Bitcoin may be in the last leg of its parabolic run and if the rally sustains, select altcoins may surprise to the upside.
Bitcoin (BTC) has consistently been hitting new all-time highs over the weekend, but the latest surge has also created a new high against gold, according to MarketWatch data. This suggests that Bitcoin has been gaining acceptance as the new store of value and that may attract more customers away from gold into Bitcoin.
Analysts suggest that the latest rally above $30,000 could have been triggered by aggressive buying from institutional investors on Coinbase, as suggested by the large premium of about $350 compared to the price in Binance.
With the latest rally, Bitcoin hit a market capitalization of over $640 billion today, just shy of Alibaba, the ninth-largest company in terms of market cap, at $649.31 billion. Meanwhile, breaking $30,000 could be creating FOMO among institutional investors who have missed buying Bitcoin at lower levels.
However, this buying will need to sustain to keep the uptrend intact because if the rally stalls, some institutional investors and momentum traders who have purchased at lower levels may be tempted to book profits.
If that happens, it could pull the price down quickly and turn the recent purchases by investors into a loss, resulting in a rush to the exit. Therefore, traders must be cautious and employ proper risk management strategies to protect their paper profits.
Meanwhile, let’s look at the charts of top-five cryptocurrencies that could extend their up-move if the sentiment remains bullish
BTC/USD
Bitcoin broke above the $30,000 overhead resistance on Jan. 2 and picked up momentum, which could have been due to a short squeeze and continued buying from the momentum traders.
While a parabolic rally provides outsized returns within a short time, it also increases the possibility of a sharp reversal that may catch many traders off guard because after such a strong up-move, the price could retrace anywhere between 62% to 79% of the entire rally.
If that happens, the BTC/USD pair could drop to the $20,000 mark, or a drop of over 30%, which at the moment looks unimaginable.
In a melt-up, it is difficult to predict the level where the rally may end because traders continue to chase prices higher due to FOMO. The next technical level which may act as a resistance is $37,000.
Shorting a rally because it is overbought on all time frames could be a losing proposition because, during a blowoff top, the price could continue to remain overbought for much longer than most traders expect.
But traders who own long positions should use proper risk management principles to protect their paper profits and not get carried away by greed.
The 4-hour chart shows that the bulls are buying on dips to the 20-exponential moving average. The bears have not been able to break the 50-simple moving average support since the price broke above $20,000.
Thus, the first sign of weakness will be a break below the 20-EMA. Such a move will suggest that traders may be booking profits after the sharp rally. A deeper correction below the 50-SMA may signal a possible change in trend.
There is a major resistance at $37,000 but if that is crossed, the rally could reach $40,000, which could again act as a stiff resistance.
ETH/USD
Ether (ETH) resumed its uptrend after a two-day minor correction on Jan. 2 and has followed it up with another strong up-move today. The upsloping moving averages and the RSI in the overbought territory suggest that the bulls are in command.
The bulls easily propelled the price above the $840.93 to $900 resistance today. The next resistance on the upside is $1,000. If the price turns down from this level, the bulls will try to defend the $840.93 breakout level.
If that happens and the ETH/USD pair rebounds off this support, the bulls will once again try to resume the up-move. On the other hand, if the bears sink the price back below $840.93, a drop to the 20-day EMA ($700) is possible.
A break below this level may be an indication that the pair may have topped out in the short-term.
The 4-hour chart shows that the momentum picked up after the bulls pushed the price above the $840.93 resistance. The latest leg of the rally has pushed the RSI deep into the overbought zone, suggesting that a minor correction or consolidation could be around the corner.
The wick on the latest candlestick suggests profit-booking by traders near $975, but if the bulls do not give up much ground and the pair rebounds off $900, it will increase the possibility of a break above $1,000.
This bullish view will be invalidated if the pair turns down and breaks below the $840.93 support and the 50-SMA.
DOT/USD
Polkadot (DOT) is currently consolidating in a strong uptrend. The bears are attempting to defend the $9.50 overhead resistance while the bulls are buying on dips to the $7.89 support.
The DOT/USD pair closed in the red on Jan. 1 but the bulls made a strong comeback on Jan. 2. This shows that the traders are not waiting for a deeper correction to buy as they expect the prices to rally further.
If the bulls can propel the price above the $9.50 to $9.89 overhead resistance zone, the uptrend could resume with the next likely target at $12.29.
However, if the price turns down from the overhead resistance, the pair could remain range-bound for a few more days. The pair may lose its bullish momentum if the price slides and sustains below the $7.89 support.
The 4-hour chart shows that the bulls are buying on dips to the 20-EMA. This suggests that the sentiment remains positive. The upsloping moving averages and the RSI in the positive zone suggest that bulls have the upper hand.
If the bulls can push and sustain the price above $9.50 for four hours, the next leg of the uptrend could begin.
However, if the price again turns down from the overhead resistance, the bears will try to sink the price below the 20-EMA. If they succeed, the momentum may weaken and the pair may remain range-bound between $7.89 to $9.50 for a few days.
BNB/USD
Binance Coin (BNB) resumed its uptrend today when the bulls pushed the price to a new all-time high at $41.5372. The upsloping moving averages and the RSI in the overbought zone suggest that bulls are in control.
The next target on the upside is $46 and then $50. This zone is likely to act as a stiff resistance.
However, the current breakout is facing profit booking above $40. If the bulls fail to sustain the price above $40, the BNB/USD pair may remain range-bound between $36 and $40 for a few more days.
A break below the 20-day EMA ($34.99) will suggest that the bullish sentiment has weakened and traders have started booking profits.
The 4-hour chart shows that the bears are selling aggressively above the $41 levels, as seen from the long wicks on the latest two candlesticks.
If the price dips back below $40, it could find support at the 20-day EMA. A strong rebound off this level will suggest demand at lower levels and the bulls may again try to resume the uptrend.
Conversely, if the bears sink the price below the moving averages, it will suggest a possible change in the short-term trend.
UNI/USD
Uniswap (UNI) broke out of the $2.90 to $4 tight consolidation on Dec. 30 and surged to $5.29 on Dec. 31. The bears are currently attempting to stall the up-move at the $5.60 resistance but the positive sign is that the bulls have not given up much ground.
The upsloping 20-day EMA ($4.06) and the RSI above 67 suggest that the path of least resistance is to the upside. If the bulls can drive the price above $5.60, the UNI/USD pair could extend the uptrend and rally to $7.50 and then to $8.60.
Contrary to this assumption, if the price again turns down from $5.60, the pair may remain range-bound between $4.50 and $5.60 for a few days. The positive view will be refuted if the bears sink the price below the $4 support.
The 4-hour chart shows that the price has broken out of the symmetrical triangle. If the bulls can sustain the breakout, the pair could start its journey to the pattern target at $6.
On the contrary, if the price slips back into the triangle, it could drop to the 20-EMA. A strong rebound off this support will indicate accumulation at lower levels and the bulls will once again try to resume the up-move.
This positive view will be invalidated if the pair turns down from the current levels and breaks below the triangle.
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.
