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Crypto Update: Market Surges 10% but Downtrend Still Intact

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Following two days of almost constant selling, the cryptocurrency segment experienced an oversold rally, with the major coins recovering a small part of their recent losses. The technical setup is little changed so far, with the steep short-term trendlines being intact in most cases, and with the key resistance levels towering ahead of the top altcoins.

That said, as the longer-term charts have become clearly oversold, and as the selloff accelerated with signs of forced liquidations across the board, such as huge volumes and very high correlations between the majors, a durable bottom could already be forming in the segment. The next few days will be crucial in deciding that, as a successful test of the lows, and the formation of a relatively strong leadership could set up a broader short-term trend change.

For now, our trend model remains on a sell signal in case of the top coins, with Bitcoin being the closest to a reversal from a technical perspective. Ethereum bounced off the $260 level, Ripple found support near $0.26, while BTC recovered above $6275 but been stopped by the $6500 resistance, failing to trigger an upgrade in the trend model.

ETH/USD, 4-Hour Chart Analysis

Ethereum surged higher after the US close yesterday and although it failed to add to those gains in early trading today, the coin is holding up just above the $275-$280 zone, but the steep downtrend is clearly in place. ETH has been very weak for more than a month, and especially since breaking below the $400 level last week, and more signs of strength would be needed for a trend change. Key resistance is ahead at $300, while further support below $260 is found at $235.

BTC/USD, 4-Hour Chart Analysis

On a positive note, Bitcoin joined the oversold rally after holding up well above the $6000 level and the key long-term zone near $5850. The coin also moved above declining trendline, but for now, the pattern of lower lows and lower highs is intact and the coin remains on a short-term sell signal.

BTC is clearly in the strongest technical position among the majors, and it could be the leader in a recovery, should it manage to build a bottom in the coming weeks.  Resistance above $6500 is ahead at $6750, and $7000, while further support is found between $5000 and $5100.

Correlations Remain High as Bearish Conditions Persist

XRP/USDT, 4-Hour Chart Analysis

While Ripple managed to hold up above its spike low below the strong $0.26 level and the bounce took it as high as $0.30, the steep downtrend remains intact and bulls would need further confirmation before entering new positions here. The coin is still deeply oversold from a longer-term perspective, and we expect a more durable bottom to form soon. Further resistance is ahead at $0.32, while support below $0.26 is found near $0.23.

LTC/USD, 4-Hour Chart Analysis

Looking at the bearish leaders, most of the coins are in very similar setups, as correlations are still very high, and Litecoin and Monero are still slightly more promising than the likes of Dash, Neo, and IOTA, which remain very weak from a technical standpoint. LTC is trading near its recent swing low at $56 and should the coin manage to hold above that durably, a short-term bottom could form, which would be a positive sign for 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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4.7 stars on average, based on 444 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

Dash Price Analysis: DASH/USDT Downside Risks Linger Despite Trust Wallet Support Announcement

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  • DASH/USDT price action is moving within a narrowing range formation, subject to further downside risks.
  • Trust Wallet, Binance-owed crypto wallet provider, announces support of DASH.

Price Behavior

DASH/USDT has been trading within a $6 range for the tenth session in a row, at the time of writing. The upper part of this range should be noted at $73. Looking to the downside, the lower support of the formation is seen at $67. The price, like many of its peers within the cryptocurrency market, is stuck within a narrowing range block. They are all currently demonstrating strong downside vulnerabilities, given the current behaviour.

This trading range came after a steep fall in the market last Thursday, 10th January. Double-digit losses were seen across the board after moving within a prior narrowing range formation. DASH/USDT had a strong run from 15th – 24th December, gaining as much as 81% within that time frame. Following the high print towards the latter part of that period, at $102.50, price cooling was seen and then begun to trade sideways.

Between 26th December 2018 – 9th January 2019, DASH/USDT was moving between a narrow $86 at the high and $73 at the low. This led to the explosive breakout to the downside, where the price dropped around 20% on 10th January.

Trust Wallet Supports Dash (DASH)

Trust Wallet, a mobile crypto wallet owned by Binance, announced earlier this week that it has added support for Dash. The announcement followed after just a week ago, when the wallet provider revealed the support of Litecoin (LTC), Bitcoin (BTC), and Bitcoin Cash (BCH). In addition, the app also supports Ethereum (ETH), Ethereum Classic (ETC), Tron (TRX) and others.

The team at Trust Wallet, upon their DASH support update, also left users somewhat excited about further announcements lined up. They stated, “Going forward, we will monitor the performance and stability of our Dash release very closely, and if everything works well, hopefully, we can surprise you with more new coins in the coming weeks!”

Technical Review – DASH/USDT

DASH/USDT daily chart.

A breakout of the key mentioned levels that make up either side of the range, $72 and $67, will likely determine the next committed trend. Firstly, in terms of the next major area of support south, eyes will be on the December low area, $58. To the north, drop supply remains heading into and just above the psychological $100 mark.

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 110 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

5 Things To Watch Next Week + ChartBook

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ECB Faces Tough Task as Eurozone Continues to Slow

DAX 30 Index CFD, 4-Hour Chart Analysis

This week’s G20 meeting in Tokio for finance ministers and central bankers was eclipsed by the trade-war-related developments, but next week, the European Central Bank will surely be at the center of attention. The ECB is lagging behind the Fed in the normalization of its monetary policies, and we doubt that it will ever reach hiking rates before the next recession strikes Europe.

Economic numbers alarmingly deteriorated in recent months, the Euro is among the weakest major currencies, and with the Brexit process still looking uncertain, it’s hard to see how Mario Draghi &. Co. will navigate through the next months. While the current risk rally might make bulls think that all is well, the major European indices are still in deep technical trouble, and the as the economic cycle is turning down, we don’t think that the ECB has too many options.

The recent dovish shift could mean that the ECB will also sound the alarms, and we will see further weakness in the Euro and a possible extension of the counter-trend move in the European indices as well. That said, the ECB’s position is desperate from a broader perspective, as its only ammunition is more quantitative easing in the case of a deeper economic downturn.

$1.5 Trillion of Earnings Out after Trade-Fueled Surge on Wall Street

S&P 500 Futures, 4-Hour Chart Analysis

Following a mixed weak of financial earnings, with strength in the core businesses and weakness in trading performance for the most important players, this week we will have a more balanced mix of quarterly earnings reports in the US. Johnson & Johnson (JNJ), Procter & Gamble (PG), IBM (IBM), and Intel (INTC) will be the most important, and although the dollar’s Q4 strength could weigh on global revenues, the domestic numbers should be still fine.

With that in mind, the reports could still boost stocks after the December plunge, but we think that the fuel is running out, and investors shouldn’t get excited about the historic short squeeze. Also, we have doubts about the Chinese plan to reduce the US trade deficit, as even the Asian giant is serious about it, implementing such a plan seems to be more borderline impossible, let alone in a few short years. So while the rally could still go on, at these levels, short positions could already be opened on US equities.

EUR/USD Falls Despite Risk Rally as Treasury Yields Hit 3-Week High

EUR/USD, 4-Hour Chart Analysis

We saw signs of technical weakness this week in the most traded forex pair, as it completed a failed break-out pattern above the 1.15 level and dipped clearly below 1.14 towards the end of the week. US Treasury yields continued to rise, on the heels of the strong rally in stocks, and the relatively stable economic numbers from the US added to the pressure on the common currency.

With the ECB’s monetary meeting coming up, we could see wild swings especially in the second half of the week, but for now, the direction looks clear, and new lows are likely in the coming months. Given the technical weakness even a quick test of the 1.12 level and a sharp sell-off to new lows is possible, should risk assets turn south next week.

AUD/USD, Our Canary in the Coalmine, Showing Weakness

AUD/USD, 4-Hour Chart Analysis

The Aussie, which has been rising together with other risk assets showed relative weakness this week, despite the rise in commodities and the positive news concerning the US-Chinese trade talks. The AUD/USD pair has been a very good indicator for the risk-on/risk-off shifts in recent months so this weakness should be closely monitored by investors.

From a technical standpoint, the pair is trading in a crucial price range between 0.7150 and 0.72 following the post-flash-crash rally. The bounce was distorted by the flash crash, as it wiped clean several important stop-loss zones, causing pain for bears and bulls alike. With the declining long-term trend clearly being intact, we would once again favor short positions here, even as the short-term trend could still take time to top out.

Chinese GDP, Eurozone PMIs, and Rate Decisions Highlight Economic Calendar

Besides the ECB and the Bank of Japan we will have key economic indicators coming out almost every day next week. The week will kick off with the quarterly Chinese GDP print and Industrial Production, but elsewhere the economic calendar will be empty on Monday, with US markets being closed oin observation of teh Marting Luther King Jr. day. Europe will be in focus on Tuesday, with the British Employment Report and the German ZEW Sentiment number coming out, while on Wednesday, the BOJ’s monetary meeting and the Canadian Retail Sales Report will likely make waves.

The last two days of the will likely be the most active in traditional financial markets, with the Eurozone Manufacturing and Services PMIs and the ECB’s monetary meeting being scheduled for Thursday. Given the pace of the recent slowdown, which usually precedes recessions, another set of negative surprises could hurt the Euro and European equities alike.

ChartBook

Major Stock Indices

Nasdaq 100 Futures, 4-Hour Chart Analysis

Dow 30 Futures, 4-Hour Chart Analysis

VIX (US Volatility Index), 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

Shanghai Composite Index CFD, 4-Hour Chart Analysis

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

Forex

USD/JPY, 4-Hour Chart Analysis

GBP/USD, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

Commodities

WTI Crude Oil, 4-Hour Chart Analysis

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

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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4.7 stars on average, based on 444 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

Your Guide to Stablecoins 2019

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Stablecoins are cryptocurrencies with a value pegged to a currency or to exchange traded commodities. Many projects today are researching and developing such technology. Issuers distribute stablecoins to customers in exchange for fiat currency such as USD at a 1:1 fixed exchange rate. USD is a desirable medium of exchange and globally accepted unit of account, making it a good choice for a stablecoin. Stablecoins most often take the following shapes.

  • Fiat-collateralized: Reserves in a national currency collateralize the creation and issuance of such tokens. The goal is price stability by pegging a token’s value to a reserved fiat value.
  • Crypto-collateralized: Cryptocurrencies backing cryptocurrencies. That might sound far fetched or futuristic, but it is possible in the present day. Forget the Gold Standard. Now you can hold a cryptocurrency backed by a basket of cryptocurrencies.
  • Seigniorage: These tokens are not-collateralized. Software maintains the price stability.
  • Hybrid: When you blend the three basic approaches above – or some assortment thereof – you get a hybrid stablecoin.

Let’s go deeper.

Fiat-backed

Fully-backed by fiat money at a 1:1 ratio, you might receive $1 of fiat-backed stablecoins in exchange for $1 of fiat money. Custodians (third-parties) typically manage the fiat in such an arrangement. In order to maintain a stable price, fiat-backed tokens may be issued or destroyed as needed. When holders redeem cash with tokens, for instance, the company might wire money to a bank account, then destroy or otherwise remove the tokens from circulation so as to maintain the fiat currency peg.

Tether (USDT)

Tether’s daily volume on January 18 was $189,134,405. Traders use tether as a way to hedge and to convert holdings into the equivalent USD value without having to cash-out. Detractors argue that Tether lacks transparency when it comes to reserves, though the company claims all issued USDT tokens are backed on a one-to-one basis. The CEO of Bitfinex is also the CEO for Tether Limited, which issues Tether.

TrueUSD (TUSD)

TrueUSD claims to be more transparent than Tether, while still enabling TUSD customers to exchange USD through an escrow account over which the TUSD team claims to have no control. The company uses smart contracts to ensure the 1:1 parity between real USD reserves in the escrow accounts and the TUSD tokens issued.

Gemini

Gemini took a different approach than most stablecoins, receiving permission from the New York Department of Financial Services (NYDFS) before creating its USD-pegged stablecoin. Designed to provide traders and institutions with a “regulated” version of tether (USDT), Gemini claims their stablecoin establishes trust through cryptographic proof and regulatory oversight.

Gemini’s ERC20 stablecoin includes an “upgrade feature, an offline approval mechanism for high-risk actions, and a hybrid online-offline approval mechanism for high-risk actions and token issuance that provides the desired level of security and flexibility.”

Gemini links licensed financial institutions and examiners. They form a network of trust that backs the Gemini dollar. This regulated stablecoin is to serve as a medium of exchange and unit of account for centralized and decentralized applications. Gemini has pledged to create a network of trusted and licensed financial institutions and examiners. These implementations combined form the Gemini dollar, a regulated stablecoin that can serve as a viable medium of exchange and unit of account for centralized and decentralized applications.

Gemini’s proof-of-solvency is also a unique selling point requires a trusted third party. It plans to have the audit committee of the board of directors of Gemini engage an independent registered public accounting firm to attest to the underlying US dollar balance.

Paxos Standard

Paxos Standard is built upon the Ethereum blockchain as an ERC-20 token. Rather than issuing new money to maintain price stability, as past coins have attempted, Paxos Standard provides a more stable representation of existing money with accepted and trusted value. The company posits early use cases for the technology as a payment means; hedge against volatility; contracts for more complicated transactions, and more. Longer term use cases include asset mobility and settlement and ecosystem development.
Centre

CENTRE is creating a network scheme to manage the creation, redemption and mechanisms enabling issuing members to mint and burn/redeem asset-backed fiat tokens, ensuring price stability. CENTRE’s fiat-collateralized approach entails a unit of tokenized fiat currency being backed by one unit of reserved fiat. According to CENTRE, Circle will become a “licensed member of the CENTRE network”, but an independent entity will govern and develop CENTRE protocols separate from Circle.
Commodity-Backed

Commodity-backed stablecoins are pegged to a specific value of, say, gold. One token, for instance, might represent one gram of gold. Physical gold is often claimed to be stored in a trusted third party vault. BitShares was one of the first projects to introduce a commodity-backed stablecoin. Backed by real assets and redeemable at the conversion rate of the real asset, commodity-backed stablecoins try to maintain the stable value of gold, while being easily transferred.

Digix Gold Tokens (DGX)

Digix has two tokens. Digix Gold Tokens (DGX) and DigixDAO Tokens (DGD). DGD tokens are used for DigixDAO’s governance model. DGX tokens are used as collateral and a trading pair by other crypto projects like MakerDAO, Kryptono Exchange, Kyber Network, WeTrust, Monolith, and others.

A Digix customer might buy gold through the Digix platform. The vendor then supplies gold and a custodian stores the customer’s gold. Relevant details (vendor, custodian, customer, etc.) are stored on a digital card, and sent to smart contracts so new, gold-backed coins can be minted.

DGX, created by DigixGlobal, is an ERC-20 token backed by physical gold. Fully-audited and stored in a vault in Singapore, the Safe House, each token’s value is fully redeemable and pegged to price of gold. Digix’s Proof-of-Provenance algorithm ensures that each gold bar’s custodianship status is tracked on the Ethereum blockchain. Reserves are audited each quarter.

Cryptocurrency-Backed Stablecoin

Backed by other cryptocurrencies, crypto-collateralized cryptocoins can be less stable than fiat and commodity-backed stablecoins because the underlying asset is less stable. Cryptocurrency-backed stablecoins might sometimes be over-collateralized to account for the volatility. While a US-backed stablecoin might be pegged 1:1, an Ethereum-backed stablecoin might be worth 2:1. (US $2 worth of ethereum for US$1 worth of stablecoin).  Still, cryptocurrency backed stablecoins are more volatile than stablecoins backed by other assets like commodities and fiat money.

Usually backed by a basket of cryptocurrencies instead of a lone currency, some such stablecoins require users to stake and lock cryptocurrency via a smart contract to create a fixed ratio of stablecoins. Considered a more decentralized alternative to fiat and commodity-backed stablecoin, cryptocurrency backed stablecoins offer quick liquidation from one cryptocurrency to another.

MakerDAO (DAI)

Maker, a smart contract platform based on the Ethereum platform, stabilizes the value of Dai, a collateral-backed cryptocurrency, through a dynamic system of Collateralized Debt Positions (CDPs), autonomous feedback mechanisms, and appropriately incentivized external actors.

Collateralized debt position are smart contracts on the Maker system. CDPs keep track of assets deposited by users so that users can generate Dai. The value of an active CDPs collateral is higher than the value of the debt. Ether is used as collateral for new coins, and must be sent to a CDP, which locks the staked ETH so new DAIs are minted. Dai is designed to be sent to others, used as payments for goods and services and held as savings. MakerDAO also issues MKR token.

Seigniorage-Style Stablecoin

Seigniorage-Style stablecoins are uncollateralized and stabilized by algorithms. Algorithms might maintain the value and stability of a coin by controlling the supply of the uncollateralized stablecoin, shrinking and growing it based on certain indicators.

Seignoriage-style coins’ algorithmically governed approach to expanding and contracting a stablecoin’s money supply. New stablecoins are minted to maintain stable prices, when, say, demand increases or decreases.

Conclusion

Technologists claim that stability offered in stablecoins would be a boon to cryptocurrency by minimizing fluctuations of value. A stablecoin theoretically represents a stable means of payment and trade, making it appealing for daily use, and perhaps more palatable for the general public. Yet, stablecoin technology is still nascent, and questions such as how to manage supply and demand in such a way as to create stable value have yet to be fully answered and understood. Of the coins listed here, Digix, Gemini, MakerDAO and Paxos represent under-publicized products on which to keep an eye.

Image: Artem Beli

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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5 stars on average, based on 1 rated postsJustin O'Connell is the founder of financial technology focused CryptographicAsset.com. Justin organized the launch of the largest Bitcoin ATM hardware and software provider in the world at the historical Hotel del Coronado in southern California. His works appear in the U.S.'s third largest weekly, the San Diego Reader, VICE and elsewhere.




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