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The last few days in the cryptocurrency market have been marked by increased volatility, mainly due to the events surrounding the collapse of the Silicon Valley bank. In theory, risk aversion should lead to a sell-off in digital currencies. But it seems like investors are in a risk-on mode.
The strong upward momentum that we are seeing, especially in popular currencies like Bitcoin and Ethereum (the strongest growth in the last seven days among the top 10 digital currencies by market cap), is due to the market's expectation of what the Fed might do in the next meeting.
It is very likely that the Federal Reserve, in an effort to calm the markets, will abandon plans to raise interest rates by 50 bps and opt for a smaller move of 25 bps or not raise rates at all.
Higher volatility is a time when interesting technical formations appear. Here are the top three formations in cryptos:
Since last June, Bitcoin prices have been forming an inverted head-and-shoulders formation, which should signal a trend reversal. But the demand side has managed to attack the potential neckline in the $25,000 area as a result of the recent upward impulse.
If we see a breakout to the upside, the next target is already above $30,000. This is where an important resistance area lies. For now, however, we can see from the strong rejection that the supply side is defending the aforementioned resistance area, resulting in the long upper shadow of the last candle.
We will talk about a possible negation of the formation if the price goes below the right shoulder, i.e., breaking $20,000. However, given the market's expectations of the Fed's decision, the bullish scenario is more likely.
After a strong rally in late 2021 and early 2022, Cosmos spent the next few months in a deep correction.
Currently, there is a consolidation with a slight uptrend in the form of a wedge. The breakout of this formation should have an impact on the medium-term direction of the price.
The bulls will target the $22 area in case of a breakout to the upside. Cosmos could move towards the June low in the $6 area in case of a break lower.
The flag formation is one of the most popular technical patterns. It usually takes the form of a corrective move relative to a previous impulse.
Such a situation can be found on the Ripple's chart, where there's been a local downtrend since the second half of January. As with Cosmos, an upward breakout can be treated as a bullish signal.
In this case, the targets for the demand side coincide with this year's highs, which fall roughly near the level of 0.43. Breaking through this area opens up the potential to attack a strong supply zone located just below $0.50.
Negating the flag will most likely lead to a retest of the repeatedly defended 0.32 area.
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Disclosure: The author does not own any of the securities mentioned.
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