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Speculative Stocks and Altcoins – Two Peas in a Pod?

Speculative stocks in the traditional market are the stocks that traders “speculate” on which possess no apparent strength, good fundamentals and business models. This type of stocks, while highly risky, can offer massive returns when the timing is right. In the crypto space, the so-called speculative stocks pose many resemblances to the smaller cap alternative coins dubbed the “Altcoins.” 

During the past few months, these small market capitalization Altcoins, especially the ones tied-up with the DeFi hype, have greatly outperformed Bitcoin and other higher-cap projects. Moreover, when small projects get listed on large cryptocurrency exchanges, this often opens a flood gate for a stream of liquidity, which subsequently drives up the prices of these assets. We recently saw a good example of this with Compound (COMP) and Algorand (ALGO.)

Major news and partnerships can also send the growth of small-cap projects skyrocketing even if that project seems to be underperforming or lacking in any sort of bullish price structure. We recently witnessed this when Stellar Lumens (XLM) announced its integration into Samsung’s Blockchain Keystore and following that, the price of XLM jumped more than 16% in just a few days.

With all that said, the nature of speculative stocks and Altcoins is that prices often go up in a short burst and cannot maintain the upward momentum for an extended period of time.

The fundamental differences between speculative and investment vehicles can be identifiable with the duration of an uptrend. Will the surge in price be like fireworks shining bright just for a brief moment then slowly fade away into the night sky or could it be something actually long-lasting and sustainable?

At the moment, the cryptocurrency bellwether Bitcoin is still trending sideways. The low volatility has driven speculators and traders to higher volatile assets where there are strong price actions in any of the directions, thus creating possibilities for profit-making trades.

Bitcoin Technical Analysis

Since the creation of the 2020’s yearly top at $10,500, Bitcoin (BTC) is clearer being pushed down by an overhead downtrend. A series of lower-highs are being created and this is driving BTC into an apex of a descending triangle.

At the moment, the 89 days exponential moving average (89EMA) is playing the role of short term support at $8,900, while breaking below $8,500 could destructure the accumulation period and cause BTC to flip bearish once again. 

The strategy for BTC trading in a sideways manner is by implementing a channel trade between resistances and supports. Without the break above of the formidable $10,500, BTC can never be fully bullish.

The SCN30 Index has recently created a new local high at 165 points benefitting from the surge in prices of Cardano (ADA), ChainLink (LINK), and Stellar Lumens (XLM.) However, with its most weighted Altcoin Ethereum (ETH) not moving much, the index is struggling to go any higher.

Moreover, as DeFi projects gain momentum in the space, we might be able to see additional DeFi projects apart from Maker (MKR) being listed on the SCN30 list of constituents in the near future.

Disclaimer: This analysis is the view of the author’s alone, and does not in any way represent trading advice. all traders should trade at their own risk.
You may also want to read: Altcoins and DeFi See Growth as Bitcoin Loses Its Charm

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© Copyright of Novum Global Consultancy Pte Ltd {2020, 2021}. All rights reserved.

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