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Analysis

Bitcoin is Close to Topping Out in the Short-Term

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Bitcoin is the toast of the town, with prices closing in on the five-figure mark. At current prices, the rally has covered a huge distance in 2017. On January 1 of this year, bitcoin opened trading at $973.37. From there, to today’s intraday highs of $9749, bitcoin has returned an astounding 901.57% for its investors. While the forecasters are quoting huge numbers for the future, we believe that at the current prices, the risk to reward ratio is skewed to the downside in the short-term.

Key observations

  1. Bitcoin’s rally is gaining momentum
  2. Experts are competing against each other in putting a huge target for bitcoin
  3. We believe the current leg is led by the newcomers who are in for a quick buck
  4. Markets are overextended in the short-term and a correction is likely
  5. We expect the next fall to be about 30% from the highs

But, just because an asset class has risen quickly is no sign that it will fall. True. There are a few sentimental factors and a few technical factors that have led us to arrive at our conclusion.

We are not calling an end to the long-term rally

First, let us make it clear that we are not calling an end to the long-term rally yet. Calling a long-term top is a futile exercise, especially for a new technology like blockchain. Many forecasters have bitten the dust in calling a top in Amazon for about two decades. So, we shall not get into that exercise.

However, we are calling a short-term top in bitcoin.

Sentimental factors

Exuberance is usually the final stage of the rally. Pick up any news on any cryptocurrency website and you will find forecasters dishing out astronomical numbers for bitcoin.

Agreed, there have been many recent developments across the globe that favor the blockchain technology and the existing cryptocurrencies. However, most experts in the field only talk about huge numbers without any caution about the volatility or a possible fall. Investors are being made to believe that the only way for bitcoin is up.

In a recent survey by LendEDU, a marketplace of private loans, bitcoin investors said that they will sell their positions if bitcoin neared $200,000 levels. While anything is possible in the markets, a price point that huge is unlikely to be reached within the next few years.

Such figures and astronomical targets are attracting new investors who are entering into cryptocurrency trading to make a quick buck.

Bitcoin futures trading by CBOE can be both good and bad

While most of the mainstream Wall Street has stayed away from bitcoin, it is unlikely that the introduction of bitcoin futures trading by the CBOE is going to lead to a stampede for initiating long positions.

Contrarily, we believe that few short sellers are likely to enter the fray and test the resolve of the bulls on the upside. At least for the first few days, after bitcoin futures trading starts, we may see an increase in volatility.

If the big players of Wall Street with deep pockets are able to overpower the bulls, then a fall is likely.

The chart structure points to at least a 30% correction

The reasons mentioned above are regarding trader psychology and they are debatable. Most of the die-hard bitcoin supporters are likely to put those to trash.

Hence, we put forth our finding from the charts that suggests a likelihood of a fall.

We have picked up the short-term tops in bitcoin in 2017 for our analysis. We have disregarded the dips that were arrested at the 20-day EMA and we have not considered the dips that happened without a material rally.

We have considered the intraday highs on the day bitcoin topped. For that day, we also took the value of the 50-day simple moving average.

We find that, all the short-term tops in the markets have started when the percentage difference between the price of bitcoin and the 50-day SMA was in the range of 35% to 39%.

The ensuing correction in the first three instances saw a dip of about 40%. The fourth and the most recent correction, however, was shallower at 30%.

Serial

Number

Date Intraday high 50-day SMA Price above 50-day SMA in % Ensuing correction in %
01 January 05, 2017 1175 821.75 35.38 37.47
02 June 12, 2017 2999.99 2014.18 39.32 41.39
03 September 02, 2017 4980 3461.14 35.98 40.26
04 November 08, 2017 7898 5330.04 38.82 30.22
05 November 27, 2017 9749 6694.14 37.15 ?

 

As of November 27, the difference between the intraday high of $9749 and the 50-day SMA value of 6694.14 has already reached 37.15%. This difference is closing in on the higher end of the percentage value, which has led to a correction in the past.

Even if we take the minimum correction following the top, we shall see a 30% correction, which will sink bitcoin to around $7000 levels.

Risks to our assumption

We have assumed that the market participants are in a euphoric state, however, this is difficult to gauge. If the markets are only in the optimism stage of the bull run, it still has a long way to go.

We have taken the performance of bitcoin only in 2017. This is a small sample size. The current rally may just continue higher without giving a meaningful pullback.

Conclusion

While the debate on the valuation is never-ending, we believe that the current pace of ascent is looking euphoric in nature. As the proponents have benefitted by holding through every dip, there is a sense of security among the buyers that no matter what, price of bitcoin can and will only go up.

We believe that even if bitcoin has to rise, it will break this notion and test the long-term investors before embarking on a long-term uptrend. We, therefore, recommend trimming long positions in bitcoin in phases, instead of selling all at once. We expect a short-term top around the $10,000 mark. We believe the investors can buy bitcoin at lower prices in the next few weeks.

Featured image courtesy of Shutterstock.

 

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 9 rated postsRakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.




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4 Comments

4 Comments

  1. Chris G

    November 27, 2017 at 6:27 pm

    Fantastic article Rakesh, and good call on ETH – I’m largely moved out of BTC and into alt-coins. The main risk for me is correlated correction with bitcoin, so I’m in more of a defensive position atm in terms of protecting profit.

    • Rakesh Upadhyay

      November 28, 2017 at 3:23 am

      Hello Chris,

      Thank you.

      I believe it is a wise decision to be defensive when investors throw caution out of the window. Yes, we may lose a few points, but we shall also lose less when the markets turn down.

      As Jeff Saut of Raymond James says often “There are old traders” and “There are bold traders”, but “There are no old and bold traders”.

      With warm regards
      Rakesh Upadhyay

  2. jf5585

    November 28, 2017 at 1:09 am

    The last 2 times that Bitcoin corrected, wasn’t it to with the China ban and also the fork cancellation? When there are no external influences, it seems nothing seems to stand in it’s way? $10k is a milestone number which may make some people want to sell. But is looking at past corrections (which were down to external influences) to analyse the future that relevant here?

  3. Rakesh Upadhyay

    November 28, 2017 at 3:31 am

    Hello jf5585,

    You have a good point there.

    In my experience, I have found that when the markets are overextended, it latches on to some news and starts a correction and I have found that such occurrences happen at important technical levels.

    Therefore, technical analysts still get a lot of their forecasts correct.

    Hence, I would be careful at $10000.

    Notwithstanding, what you say may also be correct. $10,000 may prove to be a temporary stop after all and I might be proven wrong. Hence, I have suggested booking profits in batches and not at once. If markets continue their upward momentum, we can wait to sell the remaining positions.

    With warm regards
    Rakesh Upadhyay

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Analysis

XRP/USD Price Analysis: Israel’s Largest Financial Services Company GMT Partnering with Ripple

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  • Ripple has another large financial firm leveraging its technology, as the list keeps on growing.
  • XRP/USD will search for buyers within $0.3000-$0.2500 range initially, ahead of possible $0.2000 return.
  • XRP/BTC looks surprisingly encouraging, subject to a potential breakout to the upside.

XRP in line with the rest of its peers across the cryptocurrency market remains firmly on the back foot. XRP/USD is running at its third consecutive session of losses. At the time of writing, the pair has dropped 7% over this mentioned period. A renewed wave of selling pressure hit the market after the price was allowed some time to consolidate. The market was very much within range-bound mode, before the bears struck again. As a result, XRP has firmly given up the $0.3000 mark.

Israel’s GMT to Utilize Ripple Technology

The largest financial services organization in Israel, GMT, has announced a partnership with Ripple. They will be utilizing Ripple’s technology for their cross-boarder payments.

GMT said via their latest blog update: “GMT is joining companies like MoneyGram, AmericanExpress, CIBC, Earthport, AKBANK and many more, who are already authorized to use Ripple’s platform. This partnership is establishing GMT’s place in the forefront of the Israeli Fintech industry, also allowing us to work side by side with some of the leading companies in the world.”

GMT are the largest and leading financial services organization in Israel. They have an outreach of  250 branches spanning across the country. GMT specialize in local and international remittance services, among many other financial offerings.

In terms of which technology of Ripple’s they will exactly be leveraging, it does not appear to have been stated for now. Whether GMT will be using either xCurrent or xRapid is still subject to debate. Hacked will be sure to provide further details upon those being announced.

Technical Review – XRP/USD

XRP/USD 4-hour chart

Price behavior seems to be quite readable of late. XRP/USD is going through periods of hard selling, which is then followed by some range-bound trading. Once again, bears breakout from this consolidation mode to ignite more downside pressure. Between the 7th and 14th December, XRP/USD had formed a range-block. The sellers came piling in on the 14th December, and as a result the recent range was broken with $0.3000 giving way.

XRP/USD weekly chart

XRP/USD is now moving within a critical area. This is seen running from $0.3000 to $0.2500.  A very well-known area for big buyers coming in, as proven on occasions this year. Any failure of this initial range holding could see a free-fall down to $0.2000.

XRP/BTC daily chart

Finally, looking the daily chart of XRP/BTC, it remains somewhat encouraging. XRP is holding its ground again BTC, in comparison to many of its peers. The price is ranging for now, looking possible to see a chunky breakout to the upside. It remains trading around levels seen during the explosive run in December 2017.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 86 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

Stellar Price Analysis: XLM/USD Bears Break Big $0.10 Level

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  • Fear and panic spreads as XLM takes out another big psychological level, $0.10.
  • Support of XLM continues to take place, as AlphaPoint and CoinField announce support.

Stellar’s native token XLM has been a real victim of this heavy market selling pressure. The downward trend is very much stubborn and showing lack of a shift in sentiment anytime soon. Market hopes have been dashed on numerous occasions, when the price has looked like bottoming. Each small bounce and sign of possible recovery from the bulls continues to be sold with force by the bears.

Like several of XLM’s peers, fundamental developments remain strong. There is still much in terms of positive developments surrounding the Stellar foundation. However, with the pressing lower and breaking of these key psychological levels, it only sparks more panic and fear with market participants.

XLM Support Spreads

XLM continues to be added by exchanges globally. There is certainly no shortage with the supporting developments for Stellar Lumens. This week, AlphaPoint, a white label cryptocurrency exchange platform, announced their collaboration with the Stellar foundation. They will now be supporting Lumens for their clients, covering; deposits, withdrawals, custody, and trading.

Elsewhere, CoinField, a Canadian cryptocurrency exchange, detailed via Twitter that they are launching Stellar Lumens on their platform, as an XRP based pair. They noted that the XLM/XRP pair will be available with other fiat pairings, including; USD, CAD, EUR, GBP, JPY, and AED.

Technical Review – XLM/USD

XLM/USD 4-hour chart

The bears most recently pressed for a devastating technical development as the $0.10 mark was broken to the downside, which was previously anticipated via the last article posted on Hacked. Sideways trading had initially been observed, for seven sessions, as XLM/USD formed a range-block. This technically was vulnerable to an extensive breakout south.

A bottom area was eyed at the low of 7th December at $0.1010. This was breached after sellers were penetrating the supporting area during the session of 14th December. As a result, this forced the low of the 7th December to be exposed. In addition, it caused a drop below the psychological $0.10 level.

XLM/BTC Vital Demand Zone

XLM/BTC daily chart

XLM/BTC at the time of writing is trading within a vital demand zone. This can be seen tracking from 0.00003000 to 0.00002800. Previously, the area has proven to see chunky buyers come into play in driven the price back north. As already seen this year, on two occasions, in July and also September, both going on to see around 45% bull rallies.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock.

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.5 stars on average, based on 86 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

Forex Update: Dismal Chinese Data Causes Turmoil in Markets

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1302 -0.47%
GBP/USD 1.2571 -0.68%
USD/JPY 113.35 -0.21%
AUD/USD 0.7179 -0.66%
GOLD 1,243 -0.20%
WTI Crude Oil 51.16 -3.18%
BTC/USD 3,180 -2.54%

We continue to have an unusually active December in traditional financial markets, as the recent bearish shift, the continued Brexit woes and the slowing global economy add up to a very nervous trading environment. Volatility is especially high in stock markets compared to seasonal averages but currencies are also having very active days, with the Dollar clearly being in focus.

Today we had negative headlines in China with both industrial production and retail sales missing the consensus estimates by a mile, and the history of manufactured economic releases from the country makes that even scarier.

It’s no surprise that the Chinese stock market is leading the way lower globally, while the Chinese Yuan is also among the weakest currencies globally, even amid the improving trade-related sentiment. Risk-on currencies got it hard today, and the Dollar is defying its bearish seasonality, trading very close to its recent lows, confirming the broad risk-off shift.

Technical Analysis

GBP/USD, 4-Hour Chart Analysis

The Great British Pound continues to trade with pronounced relative weakness, and as Prime Minister Theresa May was sent home empty-handed from Brussels, with the leaders of the EU refusing to renegotiate the draft Brexit plan, the currency’s position just got even shakier.

From a technical standpoint, the Cable confirmed the key breakdown with a failed pullback in the past couple of days, and with no major support found above the generational lows near 1.20, long-term odds now favor a test of that zone, and bulls shouldn’t enter positions below the key 1.27 level.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair dipped below the 1.13 level after yesterday’s the dovish growth and inflation forecast by the European Central Bank and today’s strong US Retail Sales report. The US economy continues to perform relatively well compared to its global peers, and although we think that the slowdown will eventually reach the US, the fiscal stimulus and the labor momentum could keep the engines going for a while.

That only adds to the buying pressure which is pushing the USD higher, and the troubles in the European financial system are also mounting, which could lead to another leg lower in the common currency next year. The main technical levels to watch are still the 1.12 support and the 1.1440 resistance, and with the broader downtrend clearly being intact in the most traded currency pair.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair fell below the bearish wedge pattern on the negative Chinese news as we expected, and it’s now testing the 0.7165 support zone. A move towards the 0.70 level is likely in the coming weeks, should the pair violate the support zone, and the short-term trend change is close to being confirmed, while the broader downtrend is clearly intact, with strong resistance ahead near 0.7250 and 0.74.

WTI Crude Oil, 4-Hour Chart Analysis

Another rally attempt faded away today in crude oil, and the crucial commodity continues to trade in a bearish consolidation range following the series of dead-cat-bounces. The top of the range is found near the $54.25 per barrel price level, while strong support is found in the $49.50-$50 per barrel range.

Given the deeply oversold long-term momentum readings, bulls can open speculative long positions near the bottom of the range, despite the clearly intact long-term downtrend, while bears should wait for a larger scale bounce to reenter the market.

Key Economic Events on Monday

ChartBook

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Featured image from Shutterstock

Important: Never invest (trade with) money you can't afford to comfortably lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here. Trade recommendations and analysis are written by our analysts which might have different opinions. Read my 6 Golden Steps to Financial Freedom here. Best regards, Jonas Borchgrevink.

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4.7 stars on average, based on 416 rated postsTrader and financial analyst, with 10 years of experience in the field. An expert in technical analysis and risk management, but also an avid practitioner of value investment and passive strategies, with a passion towards anything that is connected to the market.




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