Nearly 20 Altcoins Have Doubled By 2023… Can Bitcoin Break Long-Term Resistance? …fundamental bullish tailwinds…the Fed could screw everything up tomorrow
So far in 2023, nine of the top 100 cryptocurrencies have doubled in price.
If we extend our analysis to the top 200 cryptos, almost 20 have doubled.
Just in the past week, Bitcoin is up 9%… Cardano is up 10%… Polygon added 20%… and two smaller altcoins, Threshold and Aptos, have shot up over 100%.
Again, that’s it from last week.
Flashing back, it’s Tuesday, so in keeping with recent tradition, let’s take a look at the cryptocurrency sector with the help of our expert Luke Lango.
of Lucas Crypto Investor Network weekend update:
… It’s not even the end of January and already, about 15% of the top 200 cryptocurrencies have risen more than 100% this year.
Does that sound like a new boom cycle to you?
It definitely affects us…
While our “Boom Cycle 2023” prediction for cryptocurrencies may have seemed outlandish and off the mark a month ago, it is now starting to look like a consensus belief.
As is Bitcoin, so is the sector
for the newest To digest Readers, Luke is our expert on hypergrowth investing, and few sectors offer greater potential for hypergrowth than cryptocurrencies.
Before the 2022 bear market, altcoins were some of the most lucrative investments of the previous five years, some rising literally thousands of percent.
Luke Crypto Investor Network The newsletter focuses on these cutting-edge altcoins, but Bitcoin remains the barometer of the cryptocurrency industry. Overall, its trend sets the direction of momentum for the broader altcoin world.
So, to get an idea of where the sector is headed, our analysis should start with Bitcoin.
On that note, let’s go back to Lucas:
At this point, almost all technical buy signals have been triggered.
Perhaps most potent is that Bitcoin has crossed above its 30-week moving average (BREAST) for the first time in this bear market cycle.
Every time BTC has crossed above its 30-week MA, BTC has proceeded to skyrocket by at least 100% over the next few months.
Now, while “100% gains” could be in Bitcoin’s future, how the crypto handles a next key resistance level will influence how quickly it gets there.
Bitcoin is sitting on the cusp of the $24,000 to $24,500 level, which is a critical technical range
Regular To digest readers will recognize it from last Wednesday’s Digest. That’s when we looked at Bitcoin through a “Scenario Analysis” lens (you can read that issue here).
In short, it looks like Bitcoin wants to break out of its Stage 1 sideways consolidation stage into its Stage 2 growth stage.
However, for that to happen, the crypto needs to push north through its Stage 1 resistance line with heavy volume.
As you can see below, that level is about $24,000 to $24,500 (about 4%-5% higher than the Bitcoin price as I write Tuesday morning).
Luke believes macro fundamentals support a breakout
return to his Crypto Investor Network to update:
The fundamental drivers of this rally also look very strong.
On the macro front, we got more data [last] week inflation is breaking down, with PCE and core PCE cooling off rapidly in December. Those inflation rates are on track to return to “normal” levels by spring.
Also on the inflation front, near-term consumer inflation expectations fell again in January, while natural gas prices dipped below $3 this week.
Inflation is collapsing.
Meanwhile, the economy appears positioned to avoid a recession.
MasterCard (BREAST) and Visa (V) reported earnings [last] week. Both payment card giants said consumer spending was impressively resilient in the last three months of 2022 and is picking up steam here in January.
The consumer is 70% of the economy. If they are still moving forward, the economy will too.
Perhaps most important of all, Luke points towards the technical breakout of the S&P.
As we noted in yesterday’s Summary, the S&P has finally broken above its long-term downtrend line. This did not happen once in 2022.
Let’s go back to Luke for why this is so bullish for cryptocurrency:
This looks like a classic technical breakout of a bear market. And that’s bullish for cryptocurrencies because stocks and cryptocurrencies have recently developed a strongly positive correlation.
The only remaining massive cantilever
With Bitcoin and the broader altcoin sector rising in 2023, combined with a fundamental picture taking hold, why hasn’t Luke recommended new altcoin investments?
Because there’s a very big elephant in the room that has the power to make or break this looming rally…
The Federal Reserve.
Tomorrow the Fed announces its latest policy decision and we hear from Chairman Jerome Powell.
The Federal Reserve is widely expected to raise rates by just 25 basis points, but what is unclear is Powell’s tone and forward-looking comments at his press conference.
And given the potential of curveballs, Luke wants to stay out, for now.
Back to your update:
We do not want to lead this event in the world of cryptocurrencies.
Powell will light a fire in the crypto markets by saying that the Fed’s job is almost done, or he will cause a massive drop by saying that the Fed must keep raising for much longer.
we want to broadcast new purchase alerts after that event.
Because while we can’t predict what Powell will say, we can predict with reasonable confidence that inflation is cooling fast enough to allow the Fed to halt its rate-hike campaign by the summer, at the latest, regardless of what let Powell say on Wednesday.
Therefore, if Powell lights a fire under risk assets on Wednesday, we will join the rally because it will last a while longer.
If Powell causes an accident, we will buy the dip because we are sure that cryptocurrencies will recover.
Either way, it just makes more sense for us to wait for Powell to do whatever he is going to do next Wednesday, and then either join the rally or buy the dip.
While we don’t know what the future will look like with the Federal Reserve, let’s wrap up with a few more reasons for crypto optimism.
On-chain analytics platform CryptoQuant publishes a “Profit and Loss Ratio (PnL)”.
The index attempts to normalize the cycle’s top and bottom signals using combined data from three other on-chain metrics. When its value rises above its one-year moving average, that triggers a long-term “buy” signal.
And that just happened.
The PnL Index has just issued a “definitive buy signal” for Bitcoin. Notably, this is the first such signal since early 2019.
But it’s not the only bullish indicator shooting up today.
Here’s another one of coin telegraph:
CryptoQuant is not alone in seeing rare rallies in on-chain data, some of which was absent during Bitcoin’s ride to all-time highs after March 2020. COVID-19 market crash.
Among them is the Bitcoin Relative Strength Index (RSI), which has now rebounded from its lowest levels.
PlanB, the creator of the stock-to-flow family of Bitcoin price forecasting models, noted that the latest rally from the RSI’s macroeconomic lows came at the end of Bitcoin’s previous bear market in early 2019.
Bottom line: green shoots are emerging in the crypto world today, but the Federal Reserve has the power to kill them off tomorrow.
On the other hand, if Powell sounds more dovish than anticipated, hold on: cryptocurrencies could be out of the picture.
We will keep you informed.
Have a good evening,