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Analysis

Crypto Road Signs: In Conflict

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Prices of major cryptocurrencies continue to fall even amid good stock market news and very solid macro indicators.  So, what gives? These days technical analyst are making all the right calls pointing out the ugly downward sloping chart patterns and failed rallies that have formed over the last few months.  

When looking at the chart, keep in mind that there are human emotions driving prices.  It is important to remember that the bulk of global trading is composed of trend followers. In plain english we are talking a group that notoriously buys heavily in rising markets and sells just as heavily all the way down.  There is little in current behavior patterns that pays attention to fundamental value.

Fading Fundamental Interest

The fact that investors are closing their eyes and selling was clearly illustrated in a recent post at Bitcoin.com. Sighting Google Trends and Insights there is evidence that searches for words like Bitcoin, Ethereum, Ripple and cryptocurrency have fallen as much as 80% from peak fourth quarter 2017 levels.  This closely corresponds with the price action across the broad spectrum of currencies.

This simply confirms the pattern of trend following behavior; when the direction of asset prices changes from positive, investors bury their heads.  

A Few Fundamental Indicators To Ponder

The very fact that you are reading this article and taking the time to sort things out, immediately separates you from the crowd of trend followers.  So here are just a few fundamental indicators to ponder. Will any of these restore the luster to crypto overnight? Probably not but over time, fundamentals always win.  So here are a couple of thoughts.

New Money Is Coming

There is lots of media chatter about the billions being raised by hedge funds.  Bravo, this means new investors coming into the crypto market for the first time accompanied by professional managers that spend lots of dough on analysis that pay attention to fundamental factors.  

If Things Are So Bad Why Are ICOs Doing So Well

If you’ve followed the Initial Coin Offerings over the last year, this is an area that has been thoroughly trashed.  ICOs have been called out as “cash grabs” and criticized by tech experts for being “pre product” in other words nothing more than a “White Paper” and a couple of employees.  There have been cases of outright scams that have caught the attention of the media and earned damaging headlines.

For all this, ICO’s raised approximately $3.7 billion in high risk capital in 2017.  Since the start of the crypto price correction last December, ICOs have raised over more than $3.0 billion a 50%+ increase over prior periods.  This is a clear sign of new capital coming into crypto.

Crypto Conferences:  A Measure Of Interest

Woody Allen, the actor, playwright and comedian once remarked, “Those who can’t do, teach and those who can’t teach — teach Gym.”

Those pearls of wisdom could be updated and applied to the latest form of teaching- the crypto conference.  On the website BNT, I counted no fewer than 43 crypto summits, conferences, workshops in the month of March alone. There aren’t that many days in March. And the seats for these conferences are being filled. There is such a thirst for information on blockchains, smart contracts, ICO, regulation. Trend investors may still be feeling the pinch from the crypto price correction but interest from actual industry members has never been higher.  

Speed And Security: Enter PayPal

One of the good things about all of these gatherings is the focus on real world issues. Lately there has been lots of attention on scalability.  Both Bitcoin (The Lightning Network) and Ethereum (The Raiden Network) have their answers to scalability. Yes, but both propose off blockchain transactions and on top of that the crypto community is uncertain when either network will be ready for prime time.  Slow speeds and shaky security concerns are legitimate concerns. Now there is a new twist coming from PayPal.

Trade reports point to a PayPal patent application recently filed for a virtual (cryptocurrency) transaction system designed to address two major issues: speed and security.  Theoretically this could include creating their own payment channel, wallet and crypto exchange.

PayPal’s reach is one of the things that makes their patent application doubly interesting.  The company serves an audience of over 200 million according to the research firm DMR. The company has an impeccable reputation for security, reliability and customer service.

This is both an important measure of fundamental demand for crypto but a big vote for mainstream adoption.

So if you have been patient and read this article to this point I think you will agree that for the moment the crypto road signs point in different directions: prices falling and fundamentals improving.  In the long run fundamental forces almost always win out.

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 82 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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6 Comments

6 Comments

  1. mattslater74

    March 9, 2018 at 8:38 pm

    I agree there will be a new wave of investors. You mention Google searches have dropped but I bet the searches during the peak period were because bitcoin was largely unknown and people were looking for education. Not so much now. Therefore I see little correlatoin between the drop in searches and price. People look at market data before investing not Google search. PayPal is an interesting one. If the patent is approved, PayPal stocks should be a good buy

    • James Waggoner

      March 10, 2018 at 4:32 pm

      I agree, it is all in the interpretation of the data on Google Search. Until AI can show otherwise, the sheer volume of searches may not be the definitive measure. When prices are declining, the negative headlines usually follow. That is where trend followers get their news.

  2. MinerMatt17

    March 9, 2018 at 9:49 pm

    I do see a correlation, as people just want to bury their heads during these times, ad do something else to take their minds off the daily crashes. I know I do this. With that being said, I think we are very close to capitulation, and therefore the bottom, with the all weak hands being removed from the market.

    • James Waggoner

      March 10, 2018 at 4:34 pm

      It may be early to call it capitulation, but somewhere close to that point. That is for sure.

  3. ChookBunny

    March 9, 2018 at 9:49 pm

    When we talk of new money it is always in relation to Hedge Funds, large financial institutions and whales. Is there any understanding of what the opposite end of the economic spectrum is doing. Is there adoption by the worlds 2.5 billion unbanked. Are people in developing, or dictatorship based countries interested, trying or even buying into crypto?

    • James Waggoner

      March 10, 2018 at 4:37 pm

      Sure there are lots of developing countries where payments innovations are taking place. Recently we wrote about QPAGO in Mexico and then there are new systems in Africa. These may not exactly be crypto but they are quite similar.

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Analysis

Italy Spooks markets Again as Stocks Remain Under Pressure

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European stocks Led the way lower today despite a bullish start in Asia, as equities gave back their gains when Daimler published a surprising profit warning, which was deeply affected by the recent trade war developments, reigniting fears of a tariff-driven downturn in global trade.

DAX, 4-Hour Chart Analysis

The Old Continent got into more trouble later on, when two anti-EU officials were named in Italy, resurrecting fears of a clash between the systematically crucial country and the core of the Eurozone. Italian yields rose in European trading, and although they are still shy of the levels hit during the May scare, the periphery could be in trouble as the ECB pledged to exit the market by the end of the year.

Nasdaq 100 Futures, 4-Hour Chart Analysis

The main European indices were smashed lower during the session, with the DAX hitting a two month low, still being very weak relatively speaking compared to its US peers. US stocks sold off heavily following the opening bell and they failed to recover, unlike two days ago, and the major benchmarks traded well below yesterday’s levels just before the close.

The Nasdaq and the Russell 2000 lost some of their recent mojo, pulling back heavily of the all-time highs during the day. All in all, the risk off shift continues to dominate across the board, as we expected and we remain negative on risk assets here, especially regarding emerging markets, even as the Dollar’s rally could be over for a while.

Dollar Pulls back as Pound Surges

USD/CAD, 4-Hour Chart Analysis

The Dollar took a beating as the Philly Fed Index came in much worse than expected, and as the Bank of England sent hawkish signals, pushing the Pound and the Euro higher. The central bank left its benchmark rate unchanged at 0.5%, but a rate hike this year got much closer, with a key member of the bank voicing inflationary concerns.

The Greenback fell more than what the events would imply, so a larger scale consolidation could have already started in the currency following the recent gains and the marginal new high yesterday. With the EUR/USD pair nearing the 1.1450-1.15 support zone, the USD/CAD hitting 1.33 and the AUD/USD touching 0.7350, a meaningful counter-trend move would be timely in the surging reserve currency.

WTI Crude Oil, 4-Hour Chart Analysis

Gold continued to drift lower before the Dollar’s reversal and it hit $1262 for the first time since lat December before bouncing back above the $1270 level in late trading. Crude oil also fell sharply in early trading, and the WTI contract traded with a $64 handle before rallying back to $66 per barrel.

The OPEC meeting, which is expected to result in a supply increase by the cartel made the crucial commodity very volatile in recent days, but we expect the bearish trend to continue, with a likely dip to the $60 level in the coming weeks.

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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4.6 stars on average, based on 279 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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Analysis

Crypto Update: Coins Drift Sideways as Trading Activity Plunges

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Liquidity dried up in the cryptocurrency segment in recent days, as trading volumes have been declining progressively, while the major coins got stuck in tight ranges. Only a few coins show signs of activity, and the bearish short-term patterns continue to dominate the market. With a group of currencies, namely Litecoin, Monero, Dash, and Bitcoin itself clearly dragging the segment down, the short-term trend will likely continue, as the previous leaders are now showing strength either.

While all of the top digital currencies are showing some gains today, and the total value of the market edged close to $290 billion, major resistance levels are still towering above. The fact that the effect of the Bithumb hack faded away quickly is a positive here, but until signs of bullish momentum and a clear leadership forming, the short-term outlook remains bearish.

BTC/USD, 4-Hour Chart Analysis

Bitcoin continues to trade near the $6750 level, edging ever closer to the declining short-term trendline, in a bearish consolidation pattern. Bulls would need a sustained move above $7000 to negate the declining trend, but for now at least a test of last week’s lows is likely with a possible move towards the key long-term zone between $5850 and $6000.  The short-term zone around $6350 level provides support, while further resistance is ahead near $7350.

Ethereum Nears Trendline as ETC Attempts Breakout

ETH/USD, 4-Hour Chart Analysis

Ethereum has been among the strongest coins in the last few days again, and coupled with its long-term relative strength, the second largest coin is still the best candidate to lead a recovery. That said, the coin still faces strong resistance between $555 and $575, and bullish momentum is suspiciously weak. Primary support is found at $500 with further zones near $450 and $400.

ETC/USD, 4-Hour Chart Analysis

Ethereum Classic has been positively diverging compared to the rest of the market, together with Binance Coin, and to a lesser extent Tron ever since its inclusion to Coinbase, and the coin moved above the key $16 resistance yesterday in late trading.

While ETC is slightly overbought from a short-term perspective, a consolidation above $16 and a subsequent move higher could confirm a trend change. For now, the short-term trend signal is only neutral, and traders should remain cautious given the broad downtrend in the segment

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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4.6 stars on average, based on 279 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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Altcoins

Treading the Floods: Cryptocurrency Prices Stable Following Bithumb Attack 

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Cryptocurrencies emerged unscathed Wednesday following yet another security breach of a South Korean exchange, as the market continued to favor a corrective rally for bitcoin and the major altcoins.

Crypto Prices Hold Steady

Bitcoin fell by as much as $200 Wednesday on news of a cyber attack targeting South Korea’s Bithumb exchange. However, the coin quickly recovered and now sits just shy of $6,800, according to data provider CoinMarketCap. Prices peaked at $6,821.56 at 12:34 UTC.

Compared with 24 hours ago, bitcoin’s per-coin value was virtually unchanged.

The ten biggest altcoins by market cap exhibited the same pattern, with prices treading water compared with Tuesday afternoon. The total cryptocurrency market was valued above $290 billion, up from an earlier low of around $282 billion.

Bitcoin and the major altcoins have more or less retained their bullish bias, which suggests that a continuation of the upward trend is likely. Since bottoming last week, coins have rebounded $26 billion.

Bithumb Attack: What We Know

Hackers made off with roughly $31 million in stolen cryptocurrency on Wednesday as Bithumb suffered its third cyber breach in 12 months. The attackers reportedly targeted users’ holdings of XRP, the third-largest cryptocurrency by market cap, by running a series of unauthorized access attempts.

Bithumb was unable to prevent the attack despite spending upwards of 10 billion won ($9 million) on security enhancements. This includes complying with new guidelines for financial institutions requiring 5% of company staff be made up of IT specialists. Bithumb has reportedly exceeded that quota by a wide margin.

The Seoul-based exchange confirmed that it had migrated outstanding crypto balances to cold storage and said it will fully refund affected users. Transactions on the exchange remain suspended for now.

Although news of the attack hit the airwaves on Wednesday, some analysts believe the theft occurred several days earlier as part of Bithumb’s data upgrade. However, the exact cause of the breach remains unclear.

Goldman Sachs Weighs Crypto Trading as an Option

U.S. multinational investment bank Goldman Sachs is considering taking a bigger dive into cryptocurrency by launching a full-scale trading operation, according to COO David Solomon.

“We are clearing some futures around bitcoin, talking about doing some other activities there, but it’s going very cautiously,” Solomon said during an interview in China, as reported by CCN. “We’re listening to our clients and trying to help our clients as they’re exploring those things too.”

Currently, the Wall Street investment giant is clearing bitcoin futures contracts. It has also announced plans to introduce a new bitcoin trading operation, which includes using its own money to trade with clients in a variety of contracts linked to bitcoin.

Institutional traders are awaiting the arrival of custodial services dedicated to cryptocurrency before taking the full plunge into digital assets. To that effect, the San Francisco-based  Coinbase exchange is leading the charge by announcing a new line of crypto custodial services to unlock up to $10 billion in institutional capital.

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 462 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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