Three Altcoins to Consider in 2023

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The most recent articles Jason and I published discussed the possibility of Bitcoin (BTC-USD) performing bullishly for the rest of 2023. But we don’t expect Bitcoin’s price action to be that clean. If Bitcoin hits six-figure prices over the next year or two, it will do so in a very choppy fashion. I see Bitcoin’s price action from 2018 to today as a big ending diagonal. This means that the leg from $15,500 to my expected $125,000 should take an ABC structure. This is much harder to trade than the five-wave pattern of an impulse, which tends to have higher upside velocity and shallower pullbacks than ABC patterns.

As tough as I expect the price action to be, since its November 2022 low, Bitcoin has printed higher lows on its daily chart with no signs of letting up.

Bitcoin, daily chart (created in Motivewave)

A warning

Before we dive into a few choice altcoins, we need to recognize the risks. First, I liken investing in altcoins to participating in venture capital, but without the legal rights inherent in transactions that VCs participate in. Altcoin investors place bets on projects they are passionate about. However, most of the time, the tokens involved do not offer rights to the cash flows of such projects if they are successful.

That said, I still believe that the crypto industry has spawned many projects that have changed finance forever. As an example, the usefulness of decentralized DEXs has led to their volume eclipsing that of centralized exchanges over the past year. I encourage many such projects. But that doesn’t mean you have to own a DEX token. More often than not, the best way to participate in the fees of DEX traders is to participate in the liquidity pools of those DEXs. Tokens from major DEXs such as Uniswap (UNI-USD), SushiSwap (SUSHI-USD) and PancakeSwap (CAKE-USD), on the whole, have performed very well despite the success of the products they represent.

Jason and I have seen many counts in altcoins fail. They consistently tend not to fill large-scale impulses, often failing in three waves before beginning a trajectory to historic lows. That said, applying Elliott Wave analysis to altcoins is one way to gauge when sentiment is likely to drive prices higher. We were able to make track stops and get out in the event of a breakdown. Trailing stops coupled with regular profit taking lead to a big gain.

That is to say: if you are an investor, do not touch altcoins. Stick with Bitcoin and Ethereum (ETH-USD) as they have proven long-term trends. And, if you’re venturing into altcoins, you need to know when to exit early, sometimes at a loss, when warranted.

Having heard my fair warning, let’s look at three that interest me now.

ImmutableX

ImmutableX is a company that builds web3 infrastructure to create games and NFTs. It is a layer 2 scaling solution on the Ethereum blockchain.

The ImmutableX token, IMX (IMX-USD), is a highly speculative game. It was launched at the beginning of the 2021-22 bear market, in November 2021. Naturally, after its launch, it remained in an unrelenting downward trend until December 2022. This means that there are many serious sellers anxious to get their money back.

However, after printing its all-time low of 37 cents on December 30, 2022, IMX began a strong rally that took it to $1.59 on March 18, 2023. This made many previous owners whole. But after this high, a new downtrend started.

From an Elliott Wave perspective, the 2023 rally in IMX looks like a nice impulsive rally with five waves in the March high. This means that the current correction from this high is likely wave 2 before the IMX begins to form a higher degree five-wave pattern. This wave 2, shown on my chart below, should be between 77 and 54 cents. Right now it looks like it will come very close to the bottom number. Below 54 cents, sustained, I will no longer have a bullish outlook and expect new all-time lows. But assuming IMX can hold its own, and depending on where it finds a final bottom, my target for the next degree could range from $4.85 to $10.

IMX Daily Chart (Tradingview)

GMX

The GMX (GMX-USD) token is issued by GMX.io, a decentralized perpetual futures exchange that operates on the Arbitrum (ARB-USD) and Avalanche (AVAX-USD) networks. It functions as a governance token and the exchange shares 30% of the fees with the holders. This makes it one of the few tokens that provides cash flow that is not produced by inflation, but rather cash flow that enters the ecosystem by users via trading fees.

GMX was born during the 2022 crypto bear market but never participated in that year’s downtrend as the volume of the exchange continued to grow. The low on my chart was June 15, 2022, when it traded at $9.70. At that time, Bitcoin was trading at $22,500. When Bitcoin hit its 52-week low on November 9, 2022, near $15,500, GMX was trading at $26.45. As Bitcoin started its recent uptrend from this low, GMX only got stronger. It is trading at $69.17 at the time of writing.

I don’t find the long chart incredibly clean, in part because of its short history. This urges caution when suggesting longer-term swing trades. However, today we have a nice, immediately bullish, low-risk setup in GMX. Trade support is $59.30. A breakout that isn’t necessarily bearish, but it makes an already murky long-term chart even less clear. So I will use this level as a stop. If this level holds, GMX is targeting $164. This level is likely the top of the third in a large wave C. But once this level is reached, I will take substantial profits until the longer term intentions of the chart become clearer.

GMX Daily Chart (Tradingview)

Rocket

This next piece is a long term setup. This is not meant to conflict with my warnings about altcoins. I say that this setup may take time to materialize into gains. You still have to be careful about the amount to risk in this room.

Rocketpool is among the few protocols that allow users to participate in Ethereum validation and its monetary rewards by only staking 0.01 Ethereum. Without the protocol, to be an Ethereum validator, one must stake at least 32 Ethereum. The difference at today’s prices is $18 from $58,400.

The protocol token, RPL (RPL-USD), is used as a governance token and as the currency with which to pay protocol fees. The RPL has moved from $1.20 to $63 in 2021 in a pattern that can be called a main diagonal. After surpassing in 2021, it fell to the region of $7 in June 2022. But it did not continue to fall with Bitcoin until November of this year. It reversed back to $35 and started a series of higher highs and lows. Finally, in the past two months, it has reached new all-time highs.

In the short term, I can see RPL continuing in the $90-$120 region as long as $33 holds. However, this area requires care. If at any time it holds below $33, it may drop back into the $7 region in my red c wave. I consider this likely and I keep my position very light. I will move into the $30s, if this pullback occurs. This is because circle-2 is valid up to $2.91. If this holds, RPL has a chance to reach $600 above in its third wave. If it never prints that lower red C-wave, so be it; my small position will produce a large profit on a percentile basis.

These are monstrous ranges to manage, so you can’t take the position size you’re used to in low beta stocks, or high betas for that matter. You need to stay light so you can afford to capture volatility.

I take pride in earning a lot in crypto by risking very little on each trade.

RPL daily chart (Tradingview)

Conclusion

In conclusion, Bitcoin is likely to be bullish for the remainder of 2023. But unfortunately, the action so far suggests a very choppy path towards $125,000. If at any time $18,000 breaks, this view becomes moot. Since bitcoin tends to bring many altcoins, a bullish bitcoin cycle is a safer time to trade altcoins. But we cannot choose any altcoin and assume that it will act bullish. We have to judge the structure of any graph we are interested in. In light of this perspective, I have chosen three altcoins for your consideration: IMX, GMX, and RPL.

Editor’s Note: This article covers one or more microcap stocks. Please be aware of the risks associated with these actions.

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