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Analysis

Cryptocurrencies: Five Reasons Why The Worst Is Behind

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February 5, 2018 is the day when investor fear was replaced by greed. That marked the current bottom for cryptocurrency prices.  Simple enough to make this claim now that we have had a few good trading days.  But how do we know for sure that the worst is behind?

Oh if there was a reliable way to measure fear and greed in this nascent crypto world. It could tells us emphatically when market tops and bottoms are occuring, we could make some real digital dough.  True, there are lots of tools that have been tried on traditional markets likes stocks and bonds.  But if these will truly work in crypto land remains to be proven.

Sometimes the most reliable barometer is nothing more complicated than “gut feel”.  Here is what feels encouraging when I apply this test.

The February 5th Bottom

Volatility has been a major feature in crypto trading since day one.  After better than a 7000% appreciation in Bitcoin and Ether in 2017, should a massive correction be a surprise? Between December of last year and February 5th, Bitcoin lost almost two thirds of its value while Ether dropped almost 50%.  We could go on listing every currency but you get the point.

It this were the infamous Dutch tulip bubble of 1634 the carnage would have continued endlessly.  With crypto, investors collectively found value starting on February 5.  Since then, Bitcoin has gained 50% and Ether about 30%.  That has all taken place in a matter of a two weeks.

This is unprecedented.  When the dotcom price burst in February 2000 the Nasdaq began a 75% fall before hitting bottom in November.  It took fully 14 years before the Nasdaq fully recovered.

Running Scared Of Government

Many investors try to connect the stock market correction with the slide in the cryptocurrency markets.  That would be a mistake because the circumstances are quite different.

The crypto correction and frightening headlines coming from China and Korea about threatened government crackdowns had everything to do with investors heading for the sidelines. This is not to ignore the mechanical influences like the slow transaction speeds etc. But the minute the word government comes into the picture, the worst fears take over.

With the benefit of time, investors are slowly coming to the realization that no government regulation can effectively control ownership of cryptocurrencies. They can however, regulate the operation of exchanges and that is a good thing.  This offers the chance to clean up the bad practices, excessive fees and outright scams which have hurt the individual investor.  

Initial investor reaction to the Chinese and Korean government news reminds us of an important point.  There is no such thing as perfect information in the crypto market.  Even so called professional investors know very little.  The general public are price driven momentum players.  Even erroneous headlines move markets; facts take more time .  

A  Pickup In ICOs

It doesn’t matter if you are dealing with stocks bonds or Bitcoin, when investors are willing to put money in the most speculative sectors, that is a sign of market strength.  Recently we wrote an article noting a precipitous drop in capital raised from ICOs during January.

We used data compiled by ICO Watchlist.  These folks are the only ones collecting data and their numbers don’t alway agree.  But we are using their date consistently for comparative purposes.

From a monthly average of about $400 million during the four peak months of 2017,  January dropped to just $76 million.  Easy to understand, investors lost their confidence in high risk instruments.

Things are beginning to change. With the recovery of major currencies the ICO market is showing new life.  With more than a week left in the month, ICOs have raised over $176 million, according to ICO Watchlist.

These figures exclude the current ICO underway for messaging app Telegram that claims it has raised $850 million thus far in a $2 billion total effort.  If these initial reports prove accurate it would be the largest ICO on record and create bold headlines.

More Hedge Funds Are Coming

According to Autonomous hedge fund money is piling up to between $3.5 and $5 billion marked exclusively for crypto investing.  The rise is dramatic reaching 226 funds globally compared with about half that many as recently as 5 months ago.  At the start of last year there were just 37.

The Negative Headlines Are Gone

There is nothing like raising prices to force the media to seek explanations.  Now instead of naysayers like Warren Buffett being quoted incessantly, CNBC brings on Shark Tank host Robert Herjavec declaring the Bitcoin is “going to skyrocket again” the “blockchain technology is here to stay” and that more government regulation will be the key driver.

CNBC even dragged out an old forecast by Tom Lee prejecting Bitcoin at $25,000 this year and Kay Van-Petersen of Saxo Bank predicting Bitcoin at $100,000.

The market litmus that I call “ gut feel” is hardly scientific.  There are probably analysts of big data that can offer better supporting evidence.  But for now, things are looking pretty good.

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 106 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. tommudd

    February 20, 2018 at 4:42 am

    This year is going to make the nocoiners cry in their beer (provided they can afford beer) and we will laugh all the way to the wallet.

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Analysis

Crypto Update: Market Stabilizes as Ripple Craze Fades

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The major cryptocurrencies had crazy Friday, with the skyrocketing Ripple in the center of attention. XRP more than doubled in 24 hours, and the coin was up 3 times off its low from earlier this month before entering a correction in the second half of the day. Ripple briefly took over Ethereum as the second largest coin by market capitalization, even as ETH also hit an almost three-week high amid the broad rally in the segment.

XRP/USDT, 4-Hour Chart Analysis

XRP settled down above the $0.50 level near the market cap of ETH, but short-term the coin is severely overbought, and a pullback to the $0.42-$0.46 zone is still very likely even if the coin manages to hold on to its stellar gains and enter long-term rising trend. For now, a long-term trend change is not confirmed, despite the huge bullish move, with most of the segment still being in bearish long-term trends.

That said, the short-term buy signal is still intact in our trend model, and should the overbought readings get cleared, traders could enter new positions again. Support levels are found near $0.54, $0.51, while resistance is ahead near $0.57, $0.64, and $0.75.

BTC/USD, 4-Hour Chart Analysis

Bitcoin got up to $6750 yesterday, but so far, it failed to overcome the resistance zone near that price level, and the coin is now trading in a shallow short-term correction. BTC needs to stay above the $6500 support to maintain the break-out that followed Ripple’s surge and to remain on a buy signal in our trend model.

The fact that correlations are still declining between the coins is a positive sign, but the overall bearish picture in the segment and Bitcoin’s proximity to the key long-term zone still warrant caution here. Further resistance zones are now ahead near $7000 and between $7200 and $7300, while support below $6500 is still found at $6275, $6000, and near $5850.

Altcoins Pull Back with Ripple, Short-Term Setup Still Promising

ETH/USD, 4-Hour Chart Analysis

Ethereum finally broke above the key $235 support/resistance level thanks to yesterday’s broad rally, and the coin reached the next major resistance zone near $260 as expected after the bullish move. Now the dominant declining trendlines are not far away, so traders should reduce their positions, since the long-term trend is still clearly bearish.

A test of the lows is still in the cards in the coming weeks, and the coin remains on a long-term sell signal despite the short-term rally.  Support is found near $200, $180, at the low near$170, and at $160, while further resistance is ahead between $275 and $$280 and at $300.

Stellar/USDT, 4-Hour Chart Analysis

Stellar was among the strongest coins during yesterday’s rally, following Ripple higher, but now it is testing the key support/resistance zone between $0.2375 and $0.25 after entering a correction together with the broader market.

That said, the break-out is intact in Stellar, and traders could hold on to their positions here. Support levels are found near $0.21, $0.1930, and $0.1830, while further resistance is ahead near $0.2650 and $0.2850.

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 351 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

Forex Update: A Good Time to Accumulate Euros

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On our August 31 Forex Update, we revealed how the Euro is looking strong against major currencies such as the British Pound (EUR/GBP), Japanese Yen (EUR/JPY), and the Canadian Dollar (EUR/CAD). Widening our scope, we discovered that the Euro is also doing well against other major currencies. Other than its recent struggles against the US Dollar (EUR/USD), we can say, with conviction, that the Fiber is one of 2018’s top performers.

In this article, we review EUR’s performance against the Australian Dollar (EUR/AUD) and New Zealand Dollar (EUR/NZD) to show why it may be a good time to accumulate Euros.

Euro/Australian Dollar Analysis

The EUR/AUD pair dropped to as low as 1.16033 in August 2012. This concluded the long bear run that saw the 45.06% devaluation of the Euro against the Australian Dollar from the 2008 high of 2.11197. While the drop may look depressing to long-term investors, seasoned traders pray for plummets like this. They know that fortunes are made by investing when markets crash.

So far, EUR/AUD is rewarding those who bought the crash.

Monthly chart of EUR/AUD

Those who bought the bottom are now up by close to 30%. More importantly, it appears that their investments may be about to significantly grow. EUR/AUD has just broken out of a large ascending triangle pattern on the monthly chart.

In addition, the monthly RSI is threatening to break out from its own symmetrical triangle pattern. From the looks of it, the breakout can happen anytime.

With EUR/AUD reversing its trend, you have one very good reason to accumulate Euros.

Euro/New Zealand Dollar Analysis

The EUR/NZD pair suffered an even longer bear run than the EUR/AUD pair. After posting a high of 2.57906 in February 2009, EUR/NZD went into a long downtrend. The correction drove the pair to as low as 1.38792 in April 2015. In over six years, the Euro lost over 46% of its value against the New Zealand Dollar.

Then again, there are those who make a very good living by buying the bottom. This is risky business. However, a fundamentally strong currency like the Euro is likely to bounce back hard after losing almost half of its value.

Monthly chart of EUR/NZD

If you bought the bottom, you would be in the green by over 26%. If not, well, it’s not too late. As you can see, EUR/NZD has just broken out of an inverse head and shoulders pattern on the monthly chart. This structure is one of the best if not the best reversal pattern in technical analysis.

On top of that, you can see that the monthly RSI is already in an uptrend. It’s been generating a series of higher highs and higher lows for some time now. This is a great signal telling us that bulls have taken control of the market.

With this breakout, EUR/NZD has just launched a new uptrend. This is another very good reason to accumulate Euros.

Bottom Line

Other than its struggles against the mighty greenback, it appears that the Euro is performing brilliantly against other major currencies. Recently, it managed to reverse its trend against the Australian Dollar and the New Zealand Dollar. In addition to its rosy outlook against the British Pound, Japanese Yen, and Canadian Dollar, we believe that now is a good time to accumulate Euros.

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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3.6 stars on average, based on 237 rated postsKiril is a financial professional with 4+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and ETFs, as he does his own crypto research and is the subject matter expert at ETFdb.com. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.




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Analysis

ETFs: What Is The SEC  Really Thinking?

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As a veteran Wall Street type, I was not surprised at Thursday’s SEC announcement on the VanEck-SolidX Bitcoin ETF.  Once again they gave a “no decision”. This pushes the deadline back to December 29, 2018. Don’t be surprised if New Year’s Eve comes and goes and nothing happens before the SEC is forced into a action by the end of February.

Back in August, when the first delay was announced, crypto investors’ reaction was swift and painful.  On Thursday, after a temporary hiccup, prices took a surprisingly positive turn. If we are to believe for just a moment that crypto prices act rationally (or just occasionally) then comes two obvious questions, are crypto ETFs good or bad? Secondly why can’t the SEC come up with an answer?

Never Say Yes

Let’s start with the easy question first: what’s up with the SEC?  Having dealt with this teflon organization for over 30 years, their actions with regard to VanEck-SolidX are the same pattern they have followed forever.  Practically never do they approve anything. Instead they provide two choices: reject or delay. By delaying the VanEck-SolidX application they are accepting the ETF concept in principle but laying out objections that must be corrected.

The result of this regulatory song and dance, don’t expect a decision until the last minute. The reason is that the main issues are not likely to be resolved in time. In fact, I doubt that the ETF proposal gets approval for perhaps as much as another year.  Here is why.

SEC Speak: Obfuscation

According to Jake Chervinsky, attorney for VanEck, the SEC asks “18 multiple part questions covering seven pages.” He adds: “It’s not encouraging to see the SEC ask if the bitcoin futures markets are “of significant size” despite having already concluded last month that they’re not.”

This is a tactic in obfuscation that the SEC loves when an applicant has not provided an adequate response.  In this case there is no objective answer to how liquid a market must be to meet the measure of significance.  Moreover, there is little or nothing that can be done in the short run to create greater liquidity.

The SEC is a political body as much as any agency of the Federal Government.  In raising the issue of liquidity, they can stand behind their role of protecting the public without at the same time hindering public access to a class of assets, even at current depressed levels, is worth $200 billion, more or less.

The SEC Is Right With Their Delays

Does the crypto world really benefit, as this stage of its evolution, by fostering a group of ETFs?  The argument in favor says that this is the way to simply and safely offer the individual investor a way to participate in a diversified portfolio of crypto.  That sounds noble – or is it just something that makes lots of money for those who create them?

But so far, at least from the viewpoint of the SEC, ETF applicants have not created a more secure domain.  More importantly, even if this were not the case, what does the investor gain from investing in a diversified list of crypto when Bitcoin overshadows about every other altcoin?

With nothing against those that believe in the benefits of ETFs, the benefits in current terms is far better for the ETF sponsor that it is for the investor.

Looking just at the math, an individual investor could be just as well off buying Bitcoin, Bitcoin Cash, Ripple, Ethereum and EOS. Admittedly, it is somewhat more complicated finding a place to buy and store Ripple, but with this small portfolio, you cover 75% of the entire crypto asset class. If security is an issue simply go to  blockgeeks.com/cryptocurrency-safe/ and select from a list of hardware wallets.

So whether the SEC gives their approval of VanEck-SolidX in December or February might make a difference if this were 2020 or sometime thereafter.  As for now, it really isn’t critical to the mass acceptance of crypto.

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 106 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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