Bitcoin and DeFi
Can we expect another rally in Bitcoin?
Yes, say experts.
After the Bitcoin’s price rose to almost $12,500 on August 17, the price continues to be in a downtrend on the short-term price charts. The down was so strong that it even managed to break the support level of $12,265 and managed to make an intraday low of $12,137. But it did not sustain lower and immediately bounced back into the long ‘range’ that has been continuing since August. After 4 days in the green that included a 2.07% gain on Sunday has left traders wondering if there is more upside left in the cryptocurrency or will the downtrend resume.
Analyst’s such as Byzantine General has remained bullish on Bitcoin. The analyst shared data from WhaleMap yesterday, showing that Bitcoin has little selling pressure remaining in the market and hence could lead to major short-covering in the market that could take the price to new ‘highs.’ The analyst stated that there are buyers who are waiting to jump into the market but are sceptical because of the recent price action.
In that sense, the market’s expectations are bullish. Analyst and trader Josh Ranger surveyed via his twitter account to measure the overall sentiment. The result shows that 56.6% of the people who voted are still bullish and expect the price to at least go above $12,000. However, this could only happen if the cryptocurrency manages to convert the short-term resistance level of $11,800 into support. Trader ‘Credible Crypto’ even says that this could push the prices to $14,000 before making new all-time highs.
In order to understand what will happen next, let us go back at an earlier rally and understand how the market behaved. In the second half of 2017, a rally pushed the virtual currency by about 700% in less than six months. During this period, investors became obsessed with bitcoin; as a result, even people who had no idea about bitcoin started putting in all of their money. This formed a parabolic curve, shown by the purple line. Parabolic moves are inherently unsustainable, and this one is no different. In February, the bitcoin market suffered a major crash, and most investors lost all their money, which is why we need to exercise caution while buying at lifetime highs.
Talking about the current scenario, Bitcoin seemed to have formed an ascending triangle pattern where it could either breakout or breakdown. A breakout is valid only if the price can cross the ‘resistance’ level of $12,500. Once it breaks this level, there is no serious resistance until $19,000. In other words, if bitcoin breaks above a crucial level of $12,500, we could even expect all-time highs.
What do the charts say?
In the previous section, we comprehended the views on the future outlook of Bitcoin by some prominent people from the cryptocurrency world. Let us try to analyze the charts and find out what they suggest. The below image shows the chart of BTC/USD on the 4-hour time frame along with a couple of technical indicators plotted on them.
From this time-frame, it evident that price broke the downward trend line on August 28, tested it on the next day and continued moving higher. This is a typical reversal pattern that results in the short-term reversal of the current trend and the beginning of a new trend. However, this fact needs to be supported by other technical indicators which increases the odds of a reversal. In this case, the EMA is clearly indicating another move up since the price is well-maintained above the 3 major EMAs. The price has reacted fairly well from the support and provided us with enough confirmation by moving higher for three consecutive days. Considering these factors, we expect the price to at least go until the resistance level of $12,200 and eventually could break out if it supported by volume.
DeFi, the new Bitcoin?
DeFi has created a collection of highly demanded tokens in the cryptocurrency ecosystem. With DeFi tokens outperforming BTC in 2020, the community is rapidly shifting towards popular tokens as a means of value capture for DeFi’s growth. On this page, we will look at what investors and market participants have to say about the present state of DeFi and how can one approach this cryptocurrency.
According to investors, the need for solid infrastructure and interoperability between protocols and traditional finance is becoming paramount. The growing fascination for DeFi is not just in the interest to be earned from staking assets but also from the sector’s potential to provide investors decentralized access to crypto and legacy assets. Due to these fundamental reasons, investors are slowly increasing their weightage on this cryptocurrency and focussing on tokens that have the highest market cap.
Synthetix is one such token that has made substantial gains in 2020. It hit an all-time ‘high’ of $7.32 on August 15 and has rallied more than 400% year-to-date. Recently, it also reached the $1 billion in value locked milestone. Given the hype for DeFi and Synthetix, is it a smart idea to invest now. Let us find out.
Let’s look at Synthetix technically
The below image shows the 1-hour chart of Synthetix/USD along with the RSI indicator plotted on it. Looking at the current price of Synthetix, we would definitely not recommend going ‘long’ in the currency as the price is trading at its all-time high. We need a pullback or a retracement in the price before we can think to go ‘long’, and none of those is apparent here. An interesting area to look for ‘buy’ ideas would be at $6.42.
DeFi too has hit another milestone as it locked in value reaches $9 billion. DeFi projects have gained speed in the past few months, where it continues to receive encouragement from industry players. Therefore, it would not be wrong to say that Synthetix and Defi are moving hand-in-hand where we are witnessing huge investor interest and all-time highs in both these assets.
The month ahead for DeFi
Analysts are extremely bullish on DeFi tokens and expect few tokens to hit new all-time highs by the end of September. However, they also expect profit-booking and build-up of new ‘short’ positions that would result in a short-term downtrend. But the overall trend is up, and we should get ready for a new rally now or later.