Make Informed Investment Decisions: Blockster Weekly Cryptocurrency Analysis

Brief Review Of 2021

As we enter the final few weeks of the year, how will 2021 be remembered within the cryptocurrency community? In terms of crypto performance, will 2021 be considered a year of success or a year of failure? Most likely, it will be viewed as both successful and disappointing. The first four months of 2021 were incredibly rewarding. For example, Bitcoin started the year at 28,986. Within four months, the price had increased 124% to 64,789 (Chart #1).

During the past eight months, the majority of cryptocurrencies have produced mediocre results, including BTC. Therefore, 2021 will probably be regarded as both successful and disappointing.

Recent Price Action

Bitcoin — After recording a new all-time high on 10 November, Bitcoin has been unable to create any additional momentum. BTC has been trading sideways-to-lower during the past four weeks. Unfortunately, the short-term chart pattern turned bearish on 6 December when BTC penetrated 50,461 (Chart #2). The bears are now in control of the short-term momentum. To reverse the momentum, the bulls need to push BTC above 61,077 on a weekly closing basis (Chart #3). The most likely scenario during the next few weeks is a continuation of lower prices. The bulls were unsuccessful in their attempt to create a new high above 68,906. Therefore, the bears are now in control of this market.

Ethereum — Despite the recent decline, ETH continues to outperform BTC on a percentage basis. In 2021 Ethereum has advanced 421% (Chart #4). During the same time period, Bitcoin has increased 74%. ETH has been one of the best performing cryptocurrencies in 2021. Most likely, this trend will continue in 2022, particularly against BTC.

Why is Ethereum performing better than Bitcoin? Because institutional investors are discovering that ETH has more use cases than Bitcoin. For all practical purposes, BTC is nothing more than a savings vehicle, serving as a hedge against inflation and excessive money printing by global central banks. This explains why investors refer to Bitcoin as digital gold. Contrarily, Ethereum is being used in several different projects. For example, ETH serves as the primary cryptocurrency in decentralized finance. Additionally, ETH is used exclusively in the buying and selling of non-fungible tokens. The use of smart contracts has exploded during the past few years. ETH is the preferred token for smart contracts. Based on the unlimited number of use cases, Ethereum could easily outperform Bitcoin for the next several years.

Chainlink — As the popularity of smart contracts began to increase in 2017, blockchain developers discovered the need for a third-party service that connected smart contracts with the outside world for the purpose of feeding information to the smart contracts. Chainlink serves the role of collecting outside information and relaying the information to the smart contract. Chainlink is known as a blockchain oracle.

The Chainlink (LINK) ICO occurred in September 2017 @ $0.11. LINK is one of the very few tokens that has never traded below its ICO price. LINK has generated a spectacular advance over the past four years. However, the token is currently in the midst of a sharp decline following its all-time high on 10 May @ 52.91. The entire crypto universe has been drifting lower during the past six months. LINK has been no exception.

LINK has lost 57% of its value since 10 May (Chart #5). The short-term momentum is in favor of the bears. The next important support level is 13.46 (Chart #6). A weekly close below 13.46 opens the door to 10.83. To reverse the momentum, the bulls need a Friday close above 32.35. Based on the Relative Strength Index, LINK is extremely oversold. On 6 December, the RSI oscillator recorded a reading below 30 (Chart #7). This marks the first time in 15 months that the oscillator fell below 30. There is a strong probability that LINK generated an important bottom on 6 December @ 16.12.

Will Cryptos Be Bullish In 2022?

It’s quite common for speculative assets like cryptocurrencies to follow repetitive cycles. Of course, these cycles are not perfect. Occasionally, the cycle will invert and the market will move in the opposite direction of the original forecast. Despite the occasional inversion, these cycles are still quite useful in determining the overall trend of the underlying asset.

What can we learn about 2022 in terms of repetitive cycles? The dominant cycle in the crypto universe belongs to Bitcoin. The cycle is linked to Bitcoin’s block halving, which occurs approximately once every four years. The first block halving took place on 28 November 2012. The most recent halving transpired on 11 May 2020. The next halving cycle is scheduled for May 2024.

By examining each halving cycle, we can see that BTC follows a fairly predictable pattern. Typically, BTC forms an important top 18 months after each block halving. As we mentioned, the most recent halving occurred on 11 May 2020. Therefore, an important top may have developed on 10 November @ 68,906, exactly 18 months after the Bitcoin halving in May 2020 (Chart #8). If this cycle analysis is correct, Bitcoin will be bearish in 2022, along with the entire crypto universe.

What about a Cycle Inversion?

The cycle will invert if Bitcoin exceeds 68,906 during the first two months of 2022. Therefore, if BTC trades above 68,906 by the end of February, a cycle inversion will occur. This would be extremely bullish for the remainder of 2022. Please be aware that cycles invert less than 20% of the time. Therefore, the most likely scenario is lower crypto prices in 2022.

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