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It’s been a fascinating few days. We’ve started to see some of the altcoins lead sentiment, a new development for crypto. First, Ripple dramatically broke out of its downtrend, leading the pack higher. Then this morning ETH broke downwards from a decision triangle, leading BTC lower.

This is an interesting development and one that bodes well for the market: Cryptocurrencies remain around 80% correlated to BTC, so currently it’s almost impossible to diversify properly within the space. The more they start to take on lives of their own, the better for all.

Cryptocurrency correlation

Chart 1: Cryptocurrency correlation / Source: sifrdata.com

Bitcoin

BTCUSD daily chart

Chart 2: Bitcoin daily

Things are looking good for BTC. It’s over the 50 day moving average again (blue), currently retesting it from above, which is normal and healthy action until proved otherwise.

If the 50 test fails it’s likely to make another small oscillation down to the red uptrend. If it holds then we’re likely to see another test of the top of the wedge (purple) at around $7000. We’re just range-trading in a reducing range and won’t see any really firm, lasting moves until we break out of the purple wedge and above the 200 day moving average just above (red).

BTCUSD hourly chart

Chart 3: Bitcoin hourly

The hourly chart shows the interplay between price and the 50 day MA (superimposed in blue here). The recent top was at the 100 day (light green) so we’re currently sandwiched between them. This morning’s sell-off out of the blue decision triangle was initiated by ETH (see below) - volume is moderate so bears are not too excited right now.

Ethereum

ETHUSD daily chart

Chart 4: Ethereum daily

Ethereum broke out of its downtrend this week (red) which is bullish. It’s now retracing to retest the top of the downtrend - again normal and healthy. This is the acid-test of a breakout though - it’s not ‘real’ unless the retest gives us confirmation, via a rally up past yesterday’s highs around $250. Another sign that ‘this is a test’ is the daily RSI which is just below 50 and turning over - a sustained up-move requires us to break the 50 (centre-line) barrier and hold above it. Note the 50 day moving average (blue) just above which will be resistance at $26.

ETHUSD 4-hour chart

Chart 5: Ethereum 4-hour

Zooming in, this morning’s break above the downtrend, and the in-progress retest are obvious. This break out of the triangle happened before BTC, and the rest of the market followed. Above is the 50 day (blue) followed by resistance (green) at $293/305 and then a gap (yellow) at $320-325, followed by the main downtrend from the December highs (blue here). That’s our first target for a rally, the second being $460 (marked in red). Given how big the FUD-driven selloff has been I wouldn’t be surprised if we make it past a lot of these resistance points quickly on a breakout.

If the backtest fails we have support just below at $211.

Ripple

XRPUSD daily chart

Chart 6: Ripple daily

The wild horse, we said XRP would likely move like a rocket up to $0.43 once it freed itself of the resistance zone at the bottom, but I don’t think anyone expected the explosion of bullish euphoria to take it straight past that target up to the 200 day moving average (red). We’re at mild support; given the huge rally I wouldn’t be surprised if this pulled back to the $0.45 line which is roughly at the 38.2% fib retrace point. This rally started before most of the other coins moved and then led the general sentiment - again, good to see a change in leadership.

XRPUSD 4-hour chart

Chart 7: Ripple 4-hour

The volume on the topping shooting star candle (inverted hammer) is our biggest clue that this is a top. That zone, and especially the wick end (around $0.80) will be mega resistance for a while, due to the number of longs who entered at the top while shorts were selling to them. As you can see we’re just back under the 200 day, and still overbought on the RSI, so a retrace lower or sideways doodling looks most likely here.

Litecoin

LTCUSD daily chart

Chart 8: Litecoin daily

After a valiant attempt by bulls LTC is back under its downtrend. At support (yellow) and testing the 50 day moving average (blue) from above. Nothing to see here, yet.

LTCUSD 4-hour chart

Chart 9: Litecoin 4-hour

I’m including this to show how much support there is just below from the two gaps (yellow) as well as the green support line we’re just pushing over.

Bitcoin Cash

BCHUSD daily chart

Chart 10: Bitcoin Cash daily

BCH remains trapped in its trading channel, having sold off at $497 resistance. The divergence with RSI and general correlation with other coins remain in place, so although on the face of it this is worryingly under most decent support, I’m not overly worried. Supports just below shown at $454 and $423. A rally will have to overcome the 50 day MA just above at $526, followed by the channel top and first gap, which coincide around $550-$570. We have an additional target just above at $602, which would put BCH above its downtrend.

BCHUSD 4-hour chart

Chart 11: Bitcoin Cash 4-hour

Just to show the interplay of the resistance (green) with price action over the weekend.

DXY dollar index

Chart 12: Dollar Index

I’m including this because it’s nicely bearish for the dollar, and further weakness will be supportive of cryptos measured in USD.

There’s been a momentum battle raging between the weekly chart which has suffered a death cross (50 blue over 200 red moving averages), and the daily chart which experienced the exact opposite - a golden cross. This was interesting to watch, and ended up being held to the fire via an ascending triangle up under the 200 week MA - which has just failed to the downside. This victory for the weekly chart bears portends further downwards - or at best sideways - action for the dollar, which should help crypto bulls.

Summary

There’s nothing in the volumes we’re seeing on this little reversal to cause us to think it’s anything other than a normal correction after a great rally last week. ETH and XRP have made it above their downtrend, finally joining BTC which has been above its main downtrend for weeks, and ETH is retesting its downtrend from above, while some of the other coins were due a rest. These are potentially the first escapees in the herd breaking out. Meanwhile, good to see some new leadership when it comes to sentiment, long may it last.

DISCLAIMER
BCB Group has no position or opinion on the price of Bitcoin or any other cryptocurrency and this article should not be construed as analysis of or advice regarding the current or future market price of Bitcoin or any other cryptocurrency. No analysis of the price movements of BTC or any other cryptocurrency or any other asset provided by BCB Group should be construed as an invitation or inducement to buy, sell or otherwise to trade BTC or any other cryptocurrency.

Jon Cotton

Jon Cotton

Strategy and Execution Partner

Jon is BCB’s head strategist, with an emphasis on market intelligence. An expert in behavioural science and highly experienced chartist, Jon has been providing BCB’s clients with crypto and macro technical analysis since 2017, and has quickly gained a reputation for accuracy after correctly calling the December 2017 top and August 2018 bottom.

Jon is also MD of British music production company Poseidon. He began studying technical analysis in 2000 due to its overlap with behavioural economics – much used in Poseidon's international marketing work, which has seen the company achieve three iTunes US number one albums among other notable successes.