Could the big gains lie away from bitcoin in the crypto recovery?

Bitcoin cash, ripple and ether have enjoyed a bullish two months, with crypto traders expected to look beyond just bitcoin when seeking to take advantage of the recent crypto recovery.

Cryptocurrencies Source: Bloomberg

The cryptocurrency space has been the big outperformer over the course of the past two months, with bitcoin (96%) and bitcoin cash (158%) leading the way over that period.

Gains over past two-months chart

Gains over past two-months chart

Source: IG charts

Bitcoin is typically seen as the safest of the major cryptos, with the price of this giant unsurprisingly rising, gaining traction ahead of many others. Much like a bluechip stock, bitcoin also lost less ground than most over the course of this protracted sell-off.

Percentage below record highs chart

Percentage below record highs chart

Source: IG charts

However, while we have seen this impressive recovery for bitcoin, there will be many who see this as the starting gun for a wider recovery in the cryptocurrency space. Just as we have seen bitcoin lose less ground than many of its peers, the upside could also be dwarfed by some of the smaller, more risky coins. Using the prior highs as a proxy for potential future gains, we can see that there is a substantial amount to be gained if we saw the market fully take hold in the manner seen at the end of 2017.

The table below highlights the differential for some of the top currencies out there, with bitcoin cash once again showing up as a coin with huge upside potential.

Upside to record highs chart

Upside to record highs chart

Source: IG charts

Bitcoin cash price surge remains short of key resistance

With that clear appeal, we can take a look at the obvious market of most appeal; bitcoin cash. The weekly chart highlights the fact that technically, the downtrend remains in place with the creation of lower highs only invalidated with a break through 637. With the price rallying into the zone between the 61.8% and 76.4% Fibonacci retracements, there is a chance that the sellers could come back into play soon enough.

Bitcoin cash weekly chart Source: ProRealTime

Bitcoin cash weekly chart Source: ProRealTime


The daily time frame provides us with more granular detail, with the price moving higher in waves since the bottoming out process evident throughout quarter one (Q1) 2019. Now that we have a more supportive environment in play, the ability to break through this Fibonacci zone between 422 and 504 will be crucial.

A rise above 637 is certainly the key signal for bulls, yet a rise above 504 would also sign that we could be seeing something more bullish than simply a retracement. With the current momentum picture looking relatively overbought (stochastic oscillator), there is a chance we could pull back should the price fall below trendline support. However, such a move would be expected to provide a short-term drop, with a wider bearish picture only coming in the event of a break below the 229 swing low.

Bitcoin cash daily chart Source: ProRealTime

Bitcoin cash daily chart Source: ProRealTime

Ripple price managed to break out of downtrend

Ripple is another major currency that looks appealing when looking at the sheer size of the sell-off. Unlike bitcoin cash, we can see that ripple has managed to break out from its downtrend, with the rally through 38 providing a clear break from the norm.

We could see a pullback over the near term, yet the 28 level looks like a clear floor below which to put any stops. Thus, such downside would simply look like a buying opportunity.

Ripple chart Source: ProRealTime

Ether price matches ripple breakout

Ether has seen over 80% of upside over the course of the past two months, with the price gradually gaining traction to surge sharply in May. The break through 159 certainly sparked more confidence in this upside move. Much like ripple and bitcoin, we have seen a break through key swing high resistance to negate the prior bearish trend.

Much like many of the others, we have a potential retracement coming into play after the recent gains, with the stochastic turning lower for a possible head and shoulders formation. Nonetheless, a bullish picture will remain in play unless the price drops below 147.

Ether chart Source: ProRealTime

Ether chart Source: ProRealTime

In summary, bitcoin cash has both the highest two-month return, and highest possible pay-off to reach the prior record high. However, with bitcoin cash failing to break from its long-term downtrend, the likes of ripple and ether could provide greater confidence of an impending uptrend. For the short term, a retracement does look a distinct possibility, yet this could provide a more advantageous opportunity for crypto bulls.


This information has been prepared by IG, a trading name of IG Markets Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

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