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Crypto: Assessing the Damage

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A Tornado Hit

Oklahoma in the springtime has been hit with more tornadoes than about any region. We have all seen the videos of the devastation. The landscape is barely recognizable, wreckage spewed everywhere, a truck sitting on the roof of a building and crowds of displaced citizens looking lost and frightened.

The first of one of those tornadoes hit the crypto markets back in December.  But, instead of hitting hard and then quickly blowing through, this cryptonado has been hitting hard and hanging around.  From just before Christmas until today the combined value of cryptocurrencies has lost over $400 billion. That is more destruction than all of the tornadoes and hurricanes in the last century.

Thursday seemed to embody all the signs of capitulation.  It would not be unusual for a sharp rally to follow. Even if this good fortune was to take place, a certain amount of damage has been done.  Here are a few quick thoughts.

Of the leading cryptos, Ethereum and Ripple XRP appear least fundamentally challenged.  Bitcoin on the other hand could have a longer road back to $20,000.

Store of Value

Bitcoin’s image as a store of value has been tarnished.  There are those critics that will quickly claim that bitcoin never deserved to have that status.  Others believe that bitcoin was a better storehouse than gold. To be a true alternative it helps to remember that gold serves two roles: storage as well as industrial and consumer applications.

Bitcoin’s loss in value and subsequent volatility makes a strong case for the critics.  While it was soaring 7,000%+ in 2017 it was easy to buy bitcoin and store it away for the long term. There is a sense of comfort and security to help you sleep at night.  But when prices fall 50%, the storehouse empties out pretty quickly. Yes, bitcoin supporters can point to gold’s volatility. But for centuries, gold has had underlying demand as well as a medium of exchange.  This later function is critical to long term Bitcoin strategy.

The collapse of bitcoin pricing will require quite a while to reestablish credibility as a storehouse of value and this might conceivably make bitcoin less attractive to investors than other cryptocurrencies.  Time will tell.

ICOs

Regulators are taking aim at ICOs.  March 7 was a day of reckoning. That is when the Federal District Court judge ruled that cryptocurrencies are commodities and thus under the jurisdiction of the Commodities Futures Trading Commission(CFTC).

On the same day the Securities and Exchange Commission issued an order flexing their regulatory muscle over registering cryptocurrency traders.  

While you have to like the idea of regulators cleaning up the number of ICO scams, government tactics can be powerful and intimidating.  

According to Bloomberg News, the SEC Office of Compliance Inspections and Examinations has issued subpoenas to a number of cryptocurrency hedge funds.  I believe this is just the first step in their pursuit of violations related to ICOs.

Either way, you can expect more of this type of activity in the future.  Neither the CFTC nor the SEC has every issued a top 10 list for the most admirable members of Wall Street.  Their sole responsibility is to keep agents busy creating and pursuing bad guys. So along with the benefits of better enforcement will come more and bigger headlines.

Ethereum

So what does that mean for Ethereum?  At last count, Ethereum was the platform of choice for 80% of all ICOs.  If the CFTC and SEC are making headlines, no doubt there will be fewer ICO.  

So far this risk isn’t proving to hurt demand for ether.  Through the first two months this year, ICOs have raised nearly $2 billion in capital a 50% year over year gain.  This total amounts to almost half of last years total.

How should this be interpreted?  Perhaps investors are becoming more selective choosing the larger offerings.  There may be other reasons but this is the most plausible explanation.

Assuming this to be the case and the data on capital raised by ICOs is accurate, then a huge amount of the price collapse in Ethereum is nothing more than investors reacting to headlines.  If ICOs continue anywhere close to the current monthly average of $1 billion, neither the CFTC nor the SEC will be able to stop Ethereum.

Ripple:  In the Crypto Space at the Wrong Time  

The price of Ripple makes no sense.  It is not part of the ICO syndrome, no one ever claimed that it was a storehouse of value and its adoption by retailers is immaterial.  The XRP isn’t even available on one of the largest exchanges, Coinbase. And yet, Ripple has suffered the largest percentage decline of any crypto: nearly 80%.  

Just the other day, I ran across a reader who was bashed on Facebook for investing in bitcoin because of the excessive and wasteful energy consumption in bitcoin mining.  The Ripple Network uses a fraction of that of most cryptos.

Ripple’s worst feature is having to sell their seamless global payments network to slow moving governments and financial institutions.  But does that warrant losing nearly 80% in value practically no time? I don’t think so. So for fans of XRP, it will pay to be patient.

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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 115 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.




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2 Comments

2 Comments

  1. embersburnbrightly

    March 17, 2018 at 4:02 pm

    “From just before Christmas until today the combined value of cryptocurrencies has lost over $400 billion. That is more destruction than all of the tornadoes and hurricanes in the last century.”

    That is staggering. That also shows one how much money has been flowing into cryptocurrency, which reflects the interest in it. I’m sure a lot of the interest has been speculative, and the downtrend over recent months has definitely shaken out a lot of the purely speculative money. I’m share your belief that there are intrinsic values behind many of the coins, though, and I share belief that XRP remains an undervalued coin.

    • embersburnbrightly

      March 17, 2018 at 4:02 pm

      Sorry for the voice to text errors in my reply above…

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Analysis

5 Things To Watch Next Week + ChartBook

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Last Fed Rate-Hike of the Cycle?

EUR/USD, 4-Hour Chart Analysis

The Federal Reserve will announce its rate decision on Wednesday, and according to the consensus on Wall Street, the central bank will deliver the fourth rate hike of the year. The huge shift of the last couple of months in the US bond market means that now, no additional tightening steps are “priced in” for 2019.

The bearish shift in global stocks and the mounting evidence regarding a global economic slowdown confirm that view, but we still have doubts about the intentions of the Fed. While it’s true that yield curve is about to invert and the global slowdown will eventually affect the US economy, for now, the numbers remain solid, and the Central Bank might use these conditions to raise rates further in order to have “firepower” in the case of a recession.

That could fuel another strong leg higher in the USD, but in any case, the foundations of the Dollar’s rally are still strong, with the record deficits only affecting the currency’s long-term outlook in our view. Even if a stronger pullback is still possible, we expect new lows in the EUR/USD and new highs in the Dollar index in 2019.

China in Focus as Economic Slowdown Accelerates

Shanghai Composite Index CFD, 4-Hour Chart Analysis

This week’s Chinese economic releases were quite scary for bulls, as both Industrial Production and Retail Sales missed by a mile, which is unusual in the history of the country. The Chinese stock market has been one of the first to enter a bear market during the broad bearish shift, and even though a trade deal with the US got closer, equities failed to rally substantially off their lows.

The Chinese Yuan is also very close to its lows, and should the slowdown further accelerate, the country’s financial system and the currency could get under heavy pressure given the extent of the credit bubble of the past years. With that in mind, the fate of the Chinese market is crucial for risk assets globally, and a break below the prior lows would be another nail in the coffin of the US bull market as well.

Another Big Week for the Pound

GBP/USD, 4-Hour Chart Analysis

The Brexit chaos pushed the Great British Pound to its lowest level since early 2017 against the USD, and from a technical perspective, we could be looking at a test of the 1.20 level in the near future. Looking at the possible outcomes of the Brexit saga, a new referendum, a no-deal Brexit, or a renegotiated deal, uncertainty is extremely high, and unless the May-government finds a quick solution, further steep losses are likely ahead for the currency.

Several key economic releases will also be coming out next week, such as the CPI and PPI indices on Wednesday, the final GDP and the Current Account balance on Friday, while Thursday’s Retail Sales report be out just before the Bank of England’s rate decision, so forex traders could be in for another very active week in the Pound-related pairs.

Financials Signaling Trouble Across the Globe

XLF, 4-Hour Chart Analysis

The month’s most interesting market trend is the plunge in financial stocks, which continued unabated even as trade war fears subsided somewhat. The pressure on the major European banks has been apparent for a while now, and as the quantitative tightening is gaining speed, their US peers also got hammered in December. Some analysts point at the excesses of the leveraged loan market and the collapsing yield curve, but most likely the funding squeeze is at the root of the problem.

The XLF ETF firmly entered bear market territory and fell to its lowest level since mid-2017 this month, and although the broad rising trend remains intact in the sector, given the global technical picture, we would only look for short-term long positions. We continue to view all rallies as selling opportunities in equities, and the fact that more and more crucial sectors confirm the downturn is another bearish sign.

A Slew of Key Economic Releases on the Last Full Week of the Year

We will have a busy regarding the global economy even besides the Fed meeting and the British releases, with the US and Canada providing the most important indicators. The German IFO index, and US Building Permits and Housing Starts will highlight Tuesday’s session, the Canadian CPI will be out on Wednesday, followed by the Australian Employment Report and the BOJ’s rate decision on Thursday.

The Canadian GDP and Retail Sales will be released on Friday, and the US Durable Goods report will also be out, and following several months of disappointments, a positive surprise could cause a jump in the Dollar, especially we will have a hawkish surprise delivered by the Fed.

ChartBook

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

FTSE 100 Index CFD, 4-Hour Chart Analysis

EuroStoxx50 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

EEM (Emerging Markets ETF), 4-Hour Chart Analysis

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

AUD/USD, 4-Hour Chart Analysis

Commodities

 

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

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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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Altcoins

Tron Price Analysis: Fundamentals are Stronger than Ever; TRX Bulls Staging Comeback

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  • Tron network has breached over 100 million transactions, as reported by Justin Sun.
  • Zero transaction fees are anticipated on the Tron ecosystem, by Friday 21st

TRX/USD has remained generally soft since the 29th November. The price has been cooling and ranging since its spike higher at the back end of November. TRX is remaining well supported within a near-term acting demand zone. This has been in action since 20th November, providing necessary comfort, to prevent a free-fall below the 1 cent mark.

Despite this described technical behavior, the fundamentals surrounding the Tron foundation remain very strong indeed, as the founder Justin Sun likes to keep the community up to date with all the latest via his Twitter feed. There seemingly being much promise surrounding Tron’s daily activity and transactions.

Tron Hit 100 Million Transactions

Sun, took to his Twitter account today, to announce that it had recorded 100 million transactions. He said, “TRON has reached 100 million transactions today.” Sun provided a screenshot of the Tron platform, which showed the number of transactions had in fact breached the 100 million mark.

100 million transactions

Over 2 Million Daily Transactions

Previously, he had boasted how the Tron network continues to breach records with its daily transactions, tecently having well and truly smashed through the 2 million mark. One community member, which Justin Sun retweeted, provided a comparison of Tron’s daily transactions, versus its peers: “TRON’s new record of 2,64 million daily transactions in comparison w/ the Top 5; 9.6 times more than Bitcoin’s 275k, 4.6 x Ethereum’s 567k, 4.1 x Ripple’s 633k, 188 x Tether’s 14k, and 264 x Stellar’s 10k.”

Zero Transaction Fees Coming Soon

Elsewhere, Justin Sun had posted something via the Tron community on his Twitter. This detailed, “The transaction fee of TRXMarket has dropped to 0.1% at 07:00(UTC) on Dec 14th! And 0 transaction fee will be realized by next Friday.” Given this, the ecosystem may see zero transaction fees by Friday 21st December.

Technical Review – TRX/USD

TRX/USD daily chart

Looking to the upside, should the bulls maintain this current course of momentum, TRX/USD could be in for decent gain. Firstly, resistance in a prior acting demand zone must be broken down for greater moves north. This can be seen tracking from $0.01600 up to $0.01800. As mentioned, this area had previously been supporting TRX/USD from August right up until November. Given the length of acting demand, it may prove a challenge breaking down.

TRX/BTC daily chart

Lastly, TRX/BTC is heading towards an extremely critical and game-changing zone. An area where the price faltered in August and October. As can be observed via the daily chart view, there appears to be some chunky sellers camped here. As a result, on each occasion, this region sent the price free-falling back down to the south. A clearance above will see a large renewed wave of buying pressure come back into play.

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 87 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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Litecoin Price Analysis: LTC/USD E­­­njoys Double-Digit Gains as Lightening Network Seen Imminent

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  • Litecoin has run higher by 20% over the past three sessions.
  • The community of Litecoin is very much excited about the upcoming activation of the Litecoin Lightening Network.

The Litecoin price is currently enjoying a bull run, running at its third consecutive session in the green. LTC/USD having gained a whopping 20% to the upside after producing another bottom area around the $22 territory.

Prior to this push higher being observed, LTC/USD had been moving within a tight range, after bottoming on 7th December. It initially appeared to be subject to another extended move to the downside, given the formed range-block.

Litecoin bulls still need to breakout from this mentioned formation. The low as detailed above is seen down at $22. The upper part of the range can be observed up within the $27 territory. To avoid another bear attack near-term, this must be breached.

Litecoin Lightning Network Imminent

Earlier this week, cryptocurrency exchange, CoinGate, did announce via witter that the Litecoin Lightning Network is now ready for its deployment. CoinGate also put itself up for hosting for the activation to take place on their platform. The exchange tweeted: “Litecoin community, we bear some exciting news! Our Litecoin LightningNetwork is ready to be deployed and will soon be live on CoinGate! Keep up with the news as we’re getting closer!”

The Litecoin founder, Charlie Lee, responded: “Even Litecoin will soon have more than 1000 merchants accepting LN payments! Thanks CoinGatecom!” Lee recently spoke about the Lightning Network, where he detailed how it is a second-layer solution for payments that go through Bitcoin and Litecoin.

Technical Review – LTC/USD

LTC/USD daily chart

As touched on earlier, the key for greater upside is to see a break out from the mentioned range-block. The bulls must storm through the $27 territory. However, not long after there is another barrier in the way. LTC/USD, between the 25th November and the 5th December, was in a prior range-block. The bottom for this was seen around $27 up to $29, which was a very short-term demand area. A push above this zone should pave way for a fast return back towards $50.

LTC/BTC Daily Chart Review

LTC/BTC daily chart

In the latest run to the upside for Litecoin, it has moved to its highest levels seen since 1st December. There is a key near-term barrier being eyed around current levels. A descending trend line running from the start of August is observed. The bulls must force a daily close above this resistance to see a further wave of buying pressure.

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 87 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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