The tokens of protocols offering attractive trading products and services have benefited from the bullish sentiment surrounding Bitcoin’s rally to multi-year highs.
Bitcoin price may have taken a temporary breather but the sharp correction below $30,000 did little to dismay the bullish sentiment of crypto market participants.
The CME Bitcoin futures market reached an all-time high volume at $2.7 billion on Jan. 4 and the same day, LMAX Digital also achieved a record-high at $2.62 billion in traded volume. This huge surge in trading activity suggests institutional investors are continuing to invest in Bitcoin (BTC).
Due to institutional adoption, analysts believe that Bitcoin could rally as high as $100,000 in 2021. However, JPMorgan Chase analysts led by Nikolaos Panigirtzoglou have a slightly different view as they believe Bitcoin’s volatility must converge with that of gold to result in a “crowding out of gold.” Until then, the analysts do not expect Bitcoin to rise above $146,000 this year.
Even as Bitcoin takes a breather from its recent uptrend, there are a few tokens that have continued their up-move unabated. Let’s inspect the possible fundamental reasons behind their rally and ascertain the technical levels to watch out for.
Ether’s price has surged in the past few days and so has the activity on the Ethereum network. This has boosted gas fees on the network by a huge margin. While the higher fees may not trouble the wealthy, the smaller traders are likely to find it difficult to do lower-valued transactions.
To save on the skyrocketing gas fees, traders seem to have onboarded Loorpring (LRC), which saw boosted trading volume on its decentralized exchange, and data from Dune Analytics shows the figure rose to $5.49 million.
It is only recently that Loopring Exchange v2 was launched based on Loopring Protocol 3.6, and considering. the current market-wide rally and surge in ETH gas fees, it could not have come at a better time.
The team also plans to launch AMM liquidity mining and a few other programs on Jan. 7 to boost adoption of zkRollup layer-2 scalability and increase liquidity, According to Loopring’s estimation, the annualized returns of the initial three AMM pools could be as high as 40%.
If trading activity remains high, the Ethereum network’s congestion may not ease quickly and that could work in Loopring’s favor. Let’s see how its token has responded to this positive fundamental development.
LRC price skyrocketed from $0.175 on Jan. 3 to an intraday high at $0.585 today, a 234% rally within three days. This surge has pushed the RSI deep into the overbought territory, which suggests an increased risk of a minor pullback or consolidation.
The LRC/USD pair is currently facing a minor resistance close to the 200% Fibonacci extension level at $0.58952.
However, if the bulls continue their buying and push the price above $0.509, the rally could extend to the 261.8% extension level at $0.73617 and then the 300% extension level at $0.82681.
In a strong uptrend, the corrections are sharp and short-lived. The first support on the downside is the 38.2% Fibonacci retracement level of the most recent leg of the up-move at $0.42838.
A strong rebound off this level will suggest that traders are aggressively buying on dips without waiting for a deeper correction and that may enhance the prospects of resumption of the uptrend.
This bullish momentum may weaken if the pair breaks below the 50% retracement level at $0.38.
In a trending market, traders smell an opportunity to make oversized returns by using leverage. While futures can be an attractive proposition, it is also risky because an increase in volatility or a sharp reversal could result in large losses if timely steps are not taken to square up or adjust the position.
During such times, when the market is on a tear, traders prefer to use options as they have limited risk but large profit potential due to leverage.
Other than this, several experienced traders also use options to hedge their futures positions or their spot purchases if they are in large quantities. This seems to have benefited the Hegic (HEGIC) options trading protocol, which traded record options volumes on Jan. 3.
Token owners who do not want to trade options may benefit by providing liquidity to one of the pools on Hegic and earn rewards.
HEGIC has rallied from an intraday low at $0.0751 to an intraday high at $0.25 today, a 232% rally in just over a week. The sharp recovery from the recent lows suggests aggressive buying by the bulls.
If the bulls can sustain the price above $0.24, it will complete a V bottom that has a pattern target of $0.4049.
However, if the bulls fail to sustain the HEGIC/USD pair above $0.24, a drop to $0.18 is possible. If the price turns up from this level, the bulls will again try to resume the uptrend. If they succeed, the pair could form an inverted head and shoulders pattern, which will be a positive sign.
This bullish view will be invalidated if the pair turns down and breaks below $0.16. Such a move could keep the pair range-bound for a few days.
It is not only the crypto markets that have been on a strong bull run, even the U.S. equity markets have risen sharply in 2020. Thus, an exchange that offers varied trading products to its customers is likely to be a beneficiary.
Currently, FTX exchange offers thematic products such as derivative contracts on the U.S. Presidential election, pre-IPO contracts for Airbnb and Coinbase, tokenized stocks of cannabis-focused companies, and the recent addition has been the spot and futures products offered by Grayscale Bitcoin Trust, Grayscale Ethereum Trust, and Bitwise Index. Such a wide array of trading products across several asset classes may have attracted several traders.
Additionally, a recent partnership between FTX and Capitalise.ai that offers clients the opportunity to automate their trading using freestyle text is likely to be a positive as many traders like to use mechanical trading systems to remove the sentiment quotient from trading. Backed by these positives, let’s see how FTX Token (FTT) has performed.
FTT has rallied from an intraday low at $4.552 on Dec. 23 to an intraday high at $8.112 today, a 78% gain within a short time. The long tails on the candlesticks of Jan. 4 and today show that bears tried to reverse the rally but the bulls aggressively purchased the dips.
However, due to the sharp up-move of the past few days, the RSI has risen deep into the overbought territory. This suggests that the FTT/USD pair could be ripe for a consolidation or a minor correction.
On the downside, the bulls may attempt to defend $7 and then the 20-day exponential moving average ($5.83). If the pair rebounds off either support, it will suggest that the sentiment remains positive and that the bulls are buying on dips.
On the upside, the bulls are likely to face a stiff hurdle at the psychological resistance near $10 but if the level is crossed, the next stop could be $12.
This bullish view will invalidate if the price turns down and breaks below the 20-day EMA. Such a move will suggest aggressive profit booking by the traders and a lack of buying support at lower levels.
The views and opinions expressed here are solely those of the author and do not necessarily reflect the views of Cointelegraph. Every investment and trading move involves risk, you should conduct your own research when making a decision.