In a month usually reserved for ghoulish frights, October started off with a bang for many cryptos, bolstering the seemingly dormant blockchain ecosystem. Known as “Uptober” among the faithful followers of virtual currencies, the seasonal trend has previously gifted advocates with robust returns. And it seems this time is no different.
According to David Keller, Chief Market Strategist at StockCharts.com, there’s a good reason why investors should be bullish on cryptos during this cycle. Mainly, the benchmark decentralized digital asset has ended October in the green for eight of the last ten years. For whatever reason, the strong performance has been persistent.
Interestingly, another side to this narrative exists as well, with August and September generally representing challenging months. Sure enough, that was exactly the case for cryptos. In the eighth month of the year, the virtual currency market tumbled sharply around the halfway point. In the following 30-day period, decentralized assets generally moved frustratingly sideways. Nevertheless, no matter the fun start to Uptober, you want to be levelheaded. With a questionable economy in place, it’s best to approach cryptos or any sector on a rational foundation.
Bitcoin (BTC-USD)
After weeks of frustrating (largely) sideways trading, Bitcoin (BTC-USD) finally started demonstrating signs of vitality. On an eventful Monday, BTC reached just under the $28,500 level, per Coinmarketcap. Naturally, that got the blood pumping for other cryptos. However, the sentiment faded conspicuously, with BTC dipping to around $27,600 late Monday night. So, how should virtual currency investors respond?
Heading over to StockCharts.com to look at Bitcoin’s candlesticks, investors can easily see that the most recent price action still largely occurred inside the upper boundaries of the 200-day moving average (at $28,309) and above the 50 DMA (at $26,503). Put another way, what we saw wasn’t the resounding victory that many media outlets made it out to be.
In fairness, Uptober is still obviously young. However, it’s probably prudent to exercise a levelheaded approach to the recent blockchain rally. Primarily, volume levels remain deflated against earlier this year and that may be significant. Remember, Uptober 2021 also saw a price spike on deflated volume and we all know where that rally went.
Ethereum (ETH-USD)
While Bitcoin naturally received most of the attention of the October seasonality trend, Ethereum (ETH-USD) also got in on the action. Per Coinmarketcap, on early Monday, ETH clocked in at around $1,738, giving much hope to patient blockchain advocates. However, the big spike was short-lived. Later that night, ETH would trade around $1,665, raising questions about forward viability.
Interestingly, with Ethereum, its Uptober rally didn’t even threaten its 200 DMA, which presently stands at approximately $1,805. Instead, at the moment, the second-biggest crypto by market capitalization is using the 50 DMA (at $1,647) as support. Being sandwiched between the two moving averages, the price action isn’t exactly scintillating.
Another factor to keep in mind is the volume trend. Even against the trailing half-year framework, investors can noticeably distinguish the declining volume trend. Scale up the range to early 2023 and the comparison is even more dramatic. Traders just aren’t betting on cryptos like before.
Given that Uptober 2021 also rallied on limited volume, prospective market participants should at least be cognizant of the risks.
Tether (USDT-USD)
Over the last seven days, an interesting dynamic materialized for Tether (USDT-USD), the stablecoin that basically keeps cryptos running. On Sept. 28, USDT slipped to a low of around 0.9991 per every dollar. On Oct. 2, Tether jumped to a high of 1.0009 per every dollar. Stated differently, USDT lost its peg to the greenback but at opposite ends of the equation.
To be sure, this dynamic may merely result in a neat arithmetic symmetry. Fundamentally, though, I believe there’s something deeper going on. When sentiment fades for cryptos, Tether’s peg to the dollar cannot be fully trusted. Sure, the slippage is extremely minute, a percentage that’s not even worth writing out. However, at scale, we really don’t know how Tether will hold up.
Right now, one of the big currency fallout theatrics centers on the Russian ruble. At the time of writing, a dollar will get you 98.8 rubles, which is ridiculous. Not to defend Russia or anything but at least the ruble is tied to an actual economy. With Tether, we just don’t know. So, it pays to be vigilant.
BNB (BNB-USD)
A popular cryptocurrency tied to the Binance exchange, BNB (BNB-USD) enjoyed a modest pop to start Uptober. On Sunday afternoon, BNB traded hands for around $214. At its peak on Monday, the digital asset hit $221. Still, like other cryptos, the party saw the police arrive and turn down the music. As of this writing, BNB features a price of $215.
What’s got to bother BNB advocates is the asset’s 50 DMA. Since May of this year, it has consistently acted as a resistance barrier. In August, the moving average “squeezed” BNB at the $240 level, eventually leading to a sharp selloff. Primarily, the concern at the moment is that the 50 DMA appears to be squeezing BNB at $215.
If so, I really don’t want to think about where the digital asset formerly known as Binance Coin may end up. You can see from a three-year angle at StockCharts that not much horizontal support exists until the $41 level. Obviously, that’s a massive drop that the bulls must do whatever they can to avoid.
XRP (XRP-USD)
One of the most intriguing cryptos lately, XRP (XRP-USD) briefly stood above all other decentralized assets, at least on the basis of legal precedent. In July, a federal judge stated that while the institutional sales of XRP creator Ripple Labs represented securities, the court also declared that sales of XRP through the use of trading algorithms on virtual currency exchanges were not securities.
Naturally, the legal clarity significantly bolstered the XRP price. Unfortunately, the enthusiasm was short-lived as the U.S. Securities and Exchange Commission (SEC) appealed the ruling. Therefore, the two sides appear poised for another drawn-out battle. In addition, the SEC has also put the spotlight on other popular crypto platforms like Coinbase (NASDAQ:COIN).
Conspicuously, XRP didn’t get much of a lift on Monday. If anything, the cryptocurrency faltered. Still, what makes XRP distinct among cryptos is that volume trends have been rising since early September. Also, since the beginning of this year, XRP has charted a series of higher lows. For patient speculators, this may be one of the digital assets to consider.
Solana (SOL-USD)
While Uptober presented some short-lived rallies in cryptos so far, Solana (SOL-USD) at the moment appears to be the sector’s big winner. In the trailing seven sessions, SOL gained just under 22% of market value. That’s well above every other crypto ranked in the top 10 by market cap and it’s not even close.
We’ll see what happens in the coming few days. However, what has impressed onlookers is SOL’s resilience. During the Sept. 30 session, SOL largely traded inside its 200 DMA (at $21 currently) and 50 DMA (at $20.30). However, Solana broke through this squeeze, enjoying a blistering run on the first day of October. Since then, SOL has dipped slightly. Nevertheless, the overall posture appears bullish.
At the time of writing, Solana trades hands at a bit under $24. Moving forward, the bulls should try to decisively swing past the $24 to $25 range, which has acted as stubborn resistance. Should Solana continue to rise above, the next natural target would be the $35 to $36 range.
Dogecoin (DOGE-USD)
The meme coin that started it all, Dogecoin (DOGE-USD) may be a joke to some people. To be fair, that’s exactly how DOGE started – as a parody and a form of social commentary. But as the Robb Report points out, nobody is laughing right now. Whether you love it or hate it, Dogecoin represents one of the most valuable cryptos in the world.
It’s not even the caboose of the top 10 by market cap, which is really a testament to the coin’s sticking power. Still, not everything is wonderful in the world of the DOGE. For one thing, the Uptober rally was a modest one for Dogecoin. Peak to trough between Sunday and Monday, DOGE gained about 3.3%. It’s not nothing but it’s not particularly impressive.
Looking ahead, Dogecoin seems to have a moving average problem. First, in August, its 200 DMA squeezed the price down sharply. Presently, its 50 DMA appears to be stymieing DOGE’s upside mobility. Amid declining volume levels, investors should be careful about speculating in Dogecoin. It may be fun but it’s also wildly risky.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, and XRP. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
