Top 5 cryptocurrencies to watch this week: BTC, ETH, DOT, BNB, UNI

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Bitcoin (BTC) has consistently been hitting new all-time highs over the weekend, but the latest surge has also created a new high against gold, according to MarketWatch data. This suggests that Bitcoin has been gaining acceptance as the new store of value and that may attract more customers away from gold into Bitcoin. 

Analysts suggest that the latest rally above $30,000 could have been triggered by aggressive buying from institutional investors on Coinbase, as suggested by the large premium of about $350 compared to the price in Binance.

With the latest rally, Bitcoin hit a market capitalization of over $640 billion today, just shy of Alibaba, the ninth-largest company in terms of market cap, at $649.31 billion. Meanwhile, breaking $30,000 could be creating FOMO among institutional investors who have missed buying Bitcoin at lower levels.

Crypto market data daily view. Source: Coin360

However, this buying will need to sustain to keep the uptrend intact because if the rally stalls, some institutional investors and momentum traders who have purchased at lower levels may be tempted to book profits.

If that happens, it could pull the price down quickly and turn the recent purchases by investors into a loss, resulting in a rush to the exit. Therefore, traders must be cautious and employ proper risk management strategies to protect their paper profits.

Meanwhile, let’s look at the charts of top-five cryptocurrencies that could extend their up-move if the sentiment remains bullish

BTC/USD

Bitcoin broke above the $30,000 overhead resistance on Jan. 2 and picked up momentum, which could have been due to a short squeeze and continued buying from the momentum traders.

BTC/USDT daily chart. Source: TradingView

While a parabolic rally provides outsized returns within a short time, it also increases the possibility of a sharp reversal that may catch many traders off guard because after such a strong up-move, the price could retrace anywhere between 62% to 79% of the entire rally.

If that happens, the BTC/USD pair could drop to the $20,000 mark, or a drop of over 30%, which at the moment looks unimaginable.

In a melt-up, it is difficult to predict the level where the rally may end because traders continue to chase prices higher due to FOMO. The next technical level which may act as a resistance is $37,000.

Shorting a rally because it is overbought on all time frames could be a losing proposition because, during a blowoff top, the price could continue to remain overbought for much longer than most traders expect.

But traders who own long positions should use proper risk management principles to protect their paper profits and not get carried away by greed.

BTC/USDT 4-hour chart. Source: TradingView

The 4-hour chart shows that the bulls are buying on dips to the 20-exponential moving average. The bears have not been able to break the 50-simple moving average support since the price broke above $20,000.

Thus, the first sign of weakness will be a break below the 20-EMA. Such a move will suggest that traders may be booking profits after the sharp rally. A deeper correction below the 50-SMA may signal a possible change in trend.

There is a major resistance at $37,000 but if that is crossed, the rally could reach $40,000, which could again act as a stiff resistance.

 

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