A master of cryptocurrencies shares three charts
Winter seems to be coming to an end, both in the northern hemisphere and the cryptocurrency market. In late January, cryptocurrency chart maker Forrest Przybysz couldn't rule out the possibility of crypto winter, a bear market where enthusiasm and investment dry up for cryptocurrency companies and tokens. And while the founder and CEO of cryptocurrency software company CryptoStackers still can't rule out a possible downturn, he notes that interest is picking up again.
Bitcoin, the most significant token by market capitalization, has advanced 22% from its mid-March lows. The original cryptocurrency is often considered a barometer for smaller cryptocurrencies. Indeed, significant altcoins, such as ether la Solana, have risen 31% and 55%, respectively, in that period. For context, bitcoin and ether are still 30% off their all-time highs, while Solana is up 53%. Cryptocurrency skeptics have warned that these wild swings are a textbook sign of a bubble. And - perhaps surprisingly - Przybysz would agree. The former head of cryptocurrency research at Token Metrics has told Business Insider in a recent interview that, just like last fall, digital tokens are in a bubble.
"I think the market is extremely speculative," Przybysz comments. "I compare it to the dotcom boom." In the late 1990s, investors were euphoric about the internet's potential to change the world. And, as both Przybysz and MI2 Partners principal Julian Bridgen recently explained to Business Insider, they were right. The problem is that they were too early to the party. As a result, buying dotcom stocks in the early 2000s was a bad bet, as most tech companies tanked or saw their shares plunge.
"When you think back to the dotcom boom, and you look at pets.com or dogs.com-any crazy domain-it had no business plan and super-high valuations just because it was the dotcom boom," Przybysz says. "It was a speculation-driven market. But what emerged after the dotcom bubble burst was a real demand for a utility that did emerge."
Just over 20 years later, Przybysz sees a parallel between dotcom companies and cryptocurrencies, although that does not diminish the potential. He notes that many cryptocurrencies will likely disappear due to weak use cases, just like the dotcom bubble companies that don't have a viable plan. But also note that Amazon and Alphabet, Google's parent company, survived the dotcom bust and now dominate.
Where are cryptocurrencies headed? Check the charts
Suppose Przybysz believes that history repeats itself when a cryptocurrency washout causes many tokens to disappear while a lucky few survive and thrive. In that case, the multi-billion dollar question is: Which cryptocurrencies will be the winners? That's impossible to know, but many believe that today's most prominent cryptocurrency players will likely be leaders in the future rather than being displaced, as Yahoo and AOL were. Although Przybysz favors a trio of relatively unproven altcoins, the three cryptocurrency charts he chooses to discuss are three closely followed ones: bitcoin, ether, and Solana. The charts are handy for analyzing cryptocurrencies because traditional valuation metrics used for stocks, such as price-to-earnings ratios, do not apply to digital assets. This makes cryptocurrencies difficult to value and highly volatile. Bitcoin has not soared to the lofty heights Przybysz once predicted, but the technical analyst has been remarkably accurate in his forecasts for the token. At the end of January, its price bottomed at just over $35,000, right on the edge of what Przybysz had called "bubble territory." And the cryptocurrency has remained cleanly in the $30,000 to $40,000 range he predicted.
"We've hit the nail on the head in terms of buying and market timing," Przybysz asserts, adding that he personally "aggressively" bought bitcoin dips in the early months of 2022. The current outlook for bitcoin is rosy, as he believes investors will continue to diversify away from the U.S. dollar, with inflation at 40-year highs. Although the original cryptocurrency has yet to show signs of acting as a hedge against inflation, Przybysz believes that may change. The chart expert says bitcoin is undervalued relative to itself and can continue its run. "We've passed a major resistance at $46,000," Przybysz acknowledges. "And I expect a bit of a chop here in the near term between probably $45,000 and $53,000 to give you an extra $1,000 anywhere. But our levels are $46,000 and $52,000 right now. $49,000 is a great resistance level as well."
Ether, the native token of the Ethereum blockchain, can rise from $3,400 and reach an overextension target of $5,200 to $7,000 if it can maintain its positive momentum, according to Przybysz. A network upgrade for the crypto called "Ethereum 2.0" will reduce supply and may push the token into the $5,000 to $10,000 range in the long term, notes the CryptoStackers CEO. According to Przybysz's charts, Solana, which advocates have labeled an "Ethereum killer" because of its lower rates, can rise from $125 to $220 to $294. One has to buy dips below $100.