Connect with us

Analysis

Bitcoin is Close to Topping Out in the Short-Term

Published

on

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

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.




Feedback or Requests?

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

You must be logged in to post a comment Login

Leave a Reply

Analysis

Crypto Update: Market Stabilizes as Ripple Craze Fades

Published

on

The major cryptocurrencies had crazy Friday, with the skyrocketing Ripple in the center of attention. XRP more than doubled in 24 hours, and the coin was up 3 times off its low from earlier this month before entering a correction in the second half of the day. Ripple briefly took over Ethereum as the second largest coin by market capitalization, even as ETH also hit an almost three-week high amid the broad rally in the segment.

XRP/USDT, 4-Hour Chart Analysis

XRP settled down above the $0.50 level near the market cap of ETH, but short-term the coin is severely overbought, and a pullback to the $0.42-$0.46 zone is still very likely even if the coin manages to hold on to its stellar gains and enter long-term rising trend. For now, a long-term trend change is not confirmed, despite the huge bullish move, with most of the segment still being in bearish long-term trends.

That said, the short-term buy signal is still intact in our trend model, and should the overbought readings get cleared, traders could enter new positions again. Support levels are found near $0.54, $0.51, while resistance is ahead near $0.57, $0.64, and $0.75.

BTC/USD, 4-Hour Chart Analysis

Bitcoin got up to $6750 yesterday, but so far, it failed to overcome the resistance zone near that price level, and the coin is now trading in a shallow short-term correction. BTC needs to stay above the $6500 support to maintain the break-out that followed Ripple’s surge and to remain on a buy signal in our trend model.

The fact that correlations are still declining between the coins is a positive sign, but the overall bearish picture in the segment and Bitcoin’s proximity to the key long-term zone still warrant caution here. Further resistance zones are now ahead near $7000 and between $7200 and $7300, while support below $6500 is still found at $6275, $6000, and near $5850.

Altcoins Pull Back with Ripple, Short-Term Setup Still Promising

ETH/USD, 4-Hour Chart Analysis

Ethereum finally broke above the key $235 support/resistance level thanks to yesterday’s broad rally, and the coin reached the next major resistance zone near $260 as expected after the bullish move. Now the dominant declining trendlines are not far away, so traders should reduce their positions, since the long-term trend is still clearly bearish.

A test of the lows is still in the cards in the coming weeks, and the coin remains on a long-term sell signal despite the short-term rally.  Support is found near $200, $180, at the low near$170, and at $160, while further resistance is ahead between $275 and $$280 and at $300.

Stellar/USDT, 4-Hour Chart Analysis

Stellar was among the strongest coins during yesterday’s rally, following Ripple higher, but now it is testing the key support/resistance zone between $0.2375 and $0.25 after entering a correction together with the broader market.

That said, the break-out is intact in Stellar, and traders could hold on to their positions here. Support levels are found near $0.21, $0.1930, and $0.1830, while further resistance is ahead near $0.2650 and $0.2850.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
3 votes, average: 5.00 out of 53 votes, average: 5.00 out of 53 votes, average: 5.00 out of 53 votes, average: 5.00 out of 53 votes, average: 5.00 out of 5 (3 votes, average: 5.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.6 stars on average, based on 350 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.




Feedback or Requests?

Continue Reading

Analysis

Forex Update: A Good Time to Accumulate Euros

Published

on

On our August 31 Forex Update, we revealed how the Euro is looking strong against major currencies such as the British Pound (EUR/GBP), Japanese Yen (EUR/JPY), and the Canadian Dollar (EUR/CAD). Widening our scope, we discovered that the Euro is also doing well against other major currencies. Other than its recent struggles against the US Dollar (EUR/USD), we can say, with conviction, that the Fiber is one of 2018’s top performers.

In this article, we review EUR’s performance against the Australian Dollar (EUR/AUD) and New Zealand Dollar (EUR/NZD) to show why it may be a good time to accumulate Euros.

Euro/Australian Dollar Analysis

The EUR/AUD pair dropped to as low as 1.16033 in August 2012. This concluded the long bear run that saw the 45.06% devaluation of the Euro against the Australian Dollar from the 2008 high of 2.11197. While the drop may look depressing to long-term investors, seasoned traders pray for plummets like this. They know that fortunes are made by investing when markets crash.

So far, EUR/AUD is rewarding those who bought the crash.

Monthly chart of EUR/AUD

Those who bought the bottom are now up by close to 30%. More importantly, it appears that their investments may be about to significantly grow. EUR/AUD has just broken out of a large ascending triangle pattern on the monthly chart.

In addition, the monthly RSI is threatening to break out from its own symmetrical triangle pattern. From the looks of it, the breakout can happen anytime.

With EUR/AUD reversing its trend, you have one very good reason to accumulate Euros.

Euro/New Zealand Dollar Analysis

The EUR/NZD pair suffered an even longer bear run than the EUR/AUD pair. After posting a high of 2.57906 in February 2009, EUR/NZD went into a long downtrend. The correction drove the pair to as low as 1.38792 in April 2015. In over six years, the Euro lost over 46% of its value against the New Zealand Dollar.

Then again, there are those who make a very good living by buying the bottom. This is risky business. However, a fundamentally strong currency like the Euro is likely to bounce back hard after losing almost half of its value.

Monthly chart of EUR/NZD

If you bought the bottom, you would be in the green by over 26%. If not, well, it’s not too late. As you can see, EUR/NZD has just broken out of an inverse head and shoulders pattern on the monthly chart. This structure is one of the best if not the best reversal pattern in technical analysis.

On top of that, you can see that the monthly RSI is already in an uptrend. It’s been generating a series of higher highs and higher lows for some time now. This is a great signal telling us that bulls have taken control of the market.

With this breakout, EUR/NZD has just launched a new uptrend. This is another very good reason to accumulate Euros.

Bottom Line

Other than its struggles against the mighty greenback, it appears that the Euro is performing brilliantly against other major currencies. Recently, it managed to reverse its trend against the Australian Dollar and the New Zealand Dollar. In addition to its rosy outlook against the British Pound, Japanese Yen, and Canadian Dollar, we believe that now is a good time to accumulate Euros.

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
1 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 5 (1 votes, average: 5.00 out of 5)
You need to be a registered member to rate this.
Loading...

3.6 stars on average, based on 236 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




Feedback or Requests?

Continue Reading

Analysis

ETFs: What Is The SEC  Really Thinking?

Published

on

As a veteran Wall Street type, I was not surprised at Thursday’s SEC announcement on the VanEck-SolidX Bitcoin ETF.  Once again they gave a “no decision”. This pushes the deadline back to December 29, 2018. Don’t be surprised if New Year’s Eve comes and goes and nothing happens before the SEC is forced into a action by the end of February.

Back in August, when the first delay was announced, crypto investors’ reaction was swift and painful.  On Thursday, after a temporary hiccup, prices took a surprisingly positive turn. If we are to believe for just a moment that crypto prices act rationally (or just occasionally) then comes two obvious questions, are crypto ETFs good or bad? Secondly why can’t the SEC come up with an answer?

Never Say Yes

Let’s start with the easy question first: what’s up with the SEC?  Having dealt with this teflon organization for over 30 years, their actions with regard to VanEck-SolidX are the same pattern they have followed forever.  Practically never do they approve anything. Instead they provide two choices: reject or delay. By delaying the VanEck-SolidX application they are accepting the ETF concept in principle but laying out objections that must be corrected.

The result of this regulatory song and dance, don’t expect a decision until the last minute. The reason is that the main issues are not likely to be resolved in time. In fact, I doubt that the ETF proposal gets approval for perhaps as much as another year.  Here is why.

SEC Speak: Obfuscation

According to Jake Chervinsky, attorney for VanEck, the SEC asks “18 multiple part questions covering seven pages.” He adds: “It’s not encouraging to see the SEC ask if the bitcoin futures markets are “of significant size” despite having already concluded last month that they’re not.”

This is a tactic in obfuscation that the SEC loves when an applicant has not provided an adequate response.  In this case there is no objective answer to how liquid a market must be to meet the measure of significance.  Moreover, there is little or nothing that can be done in the short run to create greater liquidity.

The SEC is a political body as much as any agency of the Federal Government.  In raising the issue of liquidity, they can stand behind their role of protecting the public without at the same time hindering public access to a class of assets, even at current depressed levels, is worth $200 billion, more or less.

The SEC Is Right With Their Delays

Does the crypto world really benefit, as this stage of its evolution, by fostering a group of ETFs?  The argument in favor says that this is the way to simply and safely offer the individual investor a way to participate in a diversified portfolio of crypto.  That sounds noble – or is it just something that makes lots of money for those who create them?

But so far, at least from the viewpoint of the SEC, ETF applicants have not created a more secure domain.  More importantly, even if this were not the case, what does the investor gain from investing in a diversified list of crypto when Bitcoin overshadows about every other altcoin?

With nothing against those that believe in the benefits of ETFs, the benefits in current terms is far better for the ETF sponsor that it is for the investor.

Looking just at the math, an individual investor could be just as well off buying Bitcoin, Bitcoin Cash, Ripple, Ethereum and EOS. Admittedly, it is somewhat more complicated finding a place to buy and store Ripple, but with this small portfolio, you cover 75% of the entire crypto asset class. If security is an issue simply go to  blockgeeks.com/cryptocurrency-safe/ and select from a list of hardware wallets.

So whether the SEC gives their approval of VanEck-SolidX in December or February might make a difference if this were 2020 or sometime thereafter.  As for now, it really isn’t critical to the mass acceptance of crypto.

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
1 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 51 vote, average: 5.00 out of 5 (1 votes, average: 5.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.4 stars on average, based on 105 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




Feedback or Requests?

Continue Reading

Recent Comments

Recent Posts

A part of CCN

Hacked.com is Neutral and Unbiased

Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

Trending