Bitcoin is likely to consolidate for a few days but during this time select altcoins are likely to extend their up-move.
Ripple Labs CEO Brad Garlinghouse believes that the U.S. Federal Reserve’s recent decision
to allow inflation to stay above its 2% target objective could debase
the dollar further. According to Garlinghouse, this decision is likely
to lead “to further diversification of assets which will certainly be
good for crypto.”
The various stimulus and fiscal
measures announced around the world to counter the coronavirus pandemic
led economic slowdown are bullish for Bitcoin (BTC). However, Bitcoin’s major bull market cycles show that each successive cycle has been longer than the previous one.
Hence, if history were to repeat itself, Bitcoin could consolidate for another 3-12 months before making a decisive move.
Crypto market data daily view. Source: Coin360
During this period, when Bitcoin remains range-bound, several other altcoins are likely to rally in rotation.
For the past few months, the market action has been in the DeFi tokens, which have been in a bull run of their own.
So, while Bitcoin consolidates, let’s look at some of the altcoins that could provide an opportunity in the short-term.
BTC/USD
The
average directional index (ADX), a component of the directional
movement indicator, has dipped below 24 and the 20-day exponential
moving average ($11,534) has flattened out, which suggests that the
trend in Bitcoin has weakened considerably.
BTC/USD daily chart. Source: TradingView
Currently,
the price is largely stuck between the $12,000 and $11,000 levels,
which has brought the positive directional indicator (+DI) and the
negative directional indicator (-DI) closer to each other.
After
the bears failed to sink the price below the $11,000 support on Aug. 25
and 27, the bulls will now try to push the price above the
$12,000–$12,460 resistance zone. If they succeed, the next leg of the
up-move is likely to begin.
However, if the price turns
down from the overhead resistance zone, the BTC/USD pair is likely to
spend some more time inside the range.
BTC/USD 4-hour chart. Source: TradingView
The -DI and the +DI are closer to each other and the ADX is below 18, which suggests a balance between supply and demand.
However,
a minor positive is that the buyers are aggressively defending the
$11,000–$11,200 support zone. They will now try to push the pair to
$12,000 level.
Unless the pair picks up momentum, the
possibility of a breakout in the short-term looks weak, hence, the
range-bound action is likely to extend for a few more days.
ATOM/USD
The bears aggressively defended the $8.50 level on Cosmos (ATOM), which attracted profit booking by the short-term traders that dragged the price down to the breakout level of $7.249.
ATOM/USD daily chart. Source: TradingView
If the ATOM/USD pair rebounds off the breakout level, then it is likely to act as a strong floor during further declines.
The
ADX remains strong above 35 and the +DI is above the -DI, which
suggests that the bulls have the upper hand. On a break above $8, a
retest of the recent highs at $8.877 is likely.
If the bulls can push the price above this level, the uptrend could resume with the next target objective at $10.471.
Contrary
to this assumption, if the pair turns down from $8, the bears will
again try to sink and sustain the price below $7.249. If they succeed, a
drop to the 20-day EMA ($6.69) is possible.
ATOM/USD 4-hour chart. Source: TradingView
Although
the bears pulled the pair below $7.249, they could not sustain the
price below it, which shows that the bulls are buying at lower levels.
If
the bulls can push the price above the $7.844 resistance, a retest of
$8.877 is possible. Above this level, the uptrend is likely to resume.
This
bullish view will be invalidated if the pair turns down and sustains
below $7.249. Such a move will suggest that the correction could deepen
to $6.604 and then to $5.50.
LEND/USD
The ADX is trading above 55 and the +DI is above the -DI, which suggests that Aave (LEND) is in a strong uptrend, with the bulls firmly in command.
LEND/USD daily chart. Source: TradingView
Currently,
the LEND/USD pair has pulled back after reaching a high of $0.89985 on
Aug. 26. However, the positive thing is that the bulls have not allowed
the price to dip below $0.70426, which is the 50% Fibonacci retracement
level of the most recent leg of the rally.
History
suggests that since July, the pair has not spent a long time in
consolidation (marked via ellipses on the chart). Hence, the bulls are
likely to again make an attempt to resume the uptrend by pushing the
price above $0.89985.
If they succeed, a rally to $1 and
above it to $1.10918 is likely. However, if the price turns down from
$0.89985, the pair could enter a consolidation.
LEND/USD 4-hour chart. Source: TradingView
The
4-hour chart shows that ADX has dipped below 23 and the 20-EMA is
flattish, which suggests a balance between supply and demand. The pair
has formed a symmetrical triangle, which usually acts as a continuation
pattern.
If the bulls can push the price above the
triangle, a retest of $0.89985 is likely. A breakout of this resistance
is likely to resume the uptrend.
Contrary to this
assumption, if the bears sink the price below the triangle, a drop to
$0.65 is possible. If this support also cracks, it will suggest that the
pair has topped out at $0.89985.
in the short-term.
XEM/USD
NEM (XEM)
broke out of the $0.1295715 overhead resistance on Aug. 29, which is a
huge bullish sign. However, the sharp up move of the past few days has
led to profit booking by the short-term traders today.
XEM/USD daily chart. Source: TradingView
The
bulls are likely to defend the $0.1215678–$0.1129611 support zone,
which are the 50% and 61.8% Fibonacci retracement levels of the most
recent leg of the rally. If the XEM/USD pair rebounds off this zone, the
bulls will again attempt to resume the uptrend.
The ADX
is strong above 63 and the +DI is well above the -DI suggesting that
bulls have the upper hand. If they can scale the price above $0.158037,
the up-move can extend to $0.18 and then $0.20.
Conversely,
if the bears sink the price below $0.1129611, a drop to the 20-day EMA
($0.091) is possible. A bounce off this level will be a positive sign as
it will suggest that the bulls are buying on dips to this support.
The
bullish view will be invalidated if the bears sink and sustain the
price below the 20-day EMA. Such a move will suggest that the current
breakout was a fake one.
XEM/USD 4-hour chart. Source: TradingView
The ADX on the 4-hour chart is above 48 and the +DI is above the -DI, which suggests that the advantage is with the bulls.
Currently,
profit booking has dragged the price to the breakout level of
$0.1295715. If the pair rebounds off this level, it will be a huge
positive as it will suggest that the bulls have defended the breakout
level, which will increase the possibility that the uptrend will resume.
However,
if this level cracks, the next support is at the 20-EMA. If the pair
bounces off this support, the bulls will again attempt to resume the
uptrend.
YFI/USD
Yearn.finance YFI
has been on a stellar run. It has risen from a low of $3,000 on Aug. 13
to a high of $38,855.31 today, which is a 1,195% rally within a short
span of time. Usually, such vertical rallies are not sustainable.
YFI/USD daily chart. Source: TradingView
Today,
the YFI/USD pair witnessed profit booking close to the 200% Fibonacci
extension level of $38,451.95 and has given back the intraday gains.
If
the price closes near the lows of the day, it will form a bearish
shooting star candlestick pattern. Usually, if this pattern is followed
by a large bearish candlestick on the next day, it could indicate that a
short-term top is in place.
However, the bulls are
unlikely to give up without a fight. They will try to provide support
between $26,436.24 and $23,505.34, which are 50% and 61.8% Fibonacci
retracement levels of the most recent leg of the rally.
If
the price rebounds off this zone, the bulls will once again attempt to
push the price above $38,855.31 and resume the uptrend. If they succeed,
the next target will be the 261.8% Fibonacci extension level of
$46,899.39.
YFI/USD 4-hour chart. Source: TradingView
The ADX is above 54 and the +DI is above the -DI, which suggests that the trend remains strong and in favor of the bulls.
Currently,
the pair is attempting to rebound off the 50% Fibonacci retracement
level of $26,436.24. If the bulls can push the price above $32,500, a
retest of $38,955.31 is likely.
On the other hand, if
the bears sink the price below $26,436.24, a drop to the 20-EMA is
possible. A break below this support could sink the price to $19,332.53
and below that to $14,017.17.
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