Although 30% down, the crypto market remains strong.
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Over the last 24 hours, the crypto market has fallen by more than 30 percent. There is a combination of events that might have triggered it. Litecoin’s founder selling all his coins in this rally is certainly a sentiment breaker. This might look like he believes the elevated levels were a good position to cash out completely.
While his selling doesn’t end the future of Litecoin, it certainly dampens the sentiment and we can see it reflect on the other cryptocurrencies as well.
Elsewhere, a large individual trader or a group of traders placed an options bet on the New York-based digital currency trading platform LedgerX, that Bitcoin will rally above $50,000 by end-2018. Right now, it seems to be an overly optimistic assumption. However, anything can happen in a year’s time. If someone had told me in January 2017 that Bitcoin will climb close to $20,000 during the year, I would not have believed it.
Nonetheless, the bull market tops out when the sentiment is overly bullish, especially with the retail traders. Using the Wayback Machine, we find that the whales have been trimming their positions, while the smaller traders have been piling on Bitcoin over the period of the year. Professional’s selling is never a good sign.
Though in the past year, every fall has been a buying opportunity and the aggressive bulls have made a lot of money, we believe that, now, the traders should wait and not venture out to buy until we see some semblance of a support forming.
But won’t we miss out buying at lower levels?
We may! But, we will also sleep peacefully and enjoy the holidays without any major worry, should the cryptocurrencies extend their fall.
BTC/USD
We have not traded in Bitcoin for a while because we did not get the right setup to enter. Though we missed out on a large uptrend, at least we did not get caught in the frenzy. To the lucky few who are owning Bitcoin, we have warned in our previous two analysis reports that the cryptocurrency is at a risk of breaking down.
In our previous analysis, we had warned that if Bitcoin failed to rise above the trendline, it will break below $15,200 and that is what happened. The attempt to rebound off $15,200 failed on Dec. 20 and today the cryptocurrency has plunged even below our expected support levels of $12,505.
What’s next?
We may find a number of aggressive bulls buy at the current levels of the BTC/USD pair and continue buying till the 50-day SMA of $11,000. However, we believe that we shouldn’t try to catch a falling knife. As the selling has been overdone, we may find a bounce soon, but, if it fails to sustain, it’ll break loose. We may see the fall extend to even $10,000 levels.
So, let’s wait for the correction to end before initiating any long positions.
ETH/USD
We had warned the traders of a deeper fall, should Ethereum breakdown of the trendline. Today, it did and plunged.
The ETH/UDS pair has a strong support at $500 and below that at the 50-day SMA at $455. If these also don’t hold, then the price will fall to $400 levels.
We suggest waiting for a few days until Ethereum forms a bottom. Currently, there are no buy setups on it.
BCH/USD
Traders who followed us on Bitcoin Cash entered long positions at $1,520 and exited 50 percent positions at a handsome profit of $3,859 and the remaining position was closed at $2,400, which was our trailing stop loss. Though our revised target objective was $4,514.5173, we recommended booking partial profits because Bitcoin Cash has a history of plunging from the highs.
The BCH/USD pair rose to a high of $4,139.0893 and reversed course. It has broken below the 20-day EMA and the 61.8 percent Fibonacci retracement levels of the rally from $1,145 to $4,139.0893.
We expect the cryptocurrency to find some support at the 78.6 percent retracement levels of $1,785.
However, this is only an expectation. We should take any fresh position only when Bitcoin Cash forms a bottom. Until then, we recommend staying on the sidelines.
XRP/USD
In our previous analysis, we had forecast that Ripple will resume its uptrend once it breaks out of the pennant formation. Yesterday, the cryptocurrency broke out of the bullish pennant and skyrocketed higher.
The pattern target of the bullish formation breakout was $1.5 and yesterday, the XRP/USD pair rallied close to a high of $1.2.
However, today, it is being clobbered.
It is because of this possibility that we keep mentioning to trail the stops higher. As it has broken below the pennant formation, it has become negative. It is difficult to call a bottom, but it may find some support at the $0.6 mark.
IOTA/USD
We had expected range-bound trading in IOTA unless it broke out and closed above the overhead resistance. However, the bears have a firm grip on the IOTA/USD pair.
Today, the cryptocurrency broke down of the lower end of the range. At one point, the fall had extended to $1.1.
In such a volatile environment, we would not like to venture out and buy. The sentiment is too negative. We shall wait for the selling to exhaust before initiating any buy position. It is useless to mention any support levels when traders are selling in a panic.
LTC/USD
We had forecast a range bound movement between $243.86 and $370. While yesterday, the cryptocurrency bounced off the supports, it was not spared today.
Litecoin is currently at the 61.8 percent Fibonacci retracement level, which is a critical support for the LTC/USD pair. If this breaks, we can see the fall extend to the $146.414 levels, which is the 78.6 percent retracement of the rally.
We don’t want to be brave during a panic. We want to wait and watch for buying to emerge before initiating any position.
DASH/USD
We foresaw a short-term top in Dash in our previous analysis and it has been falling ever since.
We expect a strong support at the trendline in, which is just below the 78.6 percent retracement level for the DASH/USD pair. We expect this level to hold.
However, we don’t recommend buying until the decline ends. The cryptocurrencies can easily overshoot on the downside.
Please note that after such a sharp fall, we are bound to see strong bounces on a few cryptocurrencies. However, we believe in safeguarding our capital first and investing with a calculated risk. With this philosophy, we miss many trades; however, we are less prone to drawdowns as well. At least, let’s enjoy the holidays without any stress.
*The market data is provided by Trading View.
