST. This would be bearish, and opens the door to further decline, and a potential nuke to $1,300.
ETH/USD is in a technical downtrend and this would be invalidated if the pair forms a higher local high above $3,400. At that sage, bulls will aim to defend reclaimed territory ($3,000), creating a higher low and so on and so forth.
It’s important to note that bottoms don’t typically happen within a couple of days. In fact, it’s usually a slow grind of sideways ranging and accumulation until a breakout informs what’s likely to come next (i.e. acceleration to the breakout direction).
Litecoin Potential Bottom Targets $180
Litecoin/Dollar exchanges hands at $111 at the time of writing, down 16% week-on-week.
LTC/USD bounced 11.2% from double-digit lows over two days and could experience a relief rally if certain conditions are met.
The first over-head resistance for LTC/USD is reclaiming $122, the prior local level which gave rise to accelerated selling pressure last week. The same reasoning for ETH/USD applies here so an SFP — often denoted by a large upside wick on an H4 candle — would be an early red flag.
If bulls take this level out, the next area where resistance is likely to increase is $138 (2019 high), which would coincide with the 200-daily EMA. Confluent resistance means bulls have an uphill struggle as bag holders who are likely underwater may choose to unload at a loss or at break even.
At that level, LTC/USD may have created a double-bottom breakout pattern which could lead to a cascade of short liquidations to the upside. Areas of untapped liquidity rest above $138, meaning if bulls can push higher, then further tailwinds and acceleration become probable. The squiggle above is just one scenario of many potential scenarios.
Still, LTC/USD is in a technical downtrend so this is a counter-trend trade. However, there are positive signals which I’ve talked about in the telegram channel that suggest the bottom is in across the board.
On the other hand, if Litecoin goes nuclear, I don’t expect any support until $58-$65. If this were to happen — the absolute bottom for the coming years is either in or it’s going to zero. Given various fundamental reasons for a major Litecoin bull run, this doomsday scenario makes little sense to me.
Compound Reversal Imminent?
Finally, Compound/Dollar trades at $116 at the time of writing, down 14% week-on-week.
The pair has created a daily bullish divergence that could give rise to an explosive move higher if bulls seize the opportunity.
As price trended lower, the daily RSI printed a higher low indicating weakening sell-side pressure. Sellers are exhausted, and buyers appear to have shown up with some conviction to hold the floor price.
Should COMP/USD successfully reclaim $128 — $130 acceleration to $180 is on the cards. The order block held as support for 27 days before succumbing, so if it is reclaimed bulls may finally get a robust relief rally.
Beyond that, COMP/USD could retreat below $80 before finally bottoming out.
If crypto has taught me anything, it’s to be patient and to have conviction in anything you do. There is nothing more important than crypto’s success at this moment. This is the singularity that will alter the course of history for generations to come.
“We contend that for a nation to try to tax itself into prosperity is like a man standing in a bucket and trying to lift himself up by the handle.” — Winston Churchill
Catch you later.
p.s. This is my opinion. It is not financial advice.
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