Academy Trading Ideas Article

Crypto Markets Rebound With Equities but Fears of Second Virus Wave Linger: Technical Tuesday

2020.06.16 Cyrus Ip

In brief

  • The cryptocurrency markets rebounded after global equities rallied as the Fed announced a new round of stimulus.
  • Data shows that the number of entities holding at least 1,000 Bitcoin (BTC) has been steadily rising since January.
  • Ether (ETH) and Cardano (ADA) may need further consolidations, while Ripple (XRP) and Maker (MKR) rallies could be short-lived.

Market overview

The cryptocurrency markets rebounded Tuesday after Bitcoin prices briefly touched $8,900. The leading cryptocurrency subsequently recovered to around $9,500 in the early session, while Ether and Ripple also reversed some of yesterday’s losses.

The Monday selloff came after United States equities tumbled on the back of rising COVID-19 second wave breakout fears in the U.S. Data from Johns Hopkins University shows that the daily confirmed new cases in the U.S. have surged recently, while countries like Brazil and India seem to have already peaked.

Since traditional markets appear to take the lead these days, the general sentiment revolves around the virus outbreak and could eventually affect short-term crypto prices.

Corona Virus Cases
COVID-19 daily confirmed new cases rebounded in the US. Source: Johns Hopkins University

While new confirmed cases have sparked worries in the equities markets, the fundamentals seem to remain solid on the crypto side. Data from Glassnode shows that the number of Bitcoin whales has been growing steadily since January, with over 1,880 entities holding at least 1,000 BTC, the highest level since September 2017.

The rising number of whales could indicate that investors have been accumulating BTC while the Fed has been expanding its balance sheet.

Glassnode Data
Rising number of Bitcoin whales. Source: Glassnode

In the altcoin space, Cardano gained more than 8 percent as the network is scheduled for the Shelley upgrade next month. Kyber Network (KNC) jumped about 5 percent due to expectations around the launch of KyberDAO, which is slated for the end of Q2. Other altcoin movers included Maker (MKR), Nano (NANO) and Zilliqa (ZIL).

Looking ahead, we can expect the equities markets to continue playing the leading role over the short-term. Gold prices should also be watched, and if both markets start trading lower, the effect may spillover to crypto assets.

Price analysis

BTC/USDT – Short-term rebound imminent?

BTC/USDT has turned the one-year downward trendline into support, as the price rebounded into a triangle pattern.

The squeeze of the Bollinger Bands suggests that the price volatility could increase in the short-term. While the BB squeeze may not be able to predict which direction the price will go, we may be able to forecast direction with momentum indicators.

The stochastic produced a bullish crossover recently, suggesting the bulls have started to regain some grounds, improving prospects of a short-term price rebound. This shift is also reflected in the RSI, which rebounded to the top of the recent downtrend.

Level-wise, the area between 9,800 and 10,000 remained the short-term ceiling, while the resistance-turned-support near 8,800 to 8,900 has stayed valid till this point.

Short-term rebound of BTCUSDT could be imminent. Source: OKEx, Tradingview

ETH/USDT – is consolidation needed before the bulls takeover?

ETH/USDT recovered from June’s low of $218.30 alongside BTC’s rebound. The pair has been changing hands in the $230 handles during the Asia Tuesday session. 

Although the price has somewhat rebounded, the pair may first retest and consolidate near the lower support of the newly formed triangle, which is near the 78.6% Fibonacci retracement at $223, before a meaningful reversal occurs. 

Readings of the momentum indicators also strengthen a consolidation case. A bottom seems to be in the making on the stochastic, signaling that much of the downward pressure has already eased up, yet, the upside momentum has still not fully taken over.

The DMI also suggests the same story, with the -DI line still above the +DI line, meaning that there was more downward movement than upward, however, the difference has been narrowing.

ETHUSDT could consolidate at current levels. Source: OKEx, Tradingview

XRP/USDT – Bears still in control?

XRP/USD briefly touched $0.194 during the Tuesday rebound. However, from a broader perspective, the pair has been producing lower highs, and the descending triangle remains intact.

Momentum indicators haven’t shown a significant pick up of the upside momentum despite the 3 percent rebound on Tuesday. The fast and slow lines of the stochastic twisted, while the MACD was largely in the red.

Although the Tuesday high is higher than Monday’s, if the rebound is unable to continue in the short-term, a retest of the lower support of the triangle near $0.182 could become more likely.

 Downtrend for XRP/USDT remained intact. Source: OKEx, TradingView

ADA/USDT – 30MA remains uncompromised

ADA/USDT has been one of top movers in the altcoin space during Tuesday’s session, surging over 9 percent, just shy of $0.08.

The pair touched the 30-day moving average during Monday’s selloff, but managed to rebound quickly as the 30MA support remained valid since early April. Like many of the altcoins, ADA may need further consolidation at current levels before starting a new trend.

The case for consolidation is also supported by the DMI, with the -DI slightly dipped and the +DI ticked up marginally. A continuation of twisting of the two lines usually indicates a consolidation period.

ADA watchers can focus on the 78.6% Fibonacci retracement and the 30MA area, which lies around $0.07, and could be the lower support to watch.

30MA could be a support for ADA/USDT. Source: OKEx, TradingView

MKR/USDT – Bearish divergence occurred?

MKR/USDT booked another massive gain on Tuesday, surging more than 18% during the session. However, the rebound could be short-lived as bears may just start to growl.

The RSI has produced a bearish divergence with the price, with the indicator generating some lower highs while the price has produced some higher highs. Also, the bearish crossover of the daily MACD suggests that the bulls may be getting tired.

Level-wise, $450 could be the first area to watch, where it’s near the 30MA.

MKRUSDT bearish divergence. Source: OKEx; Tradingview

Disclaimer: This material should not be taken as the basis for making investment decisions, nor be construed as a recommendation to engage in investment transactions. Trading digital assets involve significant risk and can result in the loss of your invested capital. You should ensure that you fully understand the risk involved and take into consideration your level of experience, investment objectives and seek independent financial advice if necessary

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