Cryptocurrency Market Round-Up

Typically, cryptocurrencies are termed as digital currencies and use blockchain technology to record every transaction. There are ~9k+ crypto coins available in the market. Terra (LUNA) is a price-stable global payments system that is based on fiat-pegged stable coins. Tera was founded in January 2018 and its mainnet officially launched in April 2019. LUNA has a market capitalization of ~USD 19.33 billion (as per TradingView as of February 03, 2022). Chainlink (LINK) is a decentralized cryptocurrency founded in 2017 which enables transactions through an oracle network. The Chainlink network is run by a large open-source community and uses blockchains technology to interact securely with external data feeds. LINK has a market capitalization of ~USD 19.43 billion (as per TradingView as of February 03, 2021).

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 234.23 points (~6.46%) to 3391.60 for the week ending January 28, 2022. In the current week starting January 31, 2022, the index is trading with a positive momentum. Also, other major cryptocurrencies such as Bitcoin and Ethereum witnessed positive momentum for the week.

Having understood the S&P Cryptocurrency BDM Index movement over last week and scenario for the upcoming week, two cryptocurrencies that seem ‘Non-Attractive’ or ‘Attractive’ at the current levels are Terra (LUNA) Perpetual Futures and ChainLink (LINK)  basis the below technical parameters: -

Terra (LUNA) 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 LUNA:

 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.

LUNA Technical Analysis Summary (On the Daily Chart):

On the daily chart, Terra price witnessed a breakout of an upward sloping trendline support at USD 52.40 level on January 28, 2022. After the breakout, prices are continuously trading below the rising trendline support level. Moreover, the prices are trading below the trend-following indicators 21-period and 50-period SMA, indicating bearish momentum in the cryptocurrency. Further, the leading indicator RSI (14-period) is trading at ~35.39 level.

Daily Chart

The momentum indicator MACD is trading in a negative territory, indicating a bearish bias. Moreover, the prices are trading below the Parabolic SAR indicator, which may act as a resistance zone. Now the next support level appears to be at USD 39.80, and prices may test that level in the coming sessions (1-2 weeks).

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

LUNA

Advantages of LUNA:

• Stabilization Protocol: LUNA is a native currency for the Terra blockchain system that powers digital payment systems across the globe. LUNA has an algorithmic balancing system that maintains stability and new LUNA coins are minted to bring stabilization in Terra stablecoins that are paired to fiat currencies. At present, Terra offers stablecoins that are pegged to the US dollar, Mongolian tugrik, South Korean won, and basket of currencies in Special Drawing Rights from IMF.
• A Utility Coin: LUNA is a staked token and users can stake rewards without locking up. Staked tokens can also be used as collateral that allows users to borrow half the value of their staked LUNA tokens. LUNA can also be traded on several crypto exchanges such as Bitfinex, Binance, OKEx, and Upbit. Besides, as a utility coin, LUNA allows users to participate in governance votes and to pay network fees. As the Terra platform advanced in the digital financial systems, LUNA is used in building dApps including DeFi protocols.

Disadvantages of LUNA:

• Artificial Price Setting: LUNA has a limitation with a maximum supply of tokens is capped at 1 billion. Excess tokens are burned to maintain the cap. This artificially creates scarcity and inflates the price. This seems obvious from the recent rally in LUNA price wherein Terra’s community DAO passed a proposal to burn as much as 88 million LUNA coins.
• Threat from Centralized Cryptocurrencies: Government of various counties launching their own digital government currencies. Like, China and South Korea intended to bring their own centralized cryptocurrencies. This may negate the significance of stablecoins and LUNA adaption.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, Terra (LUNA) perpetual futures may witness movement in the downside direction. The trend looks to be in an interesting space and the currency looks ‘Non-Attractive’ and might witness correction given the current price of USD 48.568 (as on February 03, 2022, at 06:35 PM, (GMT+11) Time in Sydney NSW, Australia. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios.

ChainLink (LINK):

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

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.

LINK Technical Analysis Summary (On the Daily Chart):

Daily Chart

On the daily chart, ChainLink prices are sustaining above the horizontal trend line at USD 13.49 level and taking support of the trendline. Moreover, the leading indicator RSI (14-period) is trading near an oversold zone at ~34.95 level and formed the positive divergence, which indicate the possibility of a rebound in the prices from the lower levels. 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 is showing the positive sign, indicating a bullish bias. Moreover, 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 18.20, and prices may test that level in the coming sessions (1-2 weeks).

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

Key Positives:

• Growing Significance: LINK is a cryptocurrency that aims to incentivize a network of computers globally to provide real-world data to smart contracts running over the blockchains. With Chainlink 2.0, hybrid contracts can be executed taking information from off-chain networks.
• LINK Tokens: The data feeds from oracle helps to execute the smart contracts in blockchain. To incentivize the data accuracy, LINK tokens (ERC677 tokens) were paid to node operators in the Oracle network. Smart contracts enhance blockchains that can execute tamper-proof code, besides storing the tamper-proof data.
• Efficient and Secured Smart Contracts: Chainlink’s high-quality node network securely validates the data computations from off-chain sources with more scalability and runs smart contracts efficiently. The decentralized computation provides reliable and secured applications.

Key Negatives:

• Decentralized Data: Chainlink relies upon the oracle network. With the limited number of oracles, the data can be more decentralized. Also, the development speed is lower which may affect the real working solution for executing financial transactions.
• Limited Supply: Out of the total, only 45% of LINK tokens are currently under circulation (according to CoinMarketCap). The others are held as rewards to node operators and tokens placed under smart contracts.
• Fee-based: LINK Tokens runs on Ethereum and charges a fee to those participating in transactions. Unlike Bitcoin, it doesn’t have a lifetime limit on the number of coins and hence this may affect the price.

Conclusion:

Based on the above-mentioned price action analysis and technical indicators outlook, LINK 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 15.33 (as on February 03, 2022, at 09:10 PM, (GMT+11) Time in Sydney NSW, Australia. However, volatility in the price should be borne in mind when looking at further evaluation for investment scenarios.

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 February 03, 2022, at 06:35 pm, (GMT-5) 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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