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Bitcoin Takes a Breather as Prices Drop Below $5,700

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The world’s most talked about digital currency pulled back early Tuesday, a sign that the latest rally is nearing its end.

BTC/USD Price Levels

After a positive start to the week, bitcoin prices have reversed back toward $5,600 on Tuesday. The BTC/USD exchange rate opened up a nearly $200 trading range on Tuesday. At press time, the pair was down 1.3% at $5,653. Bitcoin remains in overbought territory, based on the RSI, with underlying momentum maintained.

Bitcoin’s current price level translates into a market cap of roughly $92.7 billion, according to CoinMarketCap. That nearly triples the Ethereum blockchain, which is currently valued at $31.2 billion. When assessed by market cap, bitcoin and Ethereum combined account for more than two-thirds of the cryptocurrency asset class.

The BTC/USD has registered a five-day gain of 15.%, which is equivalent to $772. The pair’s 52-week range is $627.77 – $5,861.15.

Analysts Struggle to Explain Rally

Analysts and market participants are struggling to explain bitcoin’s latest upsurge. The uptrend seems to have begun around the time of news suggesting Chinese policymakers may soon relax their ban on cryptocurrency. However, this alone doesn’t explain the 18% gain over the past five days.

Another plausible catalyst is the anticipated hard fork of the bitcoin blockchain in November, a plan that would benefit existing holders of the cryptocurrency.

The developers behind the Segwit2x protocol have identified a bitcoin upgrade approximately 90 days after the activation of Segregated Witnesses. The controversial plan, which aims to increase the transaction capacity of the blockchain, will occur at block 494,784.

Bitcoin Gold was also on some traders’ wish list before the blockchain community raised suspicion over the project. Several red flags have been identified by Gert-Jaap Galsbergen, which you can read here.

For now, bitcoin’s bull market appears to be taking a breather. As we’ve seen in recent weeks, it doesn’t take much to stoke investor exuberance in a market that has gained nearly 500% since Jan. 1.

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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4.6 stars on average, based on 614 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Bitcoin

Is Bitcoin Really Un-Tethered? Yes, Says University Researcher

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The debate surrounding Tether’s (USDT) effect on the price of Bitcoin has been around since the start of the year when Tether Limited was subpoenaed by the U.S Commodity Futures Trading Commision. A short while later this anonymous report was published which claimed USDT was being printed willy-nilly and that it was subsequently manipulating the price of BTC.

The BTC-Tether Connection

The debate was sparked again in June when this research paper was presented by two University of Texas researchers. The paper, titled Is Bitcoin Really Un-Tethered?, written by John Griffin and Amin Shams, arrived at the conclusion that Bitcoin was indeed being manipulated by Tether issuances:

“Overall, our findings provide substantial support for the view that price manipulation may be behind substantial distortive effects in cryptocurrencies. These findings suggest that external capital market surveillance and monitoring may be necessary to obtain a market that is truly free.”

The paper noted how little Tether activity had to take place for Bitcoin to be affected, stating at one point that a mere 1% fluctuation in USDT could affect BTC prices hugely:

“Indeed, even less than 1% of extreme exchange of tether for Bitcoin has substantial aggregate price effects. The buying of Bitcoin with Tether also occurs more aggressively right below salient round-number price thresholds where the price support might be most effective. Negative EOM price pressure on Bitcoin only in months with large Tether issuance indicates a month-end need for dollar reserves related to Tether.”

A Case for the Defence

The above paper grabbed headlines and was viewed close to 90,000 times on SSRN, however, an alternative case laid out by Dr. Wang Chun, Ph.D. in Finance at Queensland University has been viewed only 1,500 times, and arrives at the opposite conclusion – namely that no correlation is found between Tether issuances and Bitcoin price.

Furthermore, the report even suggests that issuances of Tether are broken down into time-marked clusters to avoid having an effect on BTC:

“…we find Tether grants are strongly autocorrelated. This suggests Tether Limited is intentionally breaking down large grants into smaller blocks to be issued over several days, perhaps in a bid to reduce price impact on Bitcoin exchanges. It may also suggest demand for Tether coins are clumped and exhibit time clustering.”

Either way, Dr. Chun admits that Tether issuances frequently impact BTC trade volumes, albeit briefly. But ultimately, returns for Bitcoin holders are not affected by USDT:

“In conclusion, we do not find any evidence suggesting that Tether issuances cause subsequent increases in Bitcoin returns. However, we do find that Tether issuances are highly autocorrelated and cause subsequent increases in Bitcoin (and Tether) trading volume over the short term.”

Both sets of analysis use different methods in their approximations. The report by Griffin and Shams of Texas University approached the problem by monitoring wallet activity on exchanges where USDT trades were popular.

Dr. Chun used vector autoregression, or VAR analysis. Both reports make for interesting reading without appearing conclusive in their findings.

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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4.4 stars on average, based on 62 rated postsGreg Thomson is a full-time crypto writer and digital nomad. He eats ICOs for breakfast and bleeds altcoins. Wherever he lays his public key is his home.




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Analysis

Long-Term Cryptocurrency Analysis: Bearish Trend Intact Despite Explosive Rally Attempts

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The negative trend in the cryptocurrency segment continues to be dominant, with almost all of the top coins trading below the structural support levels that were broken during the summer months. Bitcoin is still above the $5850 level, the last base support before last winter’s explosive speculative event, but Ethereum, Ripple, Litecoin, and the other main altcoins all continued relentlessly lower.

Most of the majors formed a bottom in August, even though Ethereum continued to lead the way lower amid the bleak sentiment and capital flight. Several oversold rally attempts already failed in the segment, leaving the long-term declining trends intact, with last week Ripple providing hope for bulls with its explosive move higher.

While some of the coins tried to follow Ripple higher, the development of a healthy leadership failed yet again, add our trend model continues to be overwhelmingly bearish from a long-term perspective. With that in mind, the short-term buy signals should still be treated cautiously by traders. The August lows are not in direct danger right now, and a more durable bottom might already be in, but a broader rally would be needed to confirm a trend change.

BTC/USD, Daily Chart Analysis

While BTC has been holding on relatively well during the summer months, in the past weeks, as the largest coin was hurt by selling related to large wallets. The coin failed to show bullish momentum despite its stability, and a break below the key long-term support zone near $5850 is still possible here.

Primary support is at $6275, and in the case of a breakdown below $5850, the next major support zone is found near $5000, while resistance is ahead at $7000, between $7200 and $7300, and in the $7650-$7800.

ETH/USD, Daily Chart Analysis

After spiking below $180 and forming a panic-bottom, Ethereum rallied up to $260, but due to the extent of the preceding decline, it didn’t reach the declining trendlines which dominated the market for several months. The coin has been leading the selloff in the segment, and now a re-test of the lows is once again likely, even if a more durable bottom is already in.

Short-term support is found at $200 and $180, while below the recent low, further zones are found near $160 and $130, with resistance zones ahead between $275 and$280, near $300, and in the $330-$335 zone.

(more…)

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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4.6 stars on average, based on 354 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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Bitcoin

Bitcoin’s Notorious Whale Confirms Fire-Sale

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Bitcoin’s notorious ‘Tokyo Whale’ offloaded hundreds of millions worth of BTC over a three-month period, highlighting once again the impact of fat hands on a nascent market. The liquidation period was between Mar. 7 and June 22 – a three-and-a-half-month stretch with a peak-to-trough of roughly $9,900-$5,755 for the bitcoin price.

Tokyo Whale

On behalf of Mt Gox creditors, Tokyo’s Nobuaki Kobayashi sold approximately 24,658 BTC and 25,331 BCH between the creditors’ last meeting and the date of the court ruling. That ruling, on June 22, allowed the estate to exit bankruptcy and enter civil rehabilitation.

The sale earned creditors nearly 26 billion yen, or $230 million U.S. On average, bitcoin sold for about $8,100, which is 26% higher than today’s prices. Bitcoin cash yielded an average sale of $1,190, which is nearly three times higher than current prices.

In documents that appeared on CCN, Kobayashi said the bankruptcy trustee “has already secured a suitable amount of money to secure the interests that are expected to have obtained by BTC creditors under the Bankruptcy Proceedings in connection with BTC claims to be treated as non-monetary claims under the Civil Rehabilitation Proceedings.”

In April and May, more than 24,000 units of BTC and BCH were moved out of wallets thought to be associated with Mt Gox trustee in at least two separate incidents reported by Hacked and CCN. It is now safe to assume that the transfer was part of the liquidation undertaken by Kobayashi on behalf of the creditors.

For whale watchers, the good news is Kobayashi is not planning any additional fire sales now that Mt Gox has entered civil rehabilitation. Previously, he was prepared to offload billions more in cryptocurrency holdings.

Bitcoin whales are partly to blame for the yearlong downtrend in market prices. Several mysterious price collapses, including one earlier this month, have been traced back to a few wallet addresses transferring large sums of coin to virtual exchanges. As Hacked previously reported, a whale moved 110,000 units of BTC and BCH from multiple wallets during the month of August. Roughly 14% of the total made its way to Bitfinex and Binance, where they may have been liquidated.

BTC/USD Update

It didn’t take whales to sink bitcoin on Tuesday. The leading digital currency was retreating in lockstep with the broader market as last week’s sharp rally continued to fizzle. At press time, BTC was down 2.4% on Bitfinex to trade at $6,425. The downfall pushed prices below the 50-day moving average, a critical short-term inflection point.

Bitcoin’s daily trade volumes amounted to $4.4 billion, which is above the minimum threshold observed in past rallies. But even with Tuesday’s loss, bitcoin made off with 53.6% of the overall market capitalization for cryptocurrencies. Bitcoin’s dominance rate fell below 52% last week as XRP, XLM added billions to their respective market caps.

Based on current price trends, bitcoin is unlikely to test recent highs anytime soon. BTC remains firmly entrenched in a long-term bear market, with consecutive rally attempts fading out at or above the $7,000 hurdle. This psychological threshold has proved highly elusive in recent months.

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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4.6 stars on average, based on 614 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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