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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.

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 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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  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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Altcoins

Litecoin Price Analysis: LTC/USD Set for Another Potential Explosive Move North as Bulls Penetrate Pennant Pattern

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  • Litecoin price on Saturday is seen holding decent gains of over 3% at the time of writing, as the bulls continue their latest push north.
  • Fundamental prospects surrounding the Litecoin Foundation remain strong and supportive of the price recovery.

LTC/USD since last week has been on a decent push to the north; the price has gained well over 40% since 7th February. A breakout kicked-started the previous week after the bulls managed to escape a narrowing daily range-block. LTC/USD was contained within the tightening structure from 11th January right up to 7th February, which then saw an explosive move shortly after. In terms of the range, this was seen at a high of $35 down to a low $29.

Between 10-11th February, Litecoin managed to see its highest levels since 14th November, which demonstrated its recovery. Price action over the last few sessions has been somewhat consolidating while maintaining the new heights. As a result, LTC/USD has formed a bullish pennant structure following the long pole from 8th February gains. Given the current formation, the price does appear to be subject to further upside movements.

Adoption Progress – Litecoin

Earlier this week, Spend App announced iit would begin supporting Litecoin. The Spend App currently facilitates users to buy, sell and pay with Litecoin in more than 40 million locations, a massive step towards mainstream adoption. According to Spend’s official website, card transactions can be performed in 180 countries.

The company tweeted, “Litecoin is now available on the SpendApp. You can buy, sell and pay with Litecoin with your linked bank account. Spend LTC at 40+ million locations with the Spend Wallet by instantly converting to fiat with the Spend Visa Card!”

Pricing in Litecoin’s ‘Halving’

In August of this year, Litecoin is expected to see it’s second ‘Halving’. In a PoW, or proof of work blockchain, halving results in the miner’s reward being cut in half. Although the halving causes miners’ reward to be reduced, they tend to Bboost the price of an asset over the longer-term.

The inventor of bitcoin, Satoshi Nakamoto, introduced the halving feature to protect against inflation. Besides, he wanted to ensure that not all of the blocks were mined so soon. Similarly to bitcoin, Litecoin has a cycle of “halving”. What will happen is at predetermined blocks, Litecoin’s mining reward will reduce. It will be Litecoin’s second halving, as the first one occurred back on 25th August 2015. At the time miners rewards went down from 50 LTC to 25 LTC, this time round miners reward will be 12.5 LTC.

Technical Review – LTC/USD

LTC/USD daily chart.

As detailed earlier, LTC/USD is subject to an extended move higher should the market bulls breakout of the pennant pattern. The upper part of the structure can be seen tracking around $44.00; this must be broken down to see a more significant wave of buying pressure. Looking to the north, the next realistic target for the bulls will likely be the psychological $50.00 mark. The price has not been up at these heights since 14th November 2018.

In terms of support, it is observed at the lower acting trend line of the pennant structure, $41.50. If this fails to hold a complete reversal of the latest run of gains may be seen. LTC/USD would then likely be forced to return down to the low $30 region.

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 123 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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Altcoins

NEO Price Analysis: NEO/USD Bulls Eyeing an Explosive Move Higher as Cryptocurrency Enters Western Markets

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  • NEO/USD bulls are penetrating overhead resistance of a triangular pattern formation.
  • NEO Global Development (NGD) has set up an office in Seattle, Washington, keen to break into the Western markets.

NEO/USD: Recent Price Behaviour

The NEO price over the past week has managed to see some upside momentum, having gained around 25% since 7th February. At the time of writing, NEO/USD is running towards another session in the green, which would make it nine in the last ten. This is the best run of gains observed since the crypto market uptrend of December 2018.

In terms of the latest push to the north, NEO/USD bounced off a critical near-term supporting ascending trend line, which makes up a triangular pattern structure. It began the formation of this back in mid-December 2018 when the bulls entered a decent path of upside. However, the bulls eventually ran out of steam and were forced to narrow and trade within the confinements of the mentioned pattern.

NEO Looking to Make Ground in Western Markets

The team at NEO is taking serious steps towards expansion into U.S. markets, following its latest announcement to open an office in Seattle. This is the site of the new NEO Global Development (NGD) office. NGD will begin immediately recruiting for the new set up, which is going to be headed up by ex-Microsoft executive John deVadoss.

NEO is hosting its 2019 DevCon in Seattle, Washington between 16th February through to 17th. There is much anticipation around the announcing and details of NEO 3.0. As it currently stands, no clear specifications about the upgrade have been disclosed. Previously, NEO co-founder Erik Zhang said:

“NEO 3.0 will be an entirely new version of the NEO platform built for large scale enterprise use cases. It will provide a higher TPS and stability, expanded APIs for smart contracts, optimised economic and pricing models, and much more. Most importantly, we will entirely redesign NEO’s core modules.”

More on DevCon: NEO Price Update: Bulls Take Control as Anticipation for DevCon Builds.

Technical Review – NEO/USD

NEO/USD daily chart.

The NEO/USD price continues to trade within the earlier described triangular structure, demonstrating signs of late for a possible breakout higher. The markets bulls have been testing the upper acting trend line of the pattern; given the recent penetration, one would suggest a subsequent breach is likely. The resistance is currently tracking at $8.60; a break and daily closure above could invite another wave of buying pressure.

Further to the north, eyes would be on a retest of the significant psychological area of $10.00. The price last peaked up at these heights on 9th January, before running into sellers and being forced back south. At the time this was the highest NEO/USD had reached since 20th November. A push above this will then call into action $13.00, where the price consolidated briefly during the heavy November selling. Lastly, a return to the pre-November fall levels near $20.00 would be the next likely target.

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 123 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

Crypto Update: Another Spike Fails in Crypto-Land

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The major cryptocurrencies continue to follow the pattern which consists of sudden spikes followed by choppy sideways periods. Today, the top coins jumped higher, with the strongest currencies testing their recent swing highs, but the move quickly failed. The market continues to be dominated by low liquidity and the bearish long-term forces, making it difficult to make money trading the long side.

That said, the short-term break-outs, which were formed one week ago, remain intact and our trend model is also on short-term buy signals in the case of the relatively stronger coins. Despite the buy signals, traders should remain cautious with new positions, as the long-term forces continue to work against bulls here.

The leadership of last week’s move continues to be weak and without a new batch of coins hitting new short-term highs, it’s hard to see what could propel the market higher. The top 3 coins haven’t been able to pull their weight either, so odds clearly favor the continuation of the bear market from a broader perspective.

BTC/USD, 4-Hour Chart Analysis

Bitcoin remains stuck below the $3600 level despite today’s spike, and the bearish drift that started last week in the coin continues. BTC’s relative weakness is a negative sign for the whole segment, and although it’s still above the support/resistance zone just north of $3450, the long-term setup continues to point of the $3250 and $300o support levels.

That said, the short-term buy signal is still in place in our trend model, and traders could open small, speculative positions in BTC, with strong resistance zones being ahead near $3850 and between $4000 and $4050.

XRP/USDT, 4-Hour Chart Analysis

Ripple has also been showing relative weakness in recent days, and today it dipped back below the key $0.30 support/resistance level following the failed rally attempt. While the coin once again avoided a move towards the next main level of interest at $0.28, it is still likely to violate that level and test the August low near $0.26.

With that in mind, traders should stay away from XRP, with our trend also being on short- and long-term trend signals, and barring a move above $0.32, the immediate outlook is also negative, with further resistance levels ahead near $0.3550 and $0.3750.

Litecoin Tests $44 Level Again as Ethereum Clings to $120

LTC/USD, 4-Hour Chart Analysis

After settling down near the $41 price level, last week’s star LTC spiked as high as $44 today, but it failed to break-out above the key resistance zone. While the break-out remains intact and the MACD indicator still only points to a correction, the market-wide trends remain negative, and the previously leading coin hasn’t shown signs of relative strength in the last couple of days.

Traders could still hold their positions here even though a swing low is not yet confirmed, but strict rsik management rules should still be applied. A move back below $38 would trigger a downgrade in our trend model, which is still on a short-term buy signal. Above the initial resistance at $44, further levels are ahead near the recent swing high near $46 and at $51, while support below $38 is found near $34.50 and between $30 and $30.50.

ETH/USD, 4-Hour Chart Analysis

Ethereum has been trading in a narrow range today and the recent short-term swing high capped the rally attempt in the second largest coin. While the coin is still holding on to most of its gains from last week, trading well above the $112 level, the lack of bullish follow-through is a negative sign even regarding the short-term outlook.

The hostile long-term setup raises the odds of a failed short-term rally, and although pour trend model remains on a short-term buy signal, traders should only consider small, speculative positions here. The $120 level continues to be at the center of attention, with another strong resistance above that being found near $130, while further support is found in the $95-$100 zone.

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.

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4.7 stars on average, based on 465 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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