The jitters on Wall Street have spilled into cryptocurrencies. Bitcoin (CCC:BTC-USD) and Ethereum (CCC:ETH-USD) and the rest of the gang are about 50% below their highs. Today we will make the proponent argument for the opportunities that are brewing in ETH-USD. But pretty much, what works for one major coin also works for the rest.
The Ethereum coin is second only to the chief coin in charge bitcoin. It has a market cap of $303 billion, and it’s trying to catch Bitcoin’s $700 billion. While it still lags, therein lies the upside opportunity in ETH-USD.
The market cap catch up thesis is a viable one. Much like Bitcoin is trying to do with gold.
ETH also has a viable use-case supporting the Ethereum network. When investors execute crypto transactions, they have to pay fees to networks. Since most of them happen over Ethereum, ETH-USD remains in high demand.
A few weeks ago I needed to buy some just to move $2,000 around from one account to another. Since I procrastinated, I was able to buy it half price. This is a rare case of procrastination paying off, so don’t make a habit of it.
Ethereum Is a Must for Crypto Owners
My situation is not unique, so investing in ETH is a totally viable thesis on its own. This asset has performed extremely well over the years, and will continue to do so for the foreseeable future. Ethereum has serious competition from Solana (CCC:SOL-USD) and Cardano (CCC:ADA-USD), but there is enough room for all of them to prosper.
Eventually, investors would want to collect a bit of everything so that they don’t bet the farm on one horse.
The idea of winning with crypto is very similar to that in gold. We should accumulate them over time, not go all in at once. It won’t be easy to wait for the absolute perfect time to do so. In hindsight we should have all pounced in March 2020 when it crashed. But at the time, it didn’t look so obvious, did it?
This time around I had already planned for this correction, so I have my orders spot ready. I saw the technical weakness in Bitcoin early last month, so I am waiting for my entry levels. Once Bitcoin lost $39,600, it triggered a bearish pattern with much more downside to go. While these patterns don’t always play out to a tee, they are pretty accurate.
The process is simple and investors need to be pragmatic. Once the chart breaks down, the bulls will try to recover the neckline. In this case, they’ve already failed to retake $39,600 once, so watch for it this week. Logic suggests that they try again before prices drift lower once again. True to my word, I will be adding ETH-USD on the way down and at different intervals. A major one is coming up just below current prices.
Follow the Bitcoin Lead
There aren’t surgically accurate lines, but using BTC-USD as a gauge has worked well before. ETH-USD at these levels is already reasonable. If it falls into below $2,000 per coin it would make for a solid add spot. I don’t believe I will pounce all in at any level. But if Bitcoin ends up near $20,000 — its old headline high, that would be a place to engage in size.
If you remember back in 2017, Bitcoin failed miserably near $19,000. Then the bulls bought the crash and took it out $19,000 like it was butter. It is normal for stocks to revisit their breakout necklines, so they can establish footing there. I bet that if and when that happens, investors will run away from crypto when they really should be buying.
Get your accounts ready for that moment of weakness, because ETH-USD would also have its opportunity then. Crypto coins tend to trade in unison and this correction is unfolding in relative slow motion. Stock markets rise and fall, therefore, we should expect crypto prices to do the same without questioning their viability.
In reality the crypto processes are helping shape our financial future. The technologies that are coming out of it are transforming our banking systems. That’s why central banks are panicking, and there are rumors of impending regulations. The powers become nervous when the best-performing asset is not under their control. They can restrict it, and tax it, but I fail to see how they can actually regulate it.
To be ready, I have already transacted in crypto coins as tender. Learning now is easier than panic cramming later. I have already made a few mistakes, but none that are too costly yet. So far the whole process has been fun and I encourage you to look into it. Ignore the nay-sayers, because they need new calculators. No other asset class has performed as well as this bunch.
On the date of publication, Nicolas Chahine owned a bit of USDC, SOL-USD, and ETH-USD. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
Nicolas Chahine is the managing director of SellSpreads.com.
