crypto
Buy the dip, or wait for max pain? Analysts debate whether Bitcoin price has bottomed
It has been a rough week for the cryptocurrency market, primarily because of the Terra ecosystem collapse and its knock-on effect on Bitcoin (BTC), Ethereum (ETH) and altcoin prices, plus the panic selling that took place after stablecoins lost their peg to the U.S. dollar.
The bearish headwinds for the crypto market have been building since late 2021 as the U.S. dollar gained strength and the United States Federal Reserve hinted that it would raise interest rates throughout the year.
According to a recent report from Delphi Digital, the 14-month RSI for the DXY has now “crossed above 70 for the first time since its late 2014 to 2016 run up.”
This is notable because 11 out of the 14 instances where this previously occurred “led to a stronger dollar ~78% of the time over the following 12 months,” which points to the possibility that the pain for assets could get worse.
On average, the DXY gained roughly 5.7% after its RSI rose above 70, which from May 13’s reading “would put the DXY Index just shy of 111, its highest level since 2002.”
Delphi Digital said,
“Assuming the correlation between the DXY and BTC remains relatively strong, this would not be welcoming news for the crypto market.”
Bitcoin is at a key area for price bottoms
Taking a bigger picture approach, BTC is now retesting its 200-week exponential moving average (EMA) near $26,990, which has “historically served as a key area for price bottoms” according to Delphi Digital.
Bitcoin is also continuing to hold above its long-term weekly support range of $28,000 to $30,000, which has proven to be a strong area of support throughout the recent market turmoil.
While many traders have been panic selling in recent days, Pantera Capital CEO Dan Morehead has taken a contrarian approach, noting, “It’s best to buy when [the] price is well below trend. Now is one of those times.”
Morehead said,
“Bitcoin has been this “cheap” or cheaper relative to trend only 5% of time since Dec 2010. If you have the emotional and financial resources, go the other way.”
A word of caution was offered by Delphi Digital, however, which noted that “the best opportunities or “deals” in the market are not around for long.”
Since BTC has been trading in the $28,000 to $30,000 range for an extended period of time, “the longer we see price build in these areas, further continuation becomes more likely.”
If further decline occurs, the “weekly structure and volume structure support at $22,000 to $24,000” and the “2017 all-time high retests of $19,000 to $24,000” are the next major areas of support.
Delphi Digital said,
“Early signs of capitulation are starting to bleed through, but we can’t say we’re nearing the point of max pain just yet.”
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
Purpose of Ethereum 2.0
The primary goal of the Ethereum 2.0 update is to improve scalability so that the network can handle more transactions without delays or high fees.
While the full effects of the update will not be felt until it is fully rolled out, some of the possible use cases for Ethereum 2.0 include:
- Supporting the large-scale enterprise adoption of blockchain technology in private corporations and businesses;
- Creating more decentralized autonomous organizations (DAOs) and governance models based on smart contracts and trustless interactions;
- Ethereum token launches that will allow new projects to fundraise and launch their own tokens on the Ethereum network;
- The further expansion of nonfungible tokens (NFTs) and other digital assets that can be stored on the Ethereum blockchain; and
- Improved support for decentralized finance (DeFi) platforms and DApps is expected to be widely used by crypto enthusiasts and the broader public.
In addition to these benefits, it is also likely that Ethereum 2.0 will enable a variety of new use cases that are not possible on the current network, such as:
- Distributing tokens that represent ownership rights as a method of managing royalties in the music industry;
- Creating a decentralized AI (artificial intelligence) ecosystem that will allow users to train and monetize their own machine learning models;
- Facilitating safe and inexpensive cross-border payments;
- Allowing supply chain managers to track product delivery without fear of tampering;
- Providing a decentralized platform for gaming and predictive markets; and
- Increased privacy and the capacity to store large amounts of data, which can be particularly helpful for storing sensitive information such as medical records and financial data.
While there’s still time before the update is fully rolled out, the benefits it promises to bring are significant and could have a major impact on the way businesses and individuals use blockchain technology in the future.
The Ethereum platform’s popularity
The blockchain network’s popularity is expected to grow once Ethereum 2.0 is released.
Ethereum 2.0 will offer increased scalability, security and efficiency for businesses and individuals looking to take advantage of blockchain technology. Ethereum is currently one of the most well-known cryptocurrencies, alongside Bitcoin (BTC), with nearly 4 million wallets actively holding ETH as of February 2022.
The blockchain continues to be the place where most DeFi and NFT activities happen, with new DApps and projects being launched on the platform each day. According to analysts, Ethereum currently has 70% of all DeFi transactions in the cryptocurrency market, and its blockchain is used to support the majority of NFT and gaming projects.
The number of transactions on the Ethereum network
The average number of transactions on the Ethereum network is currently 1.1 to 1.5 million transactions per day.
These numbers are expected to increase exponentially after the launch of Ethereum 2.0, as it will allow significantly more transactions to be processed per day. At the moment, the network can only handle 15 transactions per second.
Ethereum 2.0 aims to increase this exponentially to about 150,000 by the time the upgrades are fully rolled out. If this becomes a reality, Ethereum will undoubtedly become one of the fastest and most scalable blockchains in existence, which should further increase its popularity.
Addressing scalability and high gas cost concerns with Ethereum 2.0
Scalability has always been one of Ethereum’s biggest challenges. This is especially true for developers seeking to build DApps and DeFi platforms on the blockchain, as transaction costs can be prohibitively high.
However, with the launch of Ethereum 2.0 (which introduces a new PoS consensus mechanism and shard chains), it will finally be possible to scale the network in a way that significantly reduces costs and facilitates faster transactions:
Tips and tricks to spend less gas fees on Ethereum
There are several ways you can reduce or even eliminate these costs when spending on gas fees on Ethereum.
- Use wallets that support batching: Batching is a feature offered by some wallets that allows you to group multiple transactions into one, thereby reducing the amount of gas you need to spend.
- Use ERC20 tokens: ERC20 tokens are digital assets that run on the Ethereum blockchain and can be used in place of ETH when paying for gas. This is because they often have much lower transaction fees than ETH, itself.
- Use a gas price calculator: Gas prices fluctuate frequently, so it’s important to use a gas price calculator to ensure you get the best possible price for your transaction.
- Use a gas tracker: A gas tracker is a tool that allows you to monitor the current gas prices on the Ethereum network in real-time. This can help ensure you’re always aware of the latest prices.
- Use a gas station: A gas station is a website that allows you to compare the gas prices of different ETH wallets to find the best one for your needs.
By following these tips, you can significantly reduce the amount of money you spend on gas when using Ethereum. This will help make it more affordable for you to use the network and participate in DeFi and other activities until such time that Ethereum 2.0 has fully launched.
The European Central Bank (ECB) is planning to launch a prototype of the digital euro in 2023. In the next five years, Europe could have its own central bank digital currency (CBDC) up and running. However, there are still many questions surrounding the prospective digital currency. In what form could it be issued? Is the ECB too late for the CBDC party, especially compared to other central banks such as that of the People’s Republic of China? To address these and other questions, Cointelegraph auf Deutsch spoke with Jonas Gross, chairman of the Digital Euro Association (DEA) and member of the expert panel of the European Blockchain Observatory and Forum.
New digital cash
Gross said that compared to digital cash issued by a commercial bank, central bank money carries fewer risks. A commercial bank can always go bankrupt, but a central bank cannot because in an emergency, it can print as much money as needed. And, in times of crisis, people may want, at least in theory, to transfer all their digital money from a private bank to the central bank, which will mean the end of the commercial banks’ business.
There are two potential mechanisms to avoid such a scenario: Either to set a cap on the amount of funds that a citizen can hold in central bank money or implement a negative interest rate applied to CBDC funds above a specified limit.
“The digital euro is mainly to become a kind of digital cash, also a new payment method and less a store of value. The central bank does not want to take away the banks’ business.”
Complete anonymity
The digital euro will not be adopted by European Union citizens if it won’t have certain features such as complete anonymity, said Gross. His team did a study that showed that it is technologically possible to make a digital euro just as anonymous as cash. It is also technically possible, Gross maintained, to allow digital euro payments to remain anonymous only up to a certain threshold, let’s say up to 10,000 euros, above which identification could be required. “This can be a great advantage for the digital euro, especially in view of the fact that cash is becoming less and less important,” Gross said.
“In an extreme case, in a few decades there could be very little use of cash, as is now the case in China or Sweden. And, if we didn’t have a digital euro that at least partially enables anonymous payments, then we would no longer have any privacy in payments. Even if it seems counterintuitive, the digital euro can promote privacy if one were to implement such a system with a focus on anonymity.”
ECB’s indecision
According to Gross, the biggest problem at the moment is that the ECB has not yet defined the aim and functions of the prospective digital euro. Last year, the ECB, in cooperation with several member states’ central banks, tested four design options for the digital currency. The first was the digital euro on the KSI blockchain, the core technology used by Estonia’s e-government.
The second option is a digital euro built on the TIPS, a European electronic payment system launched in 2018. The third possibility is a hybrid solution that sits in between the blockchain and the conventional banking system. Finally, the fourth is a bearer instrument, which is a sort of money card that can be used for payments or hardware capable of processing offline payments without access to the internet.
These are only the rough possibilities, Gross said, and the ECB has not yet settled on a single design because the range of potential applications of the digital euro is not entirely clear.
Possible geopolitical risks
Projects like the digital yuan, China’s CBDC, could weaken the position of the euro altogether, especially if foreigners are also granted access to using it. Digital currencies can make it easier and cheaper to pay in that currency, Gross explained. Amid the Russia-Ukraine war, the issue of international payments and monetary sanctions is becoming geopolitically important again.
“The Russian government says Russian gas must now be paid for in roubles,” Gross said. “The Chinese can theoretically also come up with the idea that the products we have to export, which are currently transacted in U.S. dollars or euros, must from now on be paid for in the Chinese currency, for example, in the digital yuan.”
China can strengthen its currency by digitizing it, and this could cause the euro to lose some of its influence in the future. This is why the ECB should move faster on the digital euro and decide what it wants to get out of the CBDC after all.
This is a short version of the interview with Jonas Gross. You can find the full version here (in German.)
Cardano (ADA) pared a big portion of the weekly losses incurred during this week’s crypto market rout.
ADA’s price reached an intraday high of $0.60 on May 13, a day after rebounding from its week-to-date low of $0.38 — a 58% rally.
The huge upside retracement appeared in the wake of similar price action in the crypto market with top cryptos Bitcoin (BTC) and Ether (ETH) rebounding by 23% and 25.75% since yesterday’s lows.
But the sharp ADA recovery does not promise an extended upward continuation, at least according to the three factors discussed below.
Stock market crash far from over
First, the price action in the Cardano and similar crypto-assets has been in lockstep with U.S. equities, especially tech stocks.
Notably, the correlation coefficient between ADA and the tech-heavy Nasdaq Composite was 0.93 on May 13, meaning that any major moves in stocks would likely steer Cardano in the same direction.
Moreover, the chances of Nasdaq undergoing a sharp recovery are currently slim, as analysts highlight the overstretched valuations of the Big Tech stocks and their probability of crashing further in a higher interest-rate environment.
“The [ax] is hanging, rather, over high-growth tech companies,” opines Richard Waters, the Financial Times’ West Coast editor, adding:
“This is where valuations became most stretched, and where the market is having the most trouble finding its nadir.”
Simply put, Cardano’s persistent positive correlation with Nasdaq could result in more sharp declines in the ADA market, at least for the time being.
ADA’s “fifth wave missing”
Secondly, another hint of a potential Cardano price decline comes from a technical structure highlighted by Capo of Crypto, an independent market analyst.
The pseudonymous analyst notes that ADA could fall to the $0.30–$0.35 range next, given its possibility to paint the fifth and final wave of a bearish Elliott Wave setup, as shown in the chart below.
The target range coincides with the support area from January 2021 that preceded a 850% bull run.
Descending channel breakdown
Thirdly, Cardano has been breaking below its multi-month descending channel in another sign of weakness.
ADA has been trending lower inside a range defined by two falling, parallel trendlines, underscoring traders’ current strategy of buying near the lower trendline and selling toward the upper trendline.
But on May 12, ADA/USD broke down below the lower trendline near $0.568, showing that traders ignored the buying opportunity.
Instead, buyers showed up near the $0.378-level to accumulate ADA, leading to the price rebound, as discussed above. However, the trading volume backing the recovery move was lower than during the selloffs, indicating a weakening rebound trend.
Simultaneously, the upside retracement move showed signs of further weakness after testing the descending channel’s bottom as resistance — a way of confirming the breakdown. If the bulls fail to flip the price ceiling to support, then ADA’s likelihood of continuing its prevailing downtrend will be much higher.
Related: Look out below! Ethereum derivatives data hints at further downside from ETH
Conversely, a decisive move above the channel’s lower trendline could have ADA then test its upper trendline near $1.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph.com. Every investment and trading move involves risk, you should conduct your own research when making a decision.
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