Publicly traded business intelligence firm, MicroStrategy was the first listed company in August to dump US dollars and keep Bitcoin in its treasury. The company had invested about $475 million at that time. On December 5, the company announced another purchase of 2,574 Bitcoin worth about $50 million. The company’s total investment of $525 million has risen to about $784 million at current levels. Continuing with its bullish view on Bitcoin, MicroStrategy has announced a $400 million convertible senior notes offering, which the company plans to invest in Bitcoin.
BITCOIN VALUE FUNDAMENTAL ANALYSIS
While the initial purchase was a brave move that started the rally, the latest move gives an impression of institutional FOMO, which is a negative sign
It is not only MicroStrategy, even other institutions are aggressively buying, which has boosted Grayscale’s Bitcoin Assets Under Management to over $10.5 billion. And it is not only Bitcoin that has attracted investor’s attention. Grayscale managing director Michael Sonnenshein said that several investors are buying Ethereum only. This is a positive sign.
But why are institutional investors FOMOing when Bitcoin’s price is near $20,000? That is because several institutions believe that Bitcoin is still in its early stage of adoption and the price will be much higher in the next few years.
Legendary investor Paul Tudor Jones, in a recent interview with Yahoo finance, said: “Bitcoin reminds me so much of the internet stocks of 1999 because the internet was in its infancy. No one knew how to value it because of the world of possibility that lay ahead.”
While the long-term story is clearly bullish, the short-term sentiment seems to be reaching a frenzy among institutions, which could result in a short-term top. Let’s analyse the charts of the top-5 cryptocurrencies to determine the path of least resistance.
ALL-TIME HIGH BITCOIN VALUE TRADING – HOW TO TRADE BTC/USD
Bitcoin has formed a pennant near the highs, which is a reliable continuation pattern. If the bulls can push the price above the pennant decisively, the next leg of the uptrend could begin.
The $20,000 level may act as a psychological resistance but the possibility of a break above is high.
Several traders have not participated in the current rally as they have been waiting on the sidelines to buy on any major dip. However, the market does not oblige what most people expect.
If the price rallies above $20,000, several traders may give up and buy at higher levels because they will fear missing out on the rally. That may result in a vertical rally to $25,000 in the short term.
If that happens, the BTC/USD pair may form a short-term or a medium-term top. Traders can try to ride this rally by buying after the price sustains above $20,000 for a few hours.
This is a risky trade, hence, keep a close stop-loss and trail the stops higher as the price moves northwards. Do not wait for a windfall because the markets can turn around in a jiffy and turn the profit into a loss.
Contrary to the bullish assumption, if the price turns down from the current levels and breaks below the 20-day EMA, it will suggest profit booking by the momentum traders. Such a move could drag the price down to $16,200.
ETHEREUM TRADING – HOW TO TRADE ETH/USD
Ether broke above the $625 resistance on December 1, but the bulls could not sustain the higher levels. Hence, the buy recommended in the previous analysis did not trigger.
The bears attempted to sink the price below the 20-day EMA on December 5, but the bulls aggressively purchased that dip, which shows that the sentiment remains bullish and traders are accumulating at lower levels.
However, the bulls are struggling to push the price above the $625 resistance, which suggests that demand dries up at higher levels. If the ETH/USD pair does not scale above $625 in the next few days, it may attract profit booking from short-term traders.
A break below the 20-day EMA will be the first sign of weakness. Such a move could pull the price down to the critical support at $480. If that happens, the pair may remain range-bound for a few days.
On the other hand, if the bulls can propel the price above $625, the next leg of the up-move to $800 could start. Traders may buy if the price sustains above $625 for a few hours and the stop can be placed just below the 20-day EMA.
XRP TRADING – HOW TO TRADE XRP/USD
XRP is currently consolidating in an uptrend. The price is currently stuck between $0.542 on the downside and $0.683 on the upside.
This is a positive sign because it gives an opportunity to the altcoin to form a higher base from where it can launch the next leg of the up-move.
The moving averages are sloping up and the RSI is above 60, which shows that bulls have the upper hand. If they can push the price above $0.683, a move to $0.78 and then to $1 will be on the cards.
On the contrary, if the price turns down and plummets below $0.542, the XRP/USD pair could drop to $0.45961. A break below this support will indicate advantage to the bears.
We recommend traders remain on the sidelines until a reliable trading signal sets up.
BITCOIN CASH TRADING – HOW TO TRADE BCH/USD
We had warned in our previous analysis that the bears will defend the $326.73 to $350 overhead resistance zone and that is what happened. The price turned down sharply on December 1.
The bulls are currently attempting to defend the $280 support but the failure to achieve a strong rebound off it suggests that demand dries up at higher levels.
If the bulls fail to push the price above $300 within the next few days, the possibility of a break to the 50-day SMA and then to $250 increases. The flat 20-day EMA and the RSI near the 50 level suggest that the buyers have lost their edge.
Contrary to this assumption, if the BCH/USD pair rises from the current levels and breaks above $300, a rally to $326.73 and then to $350 is likely.
We do not find any reliable buy setups at the current levels; hence, we are not suggesting a trade in it.
LITECOIN TRADING – HOW TO TRADE LTC/USD
Litecoin has broken into the top-5 cryptocurrencies in terms of market capitalisation, hence, it has been included in our analysis. The bulls are currently attempting to keep the price above the 20-day EMA but are struggling to sustain above the $85 level.
This suggests that the bears are defending the $85 t0 $92 level aggressively. If the price turns down and breaks below the 20-day EMA, the LTC/USD pair could drop to $69.
If the price rebounds off this level, the LTC/USD pair could remain range-bound between $69 and $92 for a few days. A break below $69 will signal advantage to the bears.
Conversely, if the pair rises from the current level and breaks above the overhead resistance, the uptrend could resume. The next major resistance on the upside is $100. If that is crossed, the rally could extend to $140.
Hopefully, you have enjoyed today’s article.
Thanks for reading! Have a fantastic day! Live from the Platinum Crypto Trading Floor.
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