by Jamie Holmes
Given the recent interest shown toward Dash, Monero is another cryptocurrency that could see heightened appeal. Whereas Dash is based on the code underlying Bitcoin, Monero is not based on the bitcoin protocol but instead the CryptoNote protocol. One time keys are used for each individual payment to make transactions unlinkable and the focus on privacy, which may resonate with a large number of individuals and see Monero’s popularity surge.
How does Monero Differ from Bitcoin?
Apart from anonymizing payments, another key feature of Monero is that it is the only cryptocurrency to be on StackExchange apart from bitcoin and ether. This will boost the already strong public source code repository, indicating Monero has a good chance of continuing to innovate and serve the cryptocurrency market. With relatively high interest and effort from the developer community, we can expect Monero to be a good long-term investment.
One of the biggest differences is that no one can see your balance on the blockchain, in contrast to the Bitcoin protocol, which is made possible due to ring signatures. While Monero transactions are larger than those in bitcoin, due to the additional privacy, however, there is no block size limit; the block size limit evolves based on demand in the previous blocks.
While the block size of bitcoin is currently limited to 1MB, debate has been lively around this aspect of bitcoin, with a 2MB block size expected to be introduced within the next year or so. The main advantage of having no block size limit is that it allows Monero to handle a large number of transactions per second.
Monero uses Cryptonight instead of SHA-2 and could limit Monero’s network if the volume of transactions increases significantly. It is still possible to mine Monero with CPU, incentivizing individuals to participate and hoping to avoid centralization of mining, as witnessed by bitcoin. On the other hand, due to the high value of bitcoin, it has attracted a lot of miners. This means Monero is relatively more exposed to attack.
The Outlook for Monero
The chart below shows the daily price action for Monero against bitcoin (XMR-BTC) on the Poloniex exchange. Yesterday’s close was higher than the most recent fractal resistance at 0.0035, suggesting bullish momentum will dominate over the long term. Also, notice that the Ichimoku cloud, conversion line (blue) and base line (red) are all starting to show a steeper slope signalling the strength of the bullish momentum at present.
XMR-BTC looks to be moving above the 2016 high at 0.0042. A break of this fractal resistance will see the market tend toward 0.0050. However, the upward move is not supported by higher volume, so it may be optimal to wait for XMR-BTC to test the support zone provided by the Ichimoku cloud to buy Monero.
Looking at the longer-term timeframe, we see that the weekly price action has provided two bullish signals, displayed below. Firstly, the Ichimoku cloud has recently changed from red to green suggesting the start of an upward trend. Secondly, this week the conversion (blue) line has moved above the base (red) line, suggesting a switch to bullish momentum. Last time this happened, XMR-BTC rose from around 0.0020 to 2016’s high at 0.0042.
Against the US Dollar, Monero temporarily dipped below the $2.00 handle. XMR-USD currently trades around $2.05 and a daily close above $2.13 is required for further bullish confirmation. Again, the Ichimoku cloud will provide a support zone from $1.85 to $1.60 and buy positions could be placed in this area for a long-term bet on Monero’s appreciation.
The Awesome Oscillator is rising and positive suggesting upward momentum is in play. Moreover, today has seen a spike in volume suggesting further appreciation in XMR-USD.
The weekly price action for XMR-USD is shown below. A close above $2.20 at the end of this week should see the formation of a long-term upward trend. A fractal support looks to be forming at $1.27998998. The outlook looks bullish as we have three signals that indicate the upward trend to continue over the coming weeks.
Firstly, the Ichimoku cloud has changed color to green. Secondly, the higher upward movement is supported by higher volumes, with this week set to see higher volume than last week. Finally, the conversion line is looking to move above the base line which will give a signal that momentum has switched to favour bulls in the market.
Monero could be a good long-term investment as more and more individuals demand privacy. Also, given that it is based on a novel protocol, it could be optimal to hold Monero as a hedge against bitcoin or dash. The strong developer community and the privacy provided could attract a lot more individuals into Monero and a long-term uptrend continuation looks viable. However, XMR-USD is a stronger buy than XMR-BTC as the latter is not being supported by higher volume.