Cryptocurrencies have become increasingly popular among investors, prompting research on their price predictability and profitability. Many studies focus on their relationships to various determinants of investor behavior such as connectedness, contagion, and tail spillover (Bouri et al. 2022).
We study the time dynamics of cryptocurrency returns and volatility indices over time and find that cryptocurrencies exhibit strong predictive power for these indices – an observation which confirms other research’s finding of significant cross-variance spillover between markets.
Price Forecast
Ethereum saw a minor uptick against the US Dollar but failed to break through $860 resistance, eventually dropping beneath the $850 level and stabilizing when buyers entered and prevented further declines.
This week, Litecoin’s price saw an uptick, though it failed to breach $95 resistance. Instead, it is more likely that Litecoin will test support at $81 again.
Cardano prices were on an upward trend this week but were unable to break through its resistance of $0.36. Breaking this resistance will help resume Cardano’s upward momentum; be wary when investing too much of your own capital in such volatile markets!
Technical Analysis
Cryptocurrencies like Litecoin have been on an impressive recovery drive since March and are inching back toward three-digit valuations. A potential barrier may lie around $820-825 but an opportunity may exist at $81 as support.
Ripple (XRP) digital currency facilitates enterprises in conducting high-volume, low-value transactions without incurring transaction fees, saving accountants and transaction officers both time and effort in doing so. Furthermore, transactions in XRP settle within four seconds, as opposed to bitcoin’s two hour transaction timeframe.
LTC and XRP have managed to retain investors despite difficult market conditions characterized by prolonged price declines and pessimism thanks to their distinctive features and offerings. TOADS, for instance, is an innovative project which plans on creating an NFT marketplace and trading contests; such features are drawing in investors on dips – making the cryptocurrency more resilient against bear runs than before and offering lucrative rewards to its holders!
Fundamental Analysis
The cryptocurrency market can be unpredictable and its future uncertain; investors should conduct thorough due diligence on any coin or token before investing. To diversify a portfolio more successfully, investors may choose several coins that offer distinct value propositions and invest in these as separate coins and tokens.
Ripple positions itself as an international payments solution for large financial institutions, promising to expedite transactions that currently take days and incur expensive fees from banks – potentially driving demand for the digital currency.
This study investigates the tail spillover effects of cryptocurrencies with respect to volatility dynamics in gold, oil and equity markets by using high-frequency data. Our analysis shows that, with the exception of XRP returns positively predict returns on other cryptocurrencies. Moreover, system shocks were transmitted pairwise from BTC returns positively predict returns on other cryptocurrencies to volatility indices in their lower quantile, thus representing bearish market conditions. Furthermore, we demonstrate dynamic spillover size/direction/connectivity within and between uncertainty indices for calm/bullish market states using high frequency data analysis.
Market Cap
Cryptocurrencies offer a novel means to transfer value over a decentralized network of users. While designed to avoid government influence and control, cryptocurrency can also be misused illicitly for money laundering and terrorist financing purposes.
Bitcoin currently boasts an estimated market value of $200 billion while gold’s stands at roughly $9 trillion. Gemini co-founder Tyler Winklevoss predicts that eventually bitcoin will surpass gold as its superiority.
The Litecoin price saw a decrease this week, but could recover next week and surpass $95 resistance level if buyers show up again. Should this continue happening then three-digit valuation could occur by late 2023.
CoinMarketCap recently reported that Ripple prices have plummeted 80% since their all-time high of $3.32 set in January, providing investors with a great opportunity to acquire it at discounted rates. Ripple offers faster transaction speeds than most cryptocurrencies (with claims it is even faster than bitcoin!) while being designed as more cost effective alternative than traditional wire transfers.
