Trading Remains Range-Bound Before the Next Big Breakout

•  Bitcoin (BTC, Tech/Adoption Grade “A-”) is slipping with the broader crypto market, down 4% on the day to $36,500.

•  Ethereum (ETH, Tech/Adoption Grade “A-”) is 7% lower, currently trading slightly above $2,200.

•  Bitcoin’s market dominance increased another 1.3 percentage points to 45.8%.

Bitcoin broke through the key $40,000 level early in the week but failed to maintain it after running into heavy resistance from the 200-day moving average at $40,800. The 21-week moving average, another critical resistance level, is at $42,600.

A sustained rally past those two important levels could signal the next big breakout for the King of Crypto, and they would likely provide long-term support once the bull market resumes. Before that, though, Bitcoin could find short-term support off its 21-day moving average.

Here’s Bitcoin’s price in U.S. dollars via Coinbase Global Inc. (Nasdaq: COIN):

Ethereum has typically traded in a range between $2,300 and $2,900 over the past couple of weeks. It recently fell lower towards $2,200, but that was short-lived before buyers pushed it back above $2,600.

While the dip may have made new investors nervous, we weren’t too worried. Current downside support remains at its May 23 low near $1,700. Unless it breaks below that level, we’re not concerned.

For now, we’re keeping our eye on its upside resistance level. The second-largest cryptocurrency by market capitalization is trading well below its 21-day moving average, and it could face a short-term headwind once it retests it.

Here’s Ethereum’s price in U.S. dollars via Coinbase:

Index Roundup

It was a volatile crypto trading week, but most of the established cryptocurrencies were little-changed by Thursday’s cutoff. While small-cap cryptocurrencies were able to rebound slightly after a tough last several weeks, altseason remains halted.

This week saw a continuation of range-bound trading, with a swift reversal after Bitcoin tried to break out past $40,000. Before a bullish or bearish confirmation occurs, we’ll likely see even more sideways trading.

The Weiss 50 Crypto Index (W50) shed 0.71%, but this is negligible considering the volatile movement of the space.

The Weiss 50 Crypto Ex-BTC Index (W50X) fell 5.92%, showing the strength of Bitcoin’s influence as it tested its overhead resistance early this week.

Breaking down this week’s performance by market capitalization, we see that the small-caps outpaced their larger and mid-sized counterparts but didn’t make any major moves.

The Weiss Large-Cap Crypto Index (WLC) was able to book a 0.32% gain, but this is insignificant when considering the general scope of crypto’s volatility.

The mid-caps were this week’s underperformers, with the Weiss Mid-Cap Crypto Index (WMC) decreasing 4.79%. They also experienced the greatest volatility.

After struggling mightily over the past several weeks, the small-caps were able to reverse their downtrend. The Weiss Small-Cap Crypto Index (WSC) increased 6.54%.

Although the crypto market didn’t move much, we saw volatility spike in both directions. Bitcoin notably outperformed most of the broader market, but it failed to sustain its momentum and hold above the $40,000 price level once it faced resistance.

Small-cap cryptocurrencies surprisingly performed the best, but this is likely because they were heavily beaten down over the past several weeks. For now, investors will likely wait until Bitcoin makes a decisive move before a sustainable altcoin rally can occur.

Notable News, Notes and Tweets

•  Pomp reinforces bullish sentiment that “long-term [Bitcoin] holders are accumulating at an incredible rate.”

•  Goldman Sachs Group Inc. (NYSE: GS) is partnering with Galaxy Digital Holdings Ltd. (TSX: GLXY) to offer Bitcoin futures trading.

•  Bitcoin holders’ net position change has turned positive for the first time since October.

What’s Next

Over the past several weeks, we have repeated that as long as the major cryptocurrencies are trading above their established lows from mid-May, it supports our thesis of an extended consolidation period.

While the crypto market is decisively lower today, Bitcoin is still well above the $30,000 low it hit weeks ago. If we see a continuation of range-bound trading, it could bode well for the start of the explosive “parabolic” phase of the crypto bull market.

The Federal Reserve was forced to revisit its extended low interest rate and asset purchasing policies in its meeting this week. While no major changes are expected to occur immediately, it shows that the recent inflation data has concerned the Fed and investors.

Bitcoin remains a forward-looking hedge against inflation and the current monetary system, and the recent economic landscape inspires even more confidence in crypto moving forward.

Best,

Sam

About the Investment Analyst

Sam graduated from The Weiss School, interned at Weiss Research while attending Babson College, and now dedicates his time at Weiss Ratings to in-depth analysis of natural resource stocks and cryptocurrency markets. He regularly contributes to the research and news posted daily to the Weiss website.

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