Crypto is dead, right?
That’s what folks in the media have been claiming since the collapse of Sam Bankman-Fried’s crypto exchange, FTX, last November.
And I get why that narrative is so appealing.
If prosecutors are to be believed, Bankman-Fried committed a sophisticated scam at his exchange that cost his customers billions of dollars in wealth.
And the FTX collapse comes as crypto prices have tanked… and a bunch of overexposed crypto lenders and hedge funds have gone belly-up.
These are the darkest days for crypto I can remember. (And I bought my first bitcoin [BTC] in 2013.)
But there are two problems with the “crypto is going to zero” claim…
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Critics have been saying this for more than a decade, and it’s never happened…
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Instead of falling apart, the crypto market is having a stellar 2023…
So, today, we’ll check in on this year’s crypto comeback.
And I’ll share an important insight on how to play it from world-renowned crypto investing expert Teeka Tiwari.
Bitcoin has had an explosive start to the year…
It’s the world’s first cryptocurrency.
And since it reached an all-time high of $67,600 in November 2021, it’s been trapped in a brutal bear market.
Peak to trough, it fell 77%.
But it’s up 27% since the start of the year.
More important, it’s broken above a key trendline (red line on the chart below) for the first time since the start of this bear market.
You’re looking at the bitcoin price (blue line) plotted against its 200-day moving average (“DMA”).
It shows the average price for bitcoin over the last 200 days. Traders think of it as the “line in the sand” between a bull and a bear trend.
If the bitcoin price is under this line, it’s in a bearish downtrend. If it’s above it, it’s in a bullish uptrend.
And as you can see, bitcoin has broken above its 200-DMA for the first time in this bear market.
Ethereum has also been on a tear in 2023…
It’s the world’s first decentralized computing platform.
Most NFTs, decentralized finance apps, and crypto gaming apps are built on the Ethereum blockchain.
Ether (ETH) is the crypto native to Ethereum. And so far in 2023, it’s outstripped even bitcoin’s gains.
Ethereum is up 31% year to date. And it’s also made its first significant break above its 200-DMA since the bear market began.
And those gains are peanuts compared with the rally in Solana…
Like Ethereum, Solana (SOL) is a fully programmable blockchain.
Developers can also use it to build decentralized apps, much like developers build regular apps on Microsoft’s Windows operating system.
Solana is still nowhere near as popular as Ethereum. But it’s one of the fastest blockchains out there. And it’s one of the many potential blockchains that could take market share away from Ethereum.
Solana dropped as much as 94% in 2022. Talk about a wipeout…
But this year, it’s up 138%.
And in case you think I’m cherry-picking… The entire crypto market is up 26% this year.
That’s added about $200 billion in value. And it’s brought the crypto market back to the $1 trillion mark.
Should you buy this rally?
I’m thrilled to see bitcoin and Ethereum cross above their 200-DMAs.
It’s the most bullish news for crypto, from a technical perspective, since the start of this bear market.
But they must stay above these “lines in the sand” before we can be confident the trend has changed.
And I don’t expect it to be a straight shot higher from here. This is crypto, remember, where volatility is the name of the game.
We’re more likely to see bitcoin and Ethereum drop back down to their 200-DMAs.
From there, they’ll either find what traders call “support” at these levels and springboard higher. Or they’ll fail the test and drop back below their 200-DMAs.
Here’s colleague Teeka Tiwari with more…
Bitcoin and Ethereum are popping. But remember that this is a bear market. And in bear markets you buy on weakness. You do not buy on strength.
Will this rally last? Probably not. So if you’ve been looking for an entry to buy bitcoin, we’re not there yet.
If you’re a relatively experienced investor, keep an eye on those 200-DMAs. (You can create your own charts, like the ones above, at Yahoo Finance and other free charting websites.)
If bitcoin and Ethereum can hold above them, that will be a great time to buy.
And don’t worry if that sounds like too much work. I’ll be keeping a close eye on this setup. And I’ll report back to you once we get a clearer picture.
As always, write us your questions, concerns, and success stories at feedback@legacyresearch.com.
Regards,
Chris Lowe
Editor, The Daily Cut