Bitcoin and other cryptocurrency owners are standing tall for the first time since 2017, rescued from catastrophic losses by a relentless uptrend that has tripled the value of many digital coins in the past six months. This outstanding performance caught many traders off-guard because they lost interest in these volatile markets last year and stopped following them, forcing a game of catch-up up after missing thousands of upside points.

The breakdown of trade talks with China and Facebook, Inc.'s (FB) entry into the crypto-space has added rocket fuel to the ferocious rally, which has also coincided with a six-year gold breakout that confirms renewed interest in alternative currencies. More importantly, the breakdown of globalization could lift cryptocurrencies through their 2017 highs in the new decade, perhaps fulfilling stratospheric price targets.


Chart showing the performance of bitcoin vs. the U.S. dollar (BTC/USD)

Bitcoin/U.S. Dollar (BTC/USD) COINBASE turned sharply higher in April 2017 after breaking out above resistance at $1,360. The rally went ballistic in the fourth quarter, lifting more than $15,000 into the December all-time high at $19,892. The market crashed at the start of 2018, dropping more than $14,000 in just two months. Failed bounces into November carved a long string of lower highs, ahead of a downturn that broke February support.

The decline bottomed out at the 200-week exponential moving average (EMA) near $3,000 in December, while a quiet consolidation pattern into April 2019 set the stage for May's breakout above broken support (red line). That bullish technical event attracted heavy buying interest that has unfolded through two additional rally impulses, followed by this week's reversal at the .618 Fibonacci retracement level above $13,000.

Crypto bugs might disagree, but this isn't a good spot to get on board because reversals at this harmonic level tend to stick, generating counter-trends that can last for weeks or months. Of course, that's good news if you missed the big rally and want to get on board at a much lower price. The .382 retracement at $9,500 might do the trick for a pullback entry because a decline into that level will also test psychological support at $10,000.


Chart showing the performance of ethereum vs. the U.S. dollar (ETH/USD) 

Bitcoin dwarfs Ethereum in market capitalization, at $211 billion vs. $33 billion, but the second largest cryptocurrency still attracts high volume and intense interest. Ethereum/U.S. Dollar (ETH/USD) COINBASE took off in a strong uptrend after clearing resistance at $75 in April 2017 and stalled in $420 in June. It carved a symmetrical triangle at that level and broke out in November, entering a parabolic uptick that posted an all-time high of $1,420 in January 2019.

Ethereum fell a staggering 75% in the next two months before coming to rest on top of 2017 triangle support in March 2018. That level broke in August, yielding a gravity-laden selling climax that continued into December's 2018 low at $80.60. The downtrend also broke the 200-week EMA when it cut through the $550 level in June 2018, while the uptick into June 2019 has remounted this moving average

This price pattern is less bullish than that of bitcoin, failing so far to mount resistance at the August 2018 breakdown through the March low. In addition, the ethereum rally hasn't matched bitcoin's buying power, lifting into the .236 Fibonacci retracement level vs. the .618 level. Finally, gains could be elusive through the summer months because the weekly stochastic oscillator has just crossed into a sell cycle that could last eight to twelve weeks. Given these headwinds, crypto-traders seeking hot momentum plays should probably stick with the more dynamic uptrend.

The Bottom Line

Bitcoin and other cryptocurrencies have woken up from the dead after a brutal 2018 bear market and could eventually test all-time highs.

Disclosure: The author held no exposure in aforementioned assets at the time of publication.