Cryptocurrency Market Round-Up

Typically, cryptocurrencies are termed as digital currencies and use blockchain technology to record every transaction. Binance coin (BNB) is one of the popular digital assets created by one of the major crypto exchange platforms - Binance in 2017. Binance coin had a successful Initial Coin Offering (ICO) of 100 million BNB and has a circulation supply to 163.28 million at the time of writing. BNB has a market capitalization of ~USD 52.86 billion (as per TradingView as of May 26,2022). Polygon (MATIC) formerly known as Matic Network is an Ethereum scaling and infrastructure development platform that supports building different types of applications. It can be used to create infra required by the developer such as optimistic rollup chains, standalone chains, ZK rollup chains etc. MATIC has a market capitalization of ~USD ~5.17 billion (as per TradingView).

Last week, the benchmark S&P Cryptocurrency Broad Digital Market (BDM) Index opened on a negative note and maintained a strong bearish momentum for the entire week. The index declined by 81.34 points (~3.30%) to 2383.91 for the week ending May 20, 2022. In the current week starting May 23, 2022, the index is trading with a positive momentum. Also, other major cryptocurrencies such as Bitcoin and Ethereum witnessed bullish momentum for the week.

Having understood the S&P Cryptocurrency BDM Index movement over the last week and scenario for the upcoming week, two cryptocurrencies that seem ‘Non-Attractive’ or ‘Attractive’ at the current levels are Binance Coin (BNB) Perpetual Futures and Polygon (MATIC) based on the below technical parameters: -

Binance Coin (BNB) Perpetual Futures:  

Noted below are the generic insights, indicative entry price, resistance levels, and stop-loss for the next 1-2 weeks duration for the BNB:

 Entry level and Support Levels as mentioned herein are only indicative in nature as per trend analysis and further evaluation is required when looking at cryptocurrency under discussion.

Note: The reference Information in this report has been sourced from TradingView.

BNB Technical Analysis Summary (On the Daily Chart):

Daily Chart

On the daily chart, BNB price witnessed a breakout of the rising trendline support at USD 339.50 level on May 09, 2022. Since then, prices are sustaining below the trendline resistance, indicating negative biasness in the price action. Moreover, the prices are trading below the trend-following indicator 50-period SMA, indicating bearish momentum in the cryptocurrency. Further, the leading indicator RSI (14-period) is trading at ~44.82 level, indicating negative momentum.

The momentum indicator MACD histogram is trading below the centerline, indicating a bearish bias. However, the prices are trading above the Parabolic SAR indicator, which may act as a support zone. Now the next support level appears to be at USD 270, and prices may test that level in the coming sessions (1-2 weeks).

Noted below are the key positives and negatives when looking at Binance Coin (BNB) in the cryptocurrency space: -

Advantages of BNB:

• Best Utility token: BNB is considered as of the best utility tokens in 2022 and can be used to pay fees and to trade on the Binance exchange. BNB can also be used for payment methods for services including online purchases, travel, entertainment, credit crypto card bills and transfers.
• Unique Burnout Policy: BNB tokens has a burning policy which is an essential feature to ensure its stability and growth. Binance will procure BNB tokens out of 20% of their profits and burn them to reduce the total supply until 100 million coins will be left.( Source: Yahoo finance)

Disadvantages of BNB:

• Heavily Centralized: BNB is centralized through the strong hold by Binance. According to the data from Etherscan, Binance owned up to 80% of the BNB tokens in several wallets. This becomes a genuine concern as the majority control over the coin increase the possibility of manipulation of the blockchain.
• Regulatory Hurdles: Binance has faced many regulatory hurdles in US, Germany, Japan, Malta, and Ontario, Canada. Regulators also banned Binance in UK in 2021 which becomes vulnerable for investors.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, Binance Coin (BNB) perpetual futures may witness movement in the downside direction. The currency looks ‘Non-Attractive’ and might witness correction given the current price of USD 313.771 (as on May 26, 2022, at 07:40 PM, (GMT+10) Time in Sydney NSW, Australia. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while making investment decisions.

Polygon (MATIC):

Noted below are the generic insights, indicative entry price, support levels, and stop-loss for the next 1-2 weeks duration for the MATIC:

Entry level and Resistance Levels as mentioned herein are only indicative in nature as per trend analysis and further evaluation is required when looking at cryptocurrency under discussion.

Note: The reference Information in this report has been sourced from TradingView.

MATIC Technical Analysis Summary (On the Daily Chart):

Daily Chart

On the daily chart, MATIC prices are trading in a falling channel pattern and sustaining above the lower band of the pattern. Moreover, the leading indicator RSI (14- period) is trading near an oversold zone at ~33.29 level, indicating the possibility of recovery in the prices. However, the prices are trading below the trend-following indicators 21-period and 50-period SMA, which may act as a resistance zone.

The momentum indicator MACD histogram is showing the positive crossover, indicating the possibility of rebound in the prices. Further, the prices are trading above the Parabolic SAR indicator, which may act as a support zone. Now the next resistance level appears to be at USD 0.73, and prices may test that level in the coming sessions (1-2 weeks).

Noted below are the key positives and negatives when looking at Polygon (MATIC) in the cryptocurrency space: -

Key Positives:

• Secure and Scalable: The four layers, namely, Ethereum layer, Security layer, Polygon Networks layer, and Execution layer, made smart contracts reliable and more secure in the Ethereum blockchain platform. The Plasma Chains solves the scalability issue in Ethereum that allows developers to build their own decentralized apps. It also helps transactions to be taken off from the main blockchains into secondary chains making transactions faster and cheaper.
• Developers Strength: Due to its ability to create decentralized applications, it had attracted handful of projects on Ethereum platform such as Aavegotchi, Neon District gaming application, Decentraland virtual world, Polymarket prediction market, and SportX gambling application. It is also collaborating with Trace Network to bring transparency for retail brands to shift to tokenbased purchases.
• Faster Transactions: Polygon handles 65,000 transactions per second with a block confirmation time of below two seconds (Source: coincircle). It uses ERC-20 token as a settlement currency between users in the transaction.

 Key Negatives:

• Threat of Ethereum 2.0: The transition to Ethereum 2.0 to take effect by the end of 2021 or early 2022 is expected to boost transaction speed from 15-20 TPS (transaction per second) to whopping 100,000. This will significantly affect Polygon as users may migrate to Ethereum.
• Limited Scope and High Competition: The Polygon is simply created to widen the scale of Ethereum. It faces competition from Polkadot and Chainlink offering same scalability solution as Polygon.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, MATIC may witness movement in an upside direction. The trend looks to be in an interesting space and the currency looks ‘Attractive’ given the current price of USD 0.600 (as on May 26, 2022, at 07:40 PM, (GMT+10) Time in Sydney NSW, Australia. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios. Markets are trading in a highly volatile zone currently due to certain macro-economic issues and geopolitical tensions prevailing. Therefore, it is prudent to follow a cautious approach while making investment decisions.

Investment Related Risks: Based on the technical analysis, the risks are defined as per risk-reward ratio (~0.80:1.00), however, returns are generated within 1-2 weeks’ time frame. This may be looked at by Investors with sufficient risk appetite looking for returns within a short investment duration. Insights provided in this report are solely based on technical parameters; however, there are other factors which could impact Cryptocurrency prices which include market risks, regulatory risks, interest rates risks, and social and political instability risks, etc.

Note 1:  When a Cryptocurrency price is expected to move upward in the short-term (1-2 weeks), it is termed as 'Attractive’, while if a downward movement in prices is expected in a Cryptocurrency it is termed as 'Non-Attractive'. In general, for an ‘Attractive’ cryptocurrency an exit position can be considered if the Resistance Levels or Indicative Stop loss mentioned as per the technical analysis has been achieved. If the cryptocurrency looks ‘Non-attractive’ an exit position can be considered if the Support Levels or Indicative Stop loss mentioned as per the technical analysis has been achieved.

Note 2: How to Read the Chart?

The Green colour line reflects the 21-period simple moving average (SMA) while the red line indicates the 50-period SMA. SMA helps to identify existing price trends and if the prices trade above the 21-period and 50-period SMA, then in general it shows an uptrend trend.

The Black colour line in the chart’s lower segment is a 14-period Relative Strength Index (RSI) which indicates momentum in trend. A reading of 70 or above suggests overbought status, while a reading of 30 or below suggests an oversold status.

The Blue colour bars in the chart’s lower segment show the volume of the Cryptocurrency. The volume is the quantity that changed hands during the given period. Cryptocurrencies with high volumes are more liquid compared to lesser once and higher volumes help in easier and faster execution of the order.

The Orange colour lines are the trend lines drawn by connecting two or more price points and used for trend identification purposes. The trend line also acts as a line of support and resistance.

Technical Indicators Defined: -

Support: A level where-in the cryptocurrency prices tend to find support if they are falling, and downtrend may take a pause backed by demand or buying interest.

Resistance: A level where-in the cryptocurrency prices tend to find resistance when they are rising, and the uptrend may take a pause due to profit booking or selling interest.

Stop-loss: It is a level to protect further losses in case of unfavourable movement in the cryptocurrency prices.

Risk Reward Ratio: The risk reward ratio is the difference between an entry point to a stop loss and profit level. It is suggested to monitor the price carefully looking at ~80% Stop Loss of Resistance 1 from the entry point. 

A trailing stop-loss is a modification of stop-loss in case of favourable movement in the price to protect the gains. It is suggested to Trail the Stop-Loss as per the aforementioned levels if the Cryptocurrency price achieves more than 60% of the Resistance 1. Investors, in general, might consider exiting from the position as per the Trailing Stop-Loss level if the price starts moving downwards after achieving more than 60% of Resistance 1. However, these indications need further evaluation basis associated risks and any change in trends. 

The reference date for all price data, volume, technical indicators, support, and resistance levels is as of May 26, 2022, at 07:40 pm, (GMT+10) Time in Sydney NSW, Australia. 

Abbreviations

CMP: Current Market Price

SMA: Simple Moving Average

RSI: Relative Strength Index

USD: United States dollar 

Note: Trading decisions require a thorough analysis by investors. Technical reports in general chart out metrics that may be assessed by investors before any Cryptocurrency evaluation. The above are illustrative analytical factors used for evaluating the Cryptocurrency; other parameters can be looked at along with additional risks per se. Past performance is neither an indicator nor a guarantee of future performance.

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