Anyone who invests in cryptocurrencies must be prepared to take risks, because the price movements can safely be called dynamic. They have all had to deal with a huge correction. We discuss four of them, based on technical analysis.
All cryptocurrencies are characterized by a huge dynamic. This makes it an asset class that is only suitable for investors with high risk acceptance. But as always, return and risk are two family members who can always be found close to each other. Although we see similar movements with the various cryptos, there are also substantial differences. But with all cryptocurrencies, we saw a sharp correction, which started in the autumn of 2021. With some cryptos this correction is already over and with others it is still ongoing. The differences make it necessary to make your analysis and investment decision for each cryptocurrency separately. BTC/USD
The bitcoin (BTC/USD) chart is one of high peaks and deep troughs. We see in the chart based on monthly prices that in 2018 a first top was set at $ 19,870.10. From this point on, the bitcoin fell back to around $3000, a huge blow. It wasn’t until December 2020 that investors who had stepped in at the top were back on the verge of break-even. When the 2018 summit was taken out in 2020, a rapid advance in uncharted territory followed. The bitcoin was not hindered by any resistance. April 2021, another top was set at $64,890. This is the first point of the rising trend channel in which bitcoin now finds itself, with higher tops and higher bottoms.
The second top formed at $68,600 in November 2021. The first top was followed by a pullback to the first bottom at $29,300, which was formed around July 2020. In recent months, we have seen bitcoin fall back again, finding a bottom around $33,200. The currency is now at the bottom, in the green zone, of the rising trend channel. The price is now moving above the line of the rising moving average. This line will offer the price support at a slightly higher level each time. The MACD is above the zero line, which is positive. A warning is appropriate that the indicator itself indicates a negative divergence. In view of all the other positive signals from the various indicators, we attach less value to this.
We now zoom in on the shorter term, shown in the chart with prices on a daily basis. The first thing you notice when studying this chart is the horizontal green line at $41,132.62. This line acts alternately as a support and resistance line. The price of the bitcoin seems to be picking up in recent weeks. At the same time, we see that after a sharp decline twice, just below $ 35,000 a bottom has formed. After some back and forth movement, a triangle formation has formed in the last weeks (green triangle). This week, the price of bitcoin has broken out upwards. According to the theory, a trend-based movement can then be expected in the direction of this outbreak. This breakout is supported by the (blue) line of the moving average. The price is practically on this line, which has recently also risen again. This will be able to lead the price further up.
In summary, we see that the long-term trend is positive and that the short-term chart shows a positive breakout. This makes an investment in bitcoin promising. A purchase advice is therefore appropriate. ETH/USD
Ethereum has started an astronomical rise at the end of 2020 that has brought the price of the ETH/USD pair from about $ 140 to almost $ 5000. In the meantime, we saw a brief correction in June 2021 before the top was formed. In December 2021 and January 2022, we saw the first serious correction occur, which brought the price back to around $ 2500. With this, the ethereum seems to find a higher bottom than the earlier correction of June 2021. The price also remains well above the rising line of the moving average.
Furthermore, we see that the MACD also remains well above its zero level, even though there is some negative divergence on this indicator. Given the overall picture, we can say that the rising trend of the ethereum is still intact in the longer term and that the correction can offer a nice entry point. We will see if this picture also matches the chart on a daily basis.
At first glance, the daily chart looks a lot like the daily chart of the bitcoin. An important difference, however, is the green support line. This line was flat with the bitcoin and was regularly broken up and down. With the ethereum, we see that this line is rising and acts as a solid support. This is certainly positive, especially since the price is now relatively close to this line.
As with bitcoin, we see that the price of the ethereum is in a triangle formation, although with the ethereum it is more of a diamond. The principle is the same, in case of a breakout of the price from this formation, an acceleration of the price movement in the direction of the breakout can be expected. At the moment it is not yet that far, the ethereum is less far than the bitcoin, since the price has not yet broken out. A positive sign is that recently the price has risen above the now also rising line of the moving average. Given the rising long-term trend, a holding recommendation for the ethereum is in order.
If you still want to get in, it is wise to wait a while for the outbreak from the window formation. At a price above $ 2800 you step in with a little more clarity about the direction. SOL/USD
The solana has not been tradable for as long as bitcoin and ethereum. This is particularly reflected in the monthly price chart of the Solana (SOL/USD). However, this cryptocurrency has also had a stormy development behind it. Started in April 2020 at a price of $0.87, it exploded to a top level of over $260 in November 2021. In the following months, the value of the Solana fell sharply.
In this very recent correction, the price has dropped to a preliminary bottom at $ 77.75. For now, because we haven’t had a new green bar in the chart yet. The correction is therefore officially still ongoing. On the positive side, the price has now come close to the rising trend of the moving average. According to the theory, this line should now give the price support. The existence of the Solana is still too short for the MACD indicator on a monthly basis. As the correction has not yet been completed, we are keeping the long-term advice for the Solana at neutral.
We are now going to look at the daily chart for the trend movement in the short term. This graph immediately gives a very clear picture that corresponds to the unfinished correction in the other graph. After the top at $260, we see that the price of the Solana has entered a sharp downward trend. The pattern of ever lower buds is clearly intact.
However, the price now seems to find some support on the slightly declining green line. The blue line of the moving average is falling and the price of the Solana is below or against it. With this, momentum builds for a positive breakout from the downward trend. But let’s be clear, this outbreak hasn’t started yet. Only when the price of the Solana manages to break through the two red lines will the Solana find itself in a reversed trend.
Given the neutral picture on the long-term chart and the downward trend on the daily chart, we stick to a sell recommendation for the solana. DOT/USD
As with the solana, the price history of the polkadot is limited: the DOT/USD started in August 2020 at $2.87. Soon after the introduction, the price could rise to its first top at $ 49.72 in May 2021. This month also saw the start of a sharp correction that brought the price of the polkadot back to $ 10.38 in July 2021. From this bottom, a new rally started, which brought the price to a new and higher top of $ 55.09 in November 2021.
The correction of the crypto currencies of the fourth quarter of 2021 also hit the polkadot. This fell to $14.07 in February of this year. So a higher bottom. With this, we can determine that the polkadot is in a long-term upward trend with higher tops and bottoms. The price is now moving at the bottom of the green zone of this rising trend. The long-term chart is limited in terms of data and therefore lacks support for indicators such as a moving average line and a MACD indicator. Therefore, we will give the results of the daily chart a heavier weight.