24/01/2022 By RuneLite
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Welcome to CoinJar’s Trade Ideas. Each fortnight we explore a big Theme, an interesting Trade and some good, old-fashioned Technical Analysis (courtesy of Tom from trading gurus FX Evolution).
Attack of the ETH killers
There’s always been a tendency to write-off Ethereum’s rivals. Benefiting from a multi-year head start, brand recognition and an actually functional and frequently-used platform, Ethereum appeared to have an almost unassailable first-mover advantage when it came to blockchain platforms. More than anything, it was just hard to imagine a world in which there was so much demand for crypto that we required more than one platform to service it.
Well, 2021 has disabused us of many of our assumptions about crypto and this may be one of them. Over the last month, the best performing assets haven’t been DeFi or NFT tokens (although they’ve done just fiiiiiiine) – they’ve been certain oft-overlooked Layer 1 protocols, AKA the Ethereum killers.
The appeal of Ethereum alternatives is simple enough: these platforms have been purpose-built to overcome Ethereum’s shortcomings. While Ethereum still struggles to handle more than 20 transactions per second, some of these alternatives are already doing hundreds of thousands. And with DeFi and the NFT scene showing no signs of slowing down, there’s been a natural move toward protocols better able to withstand the frenzy.
While it’s difficult to imagine anything actually toppling Ethereum from its throne, that doesn’t mean there aren’t tremendous growth opportunities to be found in the family of platforms nipping at its heels.
Stop, HODLer time
In case you haven’t been paying attention, crypto is looking pretty, pretty good right now. The last few weeks have been some of the most consistently green periods I can remember seeing since, well, March.
However, with Bitcoin hovering around US$50k it feels like a real make or break moment for the markets. $50k is a massive psychological barrier to punch through – it’s just in human nature to make a big deal out of round numbers.
On the one hand, going long at resistance is a perilous move. However, it’s worthwhile remembering what happened in November last year when Bitcoin first punched through US$20k: a monumental and almost unstoppable 200% rally that wrecked the majority of those who tried to trade it.
Despite what some might argue, HODLing isn’t always the best option when it comes to crypto. For instance, these last three months represented one of the best compounding opportunities you’re ever going to see. But there are certain phases in the market where all you need to do is hold on for dear life. We may be approaching another of those phases.
BTC’s line in the sand
A few weeks ago, Tom from FX Evolution was telling us to watch out for a definitive breakout of Bitcoin’s Wyckoff accumulation pattern. Well, we got the breakout and then some. Since then the BTC price has surged from US$30k to US$50k with barely a pause for breath.
But now Bitcoin is up against what might be considered the final boss of the winter bear market. While all the focus has been on the US$50k break, for Tom the more significant level is the previously established support-turned-resistance at US$51.5k. Break and hold above that and we’re off to the races. Fail and we could see a new range established with the lower bound at roughly US$41k.
In the short term, the daily 20 EMA is an important line to monitor, having already acted as support twice on this move up. If/when this current surge runs out of steam, it could be a good place to set some bids – or to gauge whether a deeper correction is on the cards.
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