• Mon. Feb 6th, 2023



Are These 3 Major Cryptocurrencies Really “Alternatives?”

If you just studied the price action and ignored all the background noise, which of the major cryptocurrencies looks strongest right now? An analysis of the daily and weekly price charts of each seems to suggest that Bitcoin is weathering the recent ups and downs better than the rest, although each one is uniquely interesting.

The beauty of studying only price movement is the way it frees an investor of basing judgement on all of the stories that get told. By analyzing what the basic trends are and which support and resistance levels are identifiable, you begin to get a sense of where things stand minus all the hype.

Bitcoin’s daily price action looks like this:

The crypto is higher now than it was in April but the price is below the Ichimoku cloud. Thus, the up trend is now in question. To re-establish a solidly bullish pattern, bitcoin would need to break above the mid-August high of 12500. A break below the June/July lows would be a problem.

One other thing here: that big red sell-off bar in early September coincides with the heavy selling that hit tech stocks on the same day. For an investment often promoted as an “alternative,” that doesn’t really make sense if the crypto just follows the price action generally of the stock market.

Bitcoin’s weekly price chart looks like this:

The price in June broke above the down trend line connecting the historic late 2018 highs with the mid-2019 peak. This type of action is typically bullish. So is bitcoin’s ability to stay above the Ichimoku cloud. A drop below that down trend line would negate the bullish tone. A move above 14000 would confirm it.

Ethereum’s daily price chart looks like this:

You can see how the negative divergence of the relative strength indicator (RSI) to the price suggested the possibility of topping action. Ethereum remains above the trend line connecting the April lows with the mid-July dip. It’s managed to stay above the lower level of the Ichimoku cloud. A close or 2 above that 480 resistance would tend to confirm a continuation of the bullish pattern.

Note that this cryptocurrency also failed to qualify as an “alternative” to stocks when both types of investments plunged together in early September.

Ethereum’s weekly price chart looks like this:

From late 2018 to the present, a series of higher lows and higher highs suggests a bottom may have formed and an uptrend is in place. Ethereum needs to stay above the level of that May, 2019 high to retain the bullish tone. The next major resistance level is way up there at about 850 — the high from May, 2018.

XRP’s daily price chart looks like this:

It’s the “penny stock” of the major cryptocurrencies and investors would need a strong stomach for the volatility that comes on a percentage basis. XRP this week returned to the level of the May peak — a perfect example of how “former resistance becomes support” sometimes. The crypto would need to take out that 32/33 resistance now to regain a bullish tone.

XRP’s weekly price chart looks like this:

It’s not bullish — from the standpoint of price chart analysis — until it’s back above that Ichimoku cloud. Pretty simple. That September, 2018 high of 80 cents might be the next significant resistance if the cloud can be taken out, a big “if.”

It may be that this September crypto sell-off that coincides with the stock market sell-off is a temporary phenomenon but it’s something that bears watching if the term “alternative” has real meaning.

I do not hold positions in these investments. No recommendations are made one way or the other.  If you’re an investor, you’d want to look much deeper into each of these situations. You can lose money trading or investing in stocks and other instruments. Always do your own independent research, due diligence and seek professional advice from a licensed investment advisor.

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