It has been a tumultuous year for the crypto investors who have witnessed the total crypto market capitalization tumble from about $2.2 trillion at the beginning of 2022 to about $850 billion in December. The sharp erosion in valuation was caused due to several high-profile bankruptcies in 2022.
The entire Terra ecosystem imploded with the collapse of its LUNA token and TerraUSD (UST) stablecoin. The failure of Three Arrows Capital followed this black swan event, and the final blow came as FTX underwent a bank run and imploded. These back-to-back events triggered a liquidity and credit crunch and appear to have caused the most damage to the crypto industry.
A prolonged bear market tends to test investors’ patience, but it offers one of the best opportunities to buy fundamentally sound cryptocurrencies at lower levels. Smart investors who can go against the herd and invest during periods of panic tend to benefit the most when the trend eventually turns.
While a bear market is a great time to build a portfolio, traders tend to make the mistake of buying the coins that have fallen the most in the hope that they will recover to their previous glory. Most times that does not happen because every bull market has a new set of leaders. Generally, the ones that are resilient during the fall or recover quickly from the bottom tend to lead on the way up.
Let’s look at five cryptocurrencies that are showing promise for 2023.
The broader cryptocurrency market is unlikely to start a new bull phase until Bitcoin (BTC) stages a turnaround. Although Bitcoin has been in a strong downtrend for the past several months, the relative strength index (RSI) is forming a positive divergence, indicating that the bearish momentum may be weakening.
However, a positive divergence must have favorable price action to confirm a trend change.
The first sign of strength will be a break and close above the 20-week exponential moving average (EMA) of $19,870. The BTC/USDT pair could rally to $25,211, where the bears may mount a strong defense again.
If the price turns down from this level, then rebounds off the 20-week EMA, it will signal a change in sentiment from selling on rallies to buying on dips. That could increase the possibility of a break above $25,211.
The pair could then rise to the 50-week simple moving average (SMA) of $28,156. This remains the key level for the bears to defend because a break above it could suggest the start of a new uptrend. Bears may face a minor hurdle near $32,400, but that is likely to be crossed, and the pair could rise to $50,000.
However, the downtrend could resume if the price turns down from the current level or the 20-week EMA and breaks below $15,476. The next major support on the downside is $12,500 and $10,000.
The pair has been trading below the breakdown level of $17,622 for several days, but bears have failed to take advantage and resume the downtrend. This suggests that selling dries up at lower levels.
The 20-day EMA ($17,021) has flattened out and the RSI is near the midpoint, indicating that the bears may be losing their grip.
If buyers thrust the price above the overhead resistance, it will signal a potential trend change. A confirmation will happen after bulls flip the $17,622 level into support. That could lay the groundwork for a rally to $25,211.
Ether (ETH) has been in a strong downtrend, but a minor positive is that it is finding support near the psychological level of $1,000. The repeated rallies to the 20-week EMA ($1,428) also indicate sporadic buying by the bulls.
Although three rallies in the past few weeks have faced rejection at the 20-week EMA, the bears have failed to pull the ETH/USDT pair to the June low of $881, suggesting traders are buying the dips.
If bulls push and sustain the price above the 20-week EMA, several bears may cover their short positions. That could result in a rally to the overhead resistance at $2,030. The 50-week SMA ($1,977) is nearby; hence, this level may be a major obstacle for the bulls.
If buyers propel the price above $2,030, the pair will complete a double bottom pattern. This reversal setup has a target objective of $3,200, but the rally could extend to $3,600. The zone between $3,600 and $4,000 could prove to be a major barrier for the bulls.
If bears want to invalidate this bullish view, they will have to sink and sustain the price below $881.
The pair has been trading inside a descending channel pattern, but with the 20-day EMA ($1,255) flattening out, the RSI is near the midpoint. This suggests that the buyers are attempting a comeback.
If bulls push the price above the 50-day SMA ($1,326), the pair could rise to the resistance line of the channel. This is the key level to watch out for because a break above it will suggest that the downtrend could be ending. The pair could then rise to $1,800 and thereafter to $2,030.
On the contrary, if the price turns down from the current level or the overhead resistance, the bears will try to pull the pair to the channel’s support line.
Several major cryptocurrencies are trading or have been threatening to break below their June low, but Polygon (MATIC) has been an outperformer as it is trying to form a base well above its yearly low.
The MATIC/USDT pair nudged above the 50-week SMA ($1.05) a few weeks ago, but the bulls could not sustain the breakout. This suggests that bears are active at higher levels. An encouraging sign is that the bulls did not allow the price to break below the crucial support at $0.69.
The 20-week EMA ($0.88) has flattened out and the RSI is near the center, indicating a balance between supply and demand. The first sign of strength will be a break above $1.05. That could increase the likelihood of a retest of $1.30. This is an important level for the bears to defend because a break above it could signal the start of a new uptrend.
The pair could rally to $1.75, where the bears may pose a strong challenge again. If this resistance is crossed, the pair could pick up momentum and soar to $2.92. The bears will gain the upper hand if they sink the price below $0.69. That could clear the path for a drop to $0.31.
The pair has been stuck between $1.05 and $0.69 for several days. The breakout above $1.05 on Nov. 4 proved to be a trap as the bears pulled the price back below $1.05 on Nov. 8. Since then, the pair has continued its range-bound action.
The longer the price stays stuck inside the range, the stronger its breakout. The next break above $1.05 could enhance the prospects of a rally above $1.30. If that happens, the bullish momentum could pick up and the pair may climb to the psychological level of $2.
Alternatively, a break below $0.69 could tilt the advantage in favor of the bears. The pair could first drop to $0.40 and then retest the vital support of $0.31.
Related: Bitcoin traders cross fingers in hopes that a positive Fed meeting triggers a run to $18K
Toncoin (TON) has been gradually pulling higher since the June low of $0.74. Traders put in a higher low at $1.18 in October, which is a sign of strength.
The up-move in the TON/USDT pair has reached the overhead resistance zone between $2.15 and $2.50. The bears will strive to stop the march by the bulls in this zone. If they do that, the pair could drop to the 20-week EMA ($1.61) and then to $1.18. If this support gives way, the pair could retest its June low of $0.74.
If bulls want to maintain their advantage, they will have to bulldoze their way through the overhead zone. The pair could attract huge buying if it sustains above $2.50 as it has no major overhead resistance above this level. The next stop on the upside could be $4.26.
The bulls tried to push the price above $2.15 on Dec. 11 but the bears held their ground as seen from the long wick on the day’s candlestick. However, the bulls did not give up ground and are again trying to break above the overhead resistance on Dec. 12.
The upsloping moving averages and the RSI in the overbought zone indicate that the path of least resistance is to the upside. Above $2.15, the pair could rally to $2.50.
This level may act as resistance on the way down. But if bulls flip the $2.15 level into support, it will increase the chances of a break above $2.50.
The bears will have to pull and sustain the price below the moving averages to weaken the short-term strength. The pair could then drop to $1.50 and later to $1.20.
Quant (QNT) soared from $40 in June to $228 in October. This sharp rally in the midst of the bear phase indicates strong demand from traders. Although the price has given back a large part of its gains, buyers are trying to form a higher low near $87.
After the volatile moves of the past few weeks, the QNT/USDT pair is likely to enter a consolidation phase where the bulls and the bears battle it out for supremacy. The boundaries for the wide range may be $87 on the downside and $228 on the upside.
A well-defined range offers an opportunity for traders to buy near the support and book profits close to the resistance.
If bulls kick the price above $228, the pair could speed up and soar to $325. This level could act as a roadblock, but if cleared, the pair could retest the high at $430.
If the price turns down and breaks below $87, it will suggest that bears are in command. The pair could then plummet to $50.
After the sharp fall from $228 to $94, the pair may spend some time in a range. The important level to watch on the upside is $137, and $94 on the downside.
If bulls push the price above $137, the pair could rally to the 61.8% Fibonacci retracement level at $176. The bears are expected to aggressively defend this level because a break above it could complete a 100% retracement, resulting in a rally to $228.
However, if the price breaks and sustains below $94 in the near term, it could indicate a resumption of the downtrend.
The views, thoughts and opinions expressed here are the authors’ alone and do not necessarily reflect or represent the views and opinions of Cointelegraph.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, and readers should conduct their own research when making a decision.