While Bitcoin dominates the headlines, its underlying blockchain technology has spawned a new ecosystem of alternative cryptocurrencies, known as “altcoins.” Following Bitcoin’s staggering 1,000% moonshot of the past 12 months, a fresh wave of capital has flooded the space searching for the next 10-bagger.
Altcoins arrived on the scene via a hot, new funding mechanism called initial coin offerings (ICOs), which are like a hybrid of venture capital and initial public offerings for stocks. These crowdfunding campaigns involve the exchange of cash or cryptocurrency for the new coins, which then can be used within the specific altcoin network for purposes such as trading storage space, renting computational power or anonymous transactions.
According to coinmarketcap.com, the number of altcoins outstanding swelled from 64 in early 2014 to 869 today. This year alone, the total market capitalization of altcoins grew 4,700%, from $2.2 billion to a recent peak of $94.4 billion, before falling to $71.7 billion.
Like the dotcom bubble of the late 1990s, the current altcoin market likely contains the crypto versions of Google and Amazon, but it's also likely to contain a lot more duds a la Webvan and Pets.com. The recent surge has produced “blockchain for dentists” (DentaCoin) and “blockchain for Christians” (JesusCoin), which “boasts the unique advantage of providing global access to Jesus that’s safer and faster than ever before.”
Regulators have begun cracking down. Earlier this month, the Chinese government announced an immediate ban on ICOs for Chinese startups, claiming this new fundraising mechanism has “seriously disrupted the economic and financial order.” In the U.S., the Securities and Exchange commission concluded that altcoins would be treated as regular securities, and are subject to the same applicable securities laws that punish Ponzi schemes, boiler rooms and other fraudulent attempts to part investors with their hard-earned dollars.
With the emergence of this extremely volatile, hard-to-value asset class, technical analysis offers a framework for identifying buy-and-sell opportunities. Fibonacci retracements, based on the Fibonacci series, are one such approach that notes a mathematical relationship between past and future price moves. Fibonacci Retracements levels are created by pairing a major peak and trough and then dividing the vertical distance by the key Fibonacci ratios of 23.6%, 38.2%, 50%, 61.8% and 78.6%.
Here are four of the top-performing (and reputable) altcoins of the past month with Fibonacci retracement levels drawn to illustrate potential support levels. Each candle on the chart represents a four-hour time interval.
To select this list, I used Bitscreener’s “Coin Screener” which can be found here. The list only includes altcoins with $100 million or greater market cap.
- Recent Price: $3.41
- Market Cap: $169,909,807
- 30-Day Return: 115.74%
Nexus improves on the blockchain protocol with a lightweight database that speeds up processing power and employs large, one-time use keys for enhanced security. The cryptocompany is working with the aerospace industry to launch low earth orbit satellites to link the blockchain with communications technology for a fully decentralized internet. Founder Collin Cantrell has an aerospace pedigree—his father, Jim, was a founding member of Elon Musk’s SpaceX.
In late August, Nexus surged from $1.50 to $3.50 before pulling back and finding support at the 50% retracement level of $2.50.
- Recent Price: $96.54
- Market Cap: $1,458,212,974
- 30-Day Return: 78.30%
Monero employs an innovative algorithm called “Cryptonote” to ensure that transactions are private and untraceable. This means that transactions on the Monero blockchain cannot be linked to a particular user, a feature that only a few other cryptocurrencies can accomplish in any significant capacity.
In late August, Monero quadrupled from $39.77 to $155.22 before retracing and bouncing off the 78.6% retracement level at $64.79. Currently, it’s found support at the 50% retracement level of $97.49.
- Recent Price: $6.31
- Market Cap: $710,521,957
- 30-Day Return: 88.47%
Lisk employs a different consensus mechanism than Bitcoin called "Delegated Proof of Stake" (DPoS) to actively forge and secure the network. Its decentralized platform permits the creation of custom blockchains (also called “sidechains”) onto the Lisk blockchain. In March 2016, Lisk partnered with Microsoft to bring this innovative blockchain application to the Azure Cloud.
In late August, Lisk tokens staged an incredible rally from $1.89 to $8.50. Since then, Lisk has retraced and bounced off both the 50% and 61.8% Fibonacci retracement levels of $5.20 and $4.42.
- Recent Price: $3.27
- Market Cap: $320,147,877
- 30-Day Return: 101.30%
ARK simplifies the creation of blockchains and allows those new chains to be interconnected via the use of “SmartBridges.” This technology permits compatible blockchains where tokens or data can be easily transferred back and forth.
Ark went on a tear in mid-August, rallying from 80 cents to $4.32 in a little over three weeks. It recently pulled back and bounced off both its 38% and 61.8% Fibonacci retracement levels at $2.88 and $2.46.
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