Investors may interpret the current correction in cryptocurrencies as a long overdue pullback and purchasing opportunity.
The equity markets sold off sharply on Feb. 24 and 25. Even gold, a traditional safe-haven has stalled its rally. On similar lines, cryptocurrencies are also witnessing a period of correction.
The total crypto market capitalization has dropped from about $308 billion on Feb. 15 to $248 billion at press time, which is a fall of about 19.50%. For an investor, this is a normal and healthy correction, which can provide an opportunity to buy or add to existing positions.
In an interview with CNBC, billionaire investor Tim Draper said that he has shifted his money out of stocks and into Bitcoin and cryptocurrencies. He reiterated his target of $250,000 for Bitcoin by the end of 2022 or early 2023.
Draper expects a revolution towards a decentralized world in the next decade and this is what makes him bullish on cryptocurrencies. Although he did not share a specific figure as to what percentage of his portfolio in Bitcoin, he did say that it was “a lot.”
Daily cryptocurrency market performance. Source: Coin360
Speaking to CNN, Morgan Creek Digital co-founder Anthony Pompliano stressed that everything in the world will be digital in a few years. According to Pompliano, even though several central banks might launch a digital version of their currencies, Bitcoin would rule supreme because its monetary policy is superior to the policies of central banks.
The current correction in cryptocurrencies is likely to shake out the speculators who were getting active after the sharp run this year. This should offer an opportunity to long-term investors looking to add to their portfolio or initiate fresh long positions in cryptocurrencies.
Let’s analyze the charts to find out whether the correction is over or if cryptocurrencies decline further.
BTC/USD
Bitcoin (BTC) has broken below the small descending channel and the psychological support at $9,000. The support levels are being broken thick and fast. With today’s fall, the sequence of higher lows that was in force since January of this year has been broken. This is a bearish sign.
BTC USD daily chart. Source: Tradingview
The 20-day EMA has started to turn down and the RSI has dipped into the negative zone, which suggests that bears are back in the game. The next support on the downside is the $8,240.67-$7,856.76 zone.
Conversely, if the BTC/USD pair rebounds off the current levels and rises above $9,000, it will be a huge positive as it will indicate strong buying at lower levels. We will wait for the decline to end before suggesting a trade in it.
ETH/USD
Ether (ETH) broke below the symmetrical triangle on Feb. 25, which is a bearish sign. The selling has intensified today and the altcoin has plunged below the next support at $235.70. This triggered our suggested stop loss of $230 on the remaining long positions.
ETH USD daily chart. Source: Tradingview
The 20-day EMA has started to turn down and the RSI has dipped to the negative zone, which suggests that bears have the upper hand. The next stop is likely to be $197.75, which is just below the 50-day SMA at $203.
We expect the bulls to aggressively defend $197.75. A bounce off this support is likely to face resistance at $235.70. We will wait for the ETH/USD pair to form a new buy setup before recommending a trade in it.
XRP/USD
XRP plunged below the $0.26362 support on Feb. 25, which triggered our suggested stop loss on the long positions at $0.26. The drop also completed a head and shoulders (H&S) pattern, which has a target objective of $0.18043.
The 20-day EMA has turned down and the RSI has dipped into the negative zone, which suggests that bears have the upper hand.
XRP USD daily chart. Source: Tradingview
The next support on the downside is $0.21302 and below it $0.19979. We expect the buyers to step in closer to these levels. However, any pullback is likely to face stiff resistance at the neckline of the H&S pattern at $0.26362.
If the price turns down from the neckline, the decline will resume. However, if the bulls can push the XRP/USD pair above $0.26362, it will signal strength.
BCH/USD
Bitcoin Cash (BCH) broke below the 50-day SMA on Feb. 25 and continued to slide down. The bulls are currently attempting to defend the support at $306.78. If the buyers can push the price back above $360, it will signal demand at lower levels.
BCH USD daily chart. Source: Tradingview
However, if the rebound off $306.78 fails to climb above $360, the bears will attempt to resume the down move to the next target objective of $270.15.
The 20-day EMA has turned down and the RSI is in the negative territory, which suggests that bears are in command. We will wait for the BCH/USD pair to signal a turn around before proposing a trade in it.
BSV/USD
Bitcoin SV (BSV) broke below the critical support at $236 today, which is a huge negative. With both moving averages on the verge of a bearish crossover and the RSI in the negative zone, the advantage is with the bears.
BSV USD daily chart. Source: Tradingview
If the price sustains below $236, the decline can extend to the next support at $173.66, which was the intraday low made on Jan. 14, when the BSV/USD pair had jumped 144.40% in a single day.
Conversely, if the bulls can push the price back above $236 and sustain it, a move to the 20-day EMA is possible.
LTC/USD
Litecoin (LTC) has dipped below the support at $66.1486 and the descending channel. The 20-day EMA has started to turn down and the RSI is in the negative zone, which suggests that bears have the upper hand.
LTC USD daily chart. Source: Tradingview
The next support on the downside is at $50. We expect the bulls to defend this level aggressively.
Alternatively, if the bears fail to sustain the LTC/USD pair below the channel, the bulls will make another attempt to push the price above $66.1486. We will turn bullish after the price sustains above $66.1486 for a few days.
EOS/USD
EOS has broken below the 50-day SMA and the support at $4.00. The next support on the downside is $3.3555. The 20-day EMA is sloping down and the RSI is in the negative territory, which suggests that bears have the upper hand.
EOS USD daily chart. Source: Tradingview
If the EOS/USD pair bounces off $3.3555, the bears will attempt to defend the overhead resistance at $4.00. If the price turns down from this level, the decline will resume.
However, if the bulls manage to push the price back above $4.00 it will signal buying at lower levels. We will wait for a new buy setup to form before suggesting a trade in it.
BNB/USD
The tight range of $21.80-$23.5213 in Binance Coin (BNB) resolved to the downside on Feb. 25. This attracted selling and as a result, the altcoin has plummeted below the 50-day SMA at $19.68. The next support on the downside is at $16.4288.
BNB USD daily chart. Source: Tradingview
The 20-day EMA has started to slope down and the RSI is close to the oversold zone, which suggests that bears have the upper hand.
Any relief rally from the current levels or from the support at $16.4288 is likely to face resistance at the downtrend line. We will wait for the decline to end before suggesting a trade in the BNB/USD pair.
XTZ/USD
Tezos (XTZ) is attempting to rebound off $2.5263, which is just below $2.6025, the 50% Fibonacci retracement level of the most recent rally. If the bulls can push the price above the 20-day EMA at $2.975, a move to $3.50 is possible.
XTZ USD daily chart. Source: Tradingview
However, if the bulls fail to push the XTZ/USD pair above the 20-day EMA, the bears will attempt to sink the price back below $2.5263. If successful, a drop to the 61.8% Fibonacci retracement level of $2.28451360 is likely. We will wait for a new buy setup to form before suggesting a trade in it.
ADA/USD
Cardano (ADA) has broken below the critical support at $0.0560221 and the 50-day SMA at $0.0524. The 20-day EMA has started to turn down and the RSI has dipped into the negative territory, which suggests that bears have the upper hand.
ADA USD daily chart. Source: Tradingview
The bulls are currently attempting to defend the support at $0.0461161, which is just below the 61.8% Fibonacci retracement level of $0.0475943.
If the price rebounds off the support, it might move up to the downtrend line, which is likely to act as a stiff resistance. If the ADA/USD pair turns down from the downtrend line, the decline is likely to extend to $0.0408858.
Conversely, a break above the downtrend line will be the first signal that buyers are attempting a comeback. We will wait for a new buy setup to form before proposing a trade in it.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk. You should conduct your own research when making a decision.
Market data is provided by HitBTC exchange.
