Crypto Market Round-Up

Typically, cryptocurrencies are termed as digital currencies and use blockchain technology to record every transaction. Ethereum (ETH) decentralised blockchain network enables users to carry out transactions, collect interest on their holdings through staking, and use and store nonfungible tokens (NFTs). ETH has a market capitalization of ~USD 224.94 billion (as per TradingView as of July 13, 2023).

Last week, the benchmark S&P Cryptocurrency Broad Digital Market (BDM) Index started on a positive note but maintained bearish momentum for the entire week. The index declined by 26.08 points (~1.20%) to 2156.62 for the week ending July 07, 2023. In the current week starting July 10, 2023, the index is trading with positive momentum. Moreover, other major cryptocurrencies, such as Bitcoin and Ethereum, are witnessing positive momentum for the current week.

Having understood the S&P Cryptocurrency BDM Index movement over the last week and the scenario for the upcoming week, one crypto that seems ‘Bearish’ at the current level appears to be Ethereum (ETH) Perpetual Futures based on the below technical parameters: -

Ethereum (ETH) Perpetual Futures:

Noted below are the generic insights, indicative entry price, support levels, and resistance for the next 1-2 weeks duration for the ETH:

Entry level and Support Levels as mentioned herein are only indicative in nature as per trend analysis and further evaluation is required when looking at cryptocurrency under discussion.

Note: The reference Information in this report has been sourced from TradingView.

ETH Technical Analysis Summary (On the Daily Chart):

On the daily Chart, ETH’s prices are trading below the falling trend line resistance zone at the USD 1932.50 level and continuously facing resistance from the trendline, indicating negative biasness in the price action. Moreover, the prices are trading below the trend-following indicator 21-period SMA, indicating downside momentum in the cryptocurrency. Further, the leading indicator RSI (14-period) is showing a reading of ~51.15 level.

The momentum indicator MACD histogram is trading below the centerline, supporting a negative stance. Moreover, the prices are trading below the Parabolic SAR indicator, which may act as a resistance level. Now the next support level appears to be at USD 1630.00, and prices may test this level in the coming sessions (1-2 weeks).

Noted below are the illustrative points as key positives and risks when looking at Ethereum (ETH) in the cryptocurrency space: -

Illustrative points as Positives:

• Wide Recognition: Ethereum supports global transactions, and it is easier to mine comparatively. This contributes to increasing demand and price. In addition, Ethereum has been supported by well-known brands such as Microsoft and JP Morgan in recent times in the blockchain revolution. ERC-20 tokens are used to pay for the transaction fees.
• Superior Liquidity: Due to its larger acceptance in trading platforms, exchanges, and online brokerages, Ethereum is considered the most liquid asset. It can serve as a proxy for gold investment. Due to higher market demand, this can be seen as a long-term investment.

Illustrative points as Risks:

• Higher Transaction Fees: Due to higher transaction fees, retail investors with smaller amounts of capital have refrained from trading on Ethereum. Every transaction that is mined requires a ‘gas fees’ to be paid to the network.
• Intense Competition: There are several smart contracts platforms built on increased scalability and robust adoption of DeFi ecosystems, such as Binance Smart Chain, Cardano, Polkadot, among others.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, Ethereum (ETH) perpetual futures may witness movement in the downside direction. The trend looks to be in an interesting space and the currency looks ‘Bearish’ given the current price of USD 1872.99 (as on July 13, 2023, at 08:25 AM, (GMT) Time in London, UK. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while making investment decisions.

Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This report may be looked at from high-risk perspective and recommendations are provided are for a short duration. Recommendations provided in this report are solely based on technical parameters, and the fundamental performance of the cryptocurrency has not been considered in the decision-making process. Other factors which could impact the cryptocurrency prices include market risks, regulatory risks, interest rates risks, currency risks, social and political instability risks etc.

Note 1: Trend Indications

Bullish Trend is generally used in information services and financial reporting as a trend typified with an upward momentum in prices based on the market sentiments, overall price action, and technical analysis. Typically, Resistance Levels or Indicative Stop loss levels need to be evaluated for exit triggers. 

Bearish Trend is generally used in information services and financial reporting as a trend typified with a downward movement in prices based on the market sentiments, overall price action, and technical analysis. Typically, Support Levels or Indicative Stop loss levels need to be evaluated for exit triggers.

When we identify trends as ‘Bullish’ or ‘Bearish’ it is based on a technical analysis of the available data as we understand it and is not, and should not be considered as, either advice or a recommendation to buy, sell or hold the relevant cryptoassets.

Note 2: How to Read the Chart?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50-period SMA. SMA helps to identify existing price trends and if the prices trade above the 21-period and 50-period SMA, then in general it shows an uptrend trend.

The Black colour line in the chart’s lower segment is a 14-period Relative Strength Index (RSI) which indicates momentum in trend. A reading of 70 or above suggests overbought status, while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the Cryptocurrency. The volume is the quantity that changed hands during the given period. Cryptocurrencies with high volumes are more liquid compared to lesser once and higher volumes help in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level at which the Cryptocurrency prices tend to find support if they are falling, and a downtrend may take a pause backed by demand or buying interest. Support 1 refers to the nearby support level for the Cryptocurrency and if the price breaches the level, then Support 2 may act as the crucial support level for the Cryptocurrency.

Resistance: A level at which the Cryptocurrency prices tend to find resistance when they are rising, and an uptrend may take a pause due to profit booking or selling interest. Resistance 1 refers to the nearby resistance level for the Cryptocurrency and if the price surpasses the level, then Resistance 2 may act as the crucial resistance level for the Cryptocurrency.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the Cryptocurrency prices.

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. It is suggested to Trail the Stop-Loss as per the aforementioned levels if the Cryptocurrency price achieves more than 60% of the Resistance 1. individuals, in general, might consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of Resistance 1. However, these indications need further evaluation basis associated risks and any change in trends.

The reference date for all price data, currency, technical indicators, support, and resistance levels is July 13, 2023 at 08:25 AM, (GMT) Time in London, UK.  S&P Cryptocurrency BDM Index in this report has been sourced from REFINITIV.

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar

Note: This publication is for informational purposes only based on technical analysis and does not reflect the fundamental validity of the cryptoasset. It in no way constitutes investment advice or a recommendation to buy, sell or hold financial instruments. Trading decisions require a thorough analysis by investors taking account of a range of factors, including in relation to cryptoassets in themselves, general market trends and an investor’s own ability and appetite to take risks and bear losses. Past performance is neither an indicator nor a guarantee of future performance.

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