While it is unclear where the markets will ultimately go, it is ideal to gather perspective on the best and worst-case scenarios for the top three altcoins by market cap—Ethereum, XRP, and Litecoin—to protect against uncertainty.
The meltdown seen across most financial markets, including the cryptocurrency industry, sent investors into a state of panic. But what about altcoins?
The Worst-Case Scenario
Over the past week, the Crypto Fear and Greed Index (CFGI) has been indicating extreme levels of fear in the cryptocurrency market.
This fundamental indicator analyzes emotion and sentiment among investors from different sources, such as volatility, social media posts, and trends.
Based on these data sets, the CFGI recently reached a value of 8 (extreme fear), which is the lowest it has been since August 2019.
The high level of commotion in the market appears to be related to the probability that most digital assets in the industry could experience a further decline. In fact, the top three altcoins by market capitalization—Ethereum, XRP, and Litecoin—are developing massive bearish patterns within their respective weekly charts that could be catastrophic to many portfolios.
Ethereum, for instance, seems to be forming a symmetrical triangle on its 1-week chart that suggests an 83% retracement upon the breakout point. This target is given by measuring the distance between the initial high and low of the pattern and adding it to the breakout point.
A break below the lower trendline of the symmetrical triangle could trigger a full-blown trend reversal from bullish to bearish taking ETH to $24.5 or $20.5.
Along the same lines, Ripple’s XRP appears to be sitting on top of “white space,” according to 45-year trading veteran Peter Brandt.
A spike in the selling pressure behind this cryptocurrency around the current price levels could see it plummet to $0.061, $0.031, or even $0.009.
Meanwhile, Litecoin could be creating a descending triangle in its weekly chart as a direct consequence of its price action since mid-2018. A descending trendline can be drawn around the series of lower highs while a horizontal support line connects the swing lows.
This bearish formation suggests that LTC could see its price depreciate by 90% following a weekly candlestick close below the $25.5 support level. Such a downward impulse could see Litecoin go as low as $2.5 if the pattern is validated.
This target is determined by measuring the height of the descending triangle at its thickest point and adding that distance to the breakout point.
The Best Case Scenario
Although most financial markets around the world have suffered from the widespread transmission of coronavirus and the disagreement sparked between OPEC and Russia, the recent downturn could represent an opportunity to be “greedy when others are fearful.”
Under this premise, a sudden spike in demand for Ether could see its price bounce off the lower trendline of the symmetrical triangle to the upper boundary. Around that price level, a further increase in the buying pressure behind it could see the number two crypto breakout in an upward direction off the symmetrical triangle.
The bullish momentum could trigger a stage of FOMO (fear-of-missing-out) among market participants who would likely rush to buy more ETH. If this happens, Etherum could surge over 170% upon the breakout point to reach $667.
While the upside target is well-defined for Ether, XRP is not so clear.
This is the result of the bearish trend it entered after peaking at $3.3 in January 2018. Since then, this cryptocurrency has been making a series of lower highs and lower lows that pushed it to prices not seen since May 2017.
Therefore, the best thing that could happen to XRP is to make a higher high for the first time since early 2018 that allows it to break out of the downtrend it entered after the peak.
Finally, the descending triangle that is developing on Litecoin’s 1-week chart can also form a reversal pattern to a downtrend. If this is the case, LTC could be bouncing off the $25.5 support level to try to break above the hypotenuse of the triangle.
Breaking above this resistance cluster could see it rise by nearly 6x to a new all-time high of $400.
Intermediate Outlook for Altcoins
It is worth noting that the different outlooks presented above could take weeks or even several months to materialize. While they all present big opportunities to profit regardless of the outcome, it would be ideal to determine what would happen to these three cryptocurrencies in the near future.
Based on its 4-hour chart, Ethereum appears to be breaking out of a symmetrical triangle. A further increase in the buying pressure behind it could validate the 40% upside target presented by this technical formation. Such a bullish impulse could soon take Ether to $168.
Like Ether, XRP also seems to be breaking out. It recently moved above its 30-four-hour exponential moving average. A continuation of the bullish momentum seen in the last few hours suggests a test of the next level of resistance.
This barrier is represented by the 100-four-hour EMA that sits around $0.18.
In the meantime, Litecoin seems to be contained within a no-trade zone defined by the Bollinger bands on its 4-hour chart. Breaking above the upper or lower band would determine where this crypto is headed next.
On the upside, LTC could surge to the 38.2% Fibonacci retracement level that sits at $47.5. However, a sudden spike in the selling pressure behind it could see it plummet to the recent low of $25.
Moving Forward with Altcoins
Historically, each time the Crypto Fear and Greed Index (CFGI) senses extreme levels of fear among investors, most digital assets in the market tend to rebound and resume their respective uptrends.
In August 2019, for instance, the CFGI reached a value of 5 (extreme fear), which was followed by a 17% upswing in Bitcoin’s price. Now, a similar outlook could be taking place.
Indeed, this could be the opportunity that sidelined investors have been waiting for to get back into the market, according to the former Wall Street trader and VP at JP Morgan Chase Tone Vays. Vays recently pointed out that he would rather be long than short under the current market conditions.
“For those that ‘Bought the Dip’ under $4k, lock it down as HODL. For those that missed it, I am comfortable buying it here,” said Vays.
Now, it remains to be seen whether the bearish or bullish scenarios presented above would come true.