As unbelievable as the rise of the cryptocurrency sector has been, the top cryptos probably aren’t done delivering astonishing gains. Unfortunately, this dynamic leaves investors in a quandary: should I wait for some semblance of rationality to enter the market or is this excitement the new normal for decentralized digital assets? For the next few months, it might be the latter.
On the blockchain front, the halving event of the benchmark crypto – scheduled to occur on April 19 this year – has driven up sentiment. On the fundamental side, the approval of spot virtual currency exchange-traded funds (ETFs) exponentially increased awareness. As well, the Federal Reserve and the possibility of interest rate cuts helped fuel speculation in cryptos.
For now, the central bank is choosing to be patient, which could be a smart move. You don’t want policymakers to act too rashly, especially after engineering a delicate recovery process. However, the current quiet before the storm could be the buy-the-rumor opportunity for cryptos.
I have a suspicion that once the Fed gives us the rate cuts, the sector could get volatile. Until then, the below cryptos look awfully tempting.
Bitcoin (BTC-USD)
Let’s just get right into the good stuff. According to the point-and-figure (P&F) chart of Bitcoin (BTC-USD), the benchmark crypto recently posted what’s known as a triple top breakout pattern. According to StockCharts’ educational blog, the pattern materializing in BTC’s case could represent a continuation breakout. Normally, I’d be a bit hesitant about just relying on technical analysis signals. However, there could be something here.
Basically, Bitcoin printed this chart formation when BTC was riding its 50-day moving average (around the $44,000 level). From there, it shot past the 50K mark, though it gave up some modest bills early Tuesday morning. Nevertheless, being so close to a key psychological barrier, you’ve got to imagine that the bulls are amped up. In my opinion, they’re going to push for 60K.
Enticingly, Bitcoin’s P&F chart shows a long string of demand, meaning that available supply runs short. Given that the aforementioned halving event will reduce the rate at which new Bitcoins are created, this framework is incredibly bullish for BTC. Looking at the data, I’d have to say it’s a buy.
Ethereum (ETH-USD)
Again, let’s move right into the good stuff. According to the P&F chart for Ethereum (ETH-USD), the number two cryptocurrency by market capitalization printed what’s known as an ascending triple top breakout. If the term sounds like a foreign language, you’re not alone. However, StockCharts tells us that in this case, we’re probably dealing with a continuation pattern.
On a broader technical level, the continuation argument makes sense. Last month, ETH broke decisively into $2,600 territory. It even poked its head above $2,700 on an intraday basis. However, the good times didn’t last and a corrective wave attacked the bulls. Well, the optimists gathered reinforcements. After dipping below the 50 DMA, Ethereum firmly rose up above the $2,600 level again.
One thing I do worry about with ETH and also Bitcoin is the fading volume trend against price action. However, with enthusiasm so strong, the rally appears credible. Not only that, Ethereum’s P&F chart also shows a long string of demand, implying a supply shortage. Therefore, any bears could be in for a rude awakening.
Tether (USDT-USD)
If you’re new to cryptos, Tether (USDT-USD) doesn’t align with the profit directive of most other decentralized assets. Instead, USDT is pegged on a one-to-one basis with the dollar. In this way, virtual currency investors can “store” their wealth in crypto terms. Should an opportunity arise in the market that requires immediate engagement, these investors don’t have to wait for the cumbersome fiat-to-crypto conversion process.
However, it’s also useful to look at Tether as a broader gauge of health among individual cryptos. I think it’s fair to say that if blockchain asset demand rises, USDT units should be worth more than their dollar peg. Conversely, if investors feel pessimistic about virtual currencies, the dollar should rise in relative value. At the time of writing, Tether is pegged exactly at 1:1.
However, since Feb. 9 – excepting a minor blip on Monday – USDT has been worth more than the greenback. Likely, the previously mentioned blip could have materialized due to profit-taking from skeptical investors. Otherwise, circumstances look as they should. If cryptos are booming, Tether should beat the dollar peg.
That’s exactly what’s happening.
Solana (SOL-USD)
Occupying the number four spot in terms of market cap, Solana (SOL-USD) enjoys a value of $49.9 billion at time of writing. That’s about a billion more than BNB (BNB-USD), the cryptocurrency underlying the Binance exchange. One of the biggest winners among cryptos since the Uptober seasonal phenomenon, no one wants to get in front of this locomotive. I don’t blame the bears because there’s probably more upside to come.
According to Solana’s P&F chart, the crypto coin charted a double top breakout. According to StockCharts, the double top breakout represents the most basic P&F buy signal. As with other major cryptos, SOL sees a long demand streak, implying a supply shortage. However, StockCharts also mentions that this pattern is the most prone to whipsaw and failure.
Obviously, investors need to be vigilant, especially since the recent rally has been occurring amid declining volume. On the plus side, though, Solana bounced firmly above its 50 DMA since Feb. 7. From the data along with sentiment in other cryptos, the upswing appears credible.
XRP (XRP-USD)
In recent weeks, I’ve expressed concerns about XRP (XRP-USD). Over the long run, the coin that has caused – or should I say attracted – so much controversy in the blockchain ecosystem should ride the coattails of the broader market. But for right now, XRP is struggling to move toward and eventually get past its 50 DMA (56 cents) and 200 DMA (57 cents).
Recent price action may encourage the bulls. In the past 24 hours since Tuesday early morning, XRP gained just under 2%. And in the past one-week period, stakeholders saw a return of nearly 5%. Patience for a bit more momentum could reward investors. In the long run, XRP has done its believers a solid.
However, it’s worth noting that XRP’s P&F chart shows no recent discernible patterns. Ideally, then, it needs to break above the 200 DMA soon to reinject confidence. Another critical matter is that up until the beginning of this year, XRP charted a series of higher lows.
The way the current price action is set up, it’s in no-man’s-land. To be fair, XRP is one of the cryptos with robust upside potential but there’s also huge risks involved.
Avalanche (AVAX-USD)
I’ve been tracking Avalanche (AVAX-USD) for the past few weeks and I admit that I didn’t like what I saw. Yes, in December, AVX soared toward the $50 level, just barely falling short on an intraday basis on Christmas Eve. However, between then and Jan. 22, Avalanche began living up to its name (in a bad, literal sense).
When you ignore what came next, it appeared that AVAX would print a bearish head-and-shoulders pattern. Even folks who don’t care too much about technical analysis know what that is. However, that pessimistic thesis proved to be incorrect (at least so far). Avalanche steadily rose higher, reaching just underneath the $41 level at time of writing.
Sure enough, AVAX’s P&F chart shows the development of a triple top breakout pattern. Likely, this setup represents a continuation rather than a reversal. As with other top cryptos, Avalanche has posted a demand string across multiple price points. So, supply is short, yielding a rise in price.
Perhaps the lesson here is that with cryptos, traditional warning signals might not apply.
Chainlink (LINK-USD)
For followers of altcoins, one of the biggest questions may be this: will Chainlink (LINK-USD) hit $100? According to one crypto resource, the answer is yes – maybe even $103 by 2025. Given that I recently acquired LINK after selling it during the 2021 heyday, I sure hope so. That would be fantastic.
However, the real question is whether it’s worth investors just learning about this opportunity to dive in? It’s a little bit tricky because of the substantial near-term momentum. In the past seven days, LINK gained over 7% of market value. That’s not groundbreaking per say but it’s been on the move since the beginning of February. Additionally, the bears can’t seem to stop this freight train.
If they’re fans of P&F charts, then it may be better to pick on another blockchain asset. Unsurprisingly, on Feb. 1, LINK printed a double top breakout. Again, this is the classic buy signal for P&F aficionados.
However, I’d like to see Chainlink establish a baseline of support at $20. If so, we could be on our way to $30. If not, it might have to work out some kinks before treading higher.
On the date of publication, Josh Enomoto held a LONG position in BTC, ETH, USDT, XRP, and LINK. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.
