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Cryptocurrencies Recover, EOS and Cardano Outperform

2018-05-04 18:02:15.0

Quick glance at top seven
In April, Bitcoin recovered past 45% against the US dollar and Ether gained up to 90%. Ripple doubled its price over the same month, as Bitcoin Cash’s price was multiplied by 2.5. 

Even Litecoin, which retreated to the seventh place in terms of market cap, rebounded by 50%. 

EOS, which rallied by 355% in April, became the fifth largest cryptocurrency by market cap and Cardano took the sixth place, following an advance of 155% over the same period.

Investors returned to cryptos at the wake of US tax-day
As we have discussed in our earlier weekly market reviews, one of the reasons behind the depressed cryptocurrency prices was the US tax deadline, as traders sold their holdings and realized profit and losses to meet their tax liabilities. 

Good news is, investors returned to cryptocurrencies at the wake of the tax-day. 

Although the positive correction was widely expected, the amplitude gave a better indication on the popularity of the market among investors. 

The significant rebound is of course encouraging for the sentiment, especially following a difficult beginning of the year, where the debasement of the market revealed concerns and questions about the viability of the sector in term.

EOS, Cardano outperformed the market
EOS has particularly attracted the market attention recently, as it bounced more than four-fold since March approaching the historical high levels last seen in January.

Besides providing an Ethereum-like smart-contract platform for decentralized applications, as known as dapps, EOS aims to resolve the scalability issues and allow millions of transactions within a second. 

To us, the exponentially growing demand in crypto-userbase justifies the emergence of an industrial-scale blockchain system. But the relatively new EOS could experience a higher price volatility before finding a stable ground.

Cardano, on the other hand, is also a cryptocurrency allowing to send and receive funds, but what makes Cardano appealing to investors is the way it is constructed. Cardano has layers to provide more flexibility for maintenance and updates. Remember, this is what Ethereum has been considering for improving the efficiency of its platform as well.  

The April rally helped the price of Cardano to double, although the unit of Cardano still trades 68% lower compared to its January peak ($1.22). Cardano has recently became the sixth largest cryptocurrency in the market, pushing Litecoin to the seventh place.

Cryptomarket absorbed the latest Mt. Gox dump
News that Mt. Gox Trustee Wallet dumped another 16’000 Bitcoin, and the equivalent in Bitcoin Cash, had a lighter negative impact on the market in April compared with similar news in the past. In February, a comparable sell-off have shred 50% off the market capitalization.  

This time, Bitcoin and Bitcoin Cash held ground despite the large volume of sales. In terms of US dollars, the sell-off in Bitcoin (>140 million USD) and Bitcoin Cash (>21 million USD) was worth more than 160 million US dollars. 

What we know is Mt. Gox bankrupt trustee still holds near 146K Bitcoins, which will be sold over time to redeem creditors after the business went burst in 2014. Yet the building trust and sector consolidation will likely do a better job in absorbing large redemption volumes in the future.

Are cryptocurrencies overbought?
The Relative Strength Index (RSI) is a popular technical indicator to assess whether a security has been bought or sold excessively within a ‘too short’ period of time.

Usually, FX and stock traders avoid buying or selling an asset if it has already been overbought or oversold respectively. 

Though the concept is interesting in well established markets, it could give a poor indication in a market with a strong positive or negative trend. In this respect, the newly born cryptomarket has proved to have strong one-directional moves, resulting in persistently ‘overbought’ or ‘oversold’ market conditions.

Recently, the rally in cryptocurrency prices sent the short-term RSI into the overbought territory. In other terms, the RSI index for major cryptocurrencies stepped above the 70 level, and the underlying assets were thought to have gained ‘too much value’, ‘too quickly’. 

While the overbought market conditions could be expected to slow down the rally, encourage some tactical players to realize profits and result in minor short-term price corrections, traders should not forget that technical indicators are not an exact science and the cryptocurrencies could stay in deeply overbought, or oversold territories without necessitating a significant price correction in the immediate future. 

It is important to keep in mind that fundamental news usually rules over the technical indicators.

Ipek Ozkardeskaya
Senior Market Analyst
MBAex Analyst