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Cryptocurrency Analysis: Bitcoin Undergoes 40% Correction as Altcoins Plunge Too

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The sell-off that started out in BTC as a skirmish between Bitcoin and its forked counterpart Bitcoin Cash, accelerated overnight and today, and the most valuable coin dragged the whole segment sharply lower. The decline turned into a full-fledged crash later on, with the major coins falling by an average of 30% from the recent highs, and with deeper losses in some of the largest names.

BTC found short-term support near $15,000 yesterday, but after the coin fell below that level, waves of heavy selling pushed the coin to the primary support at $13,000 as we expected, and for now, the bottom formed near the $11,300 support.

The short-term downtrend is clearly intact, and although violent bounces are possible along the way, we still expect further downside in the market, as the long-term setup remains overbought. Below $11,300, further support levels are found at $10,000 and $9000, with stronger levels at $8200 and $7700.

BTC/USD, 4-Hour Chart Analysis

Ethereum also entered a violent correction, as the second largest coin spiked as low as $500 before rebounding above $60. The long-term overbought readings are not yet cleared, so the correction will likely continue, although volatile counter-trend rallies are likely. Key support levels are now found at $575, between $480 and $500, and near the prior all-time high at $400, where the long-term uptrend lone is also providing support currently.

ETH/USD, 4-Hour Chart Analysis

Litecoin

LTC/USD, Daily Chart Analysis

As correlations exploded in the segment, Litecoin also turned sharply lower after its recent failed break-out attempt. The coin broke below the primary support zone between $250 and $260 and got close to hitting the $170 level too amid the mini-crash, completing a 50% pullback from its all-time high. Despite the oversold short-term picture, we expect further correction with further support levels at $125 and $100.

Dash

DASH/USD, 4-Hour Chart Analysis

Dash continues to be among the relatively strong coins, even amid the sharp sell-off, but it also fell more than 40% top-to-bottom before the rebound. The short-term overbought readings are now cleared, but the long-term picture is still stretched and more bearish price action is likely, with major support levels still at $1000, $800, $650, and $600.

Ripple

XRP/USD, 4-Hour Chart Analysis

Ripple got very close to the $1.25 target level after yesterday’s break-out, and although the broad correction dragged the coin lower and it spiked below the previous high at $0.85, the steep short-term uptrend remained intact. That said, long-term investors shouldn’t buy the coin here, while traders could still play the rising trend with smaller positions. Further support levels below $0.85 are found at $0.68, at $0.4250 and in the $0.30-$0.32 range.

Ethereum Classic

ETC/USD, 4-Hour Chart Analysis

Ethereum Classic followed the other majors lower too, after failing at the lower boundary of the previous uptrend channel, and it hit a low near $25 after violating the $32 and $30 supports. Given the extremely overbought readings on the long-term MACD we expect an even deeper correction with a likely dip below the prior all-time high at $23 before the end of this cycle.

Monero

XMR/USD, 4-Hour Chart Analysis

Monero is still trading inside the rising short-term trend channel, despite the almost 50% retracement, as the coin found strong support at $300, following a series of spikes below that level. While a durable short-term bounce is possible after the mini-crash we expect a deeper correction in the coin in the coming weeks, with further support levels found at $240, $200, $180, and $150.

NEO

NEO/USDT, 4-Hour Chart Analysis

NEO re-tested the level of its recent break-out as the broad correction in the segment dragged the coin lower as well, despite the less overbought long-term setup. We still expect a rally towards the $100 level following the correction, but traders should expect a volatile consolidation period amid the segment-wide correction. Key support zones are still found near $0.56, $0.50, and around $0.40.

IOTA

IOTA/USD, 4-Hour Chart Analysis

IOTA has been the most volatile coin during today’s sell-off, and the coin flash-crashed to the $1.1 support on several exchanges after violating the dominant rising trendline. The coin has been trading between $3 and $3.50 since the spike lower, and we expect volatile conditions to persist in the market, as a longer corrective phase is likely still ahead after the recent exponential surge. Strong support is still found at $3 and $1.5, with a Fibonacci support level between those at $2.35.

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 321 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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3 Comments

3 Comments

  1. MinerMatt17

    December 22, 2017 at 10:39 pm

    Bitcoin found major support when it got close to 10,400 on coinbase. As soon as it got tat low, the site shut down due to so many people trying to buy.

    What makes you think 10,400 wasn’t the low? It would be almost right on par with previous 35-40% corrections.

    • Mate Cser

      December 23, 2017 at 1:59 am

      Hi Matt,

      basically, the run-up to the correction was more like Ethereum’s rally in the spring than the previous cycles in BTC from a market dynamic’s perspective, so a longer consolidation period is likely in my view, with a final low at $7500-$7700, the last major break-out point. But I will happy to buy above that if a clear bottom forms, my gut feeling is that the stops near $10,000 will be taken out before this is over.

  2. MinerMatt17

    December 23, 2017 at 4:11 am

    How do you define a clear bottom? I guess how many days of consolidation is needed? I just view these corrections that bitcoin experiences as all being the same. They get a 30-40% which is almost impossible to buy into at that exact moment, and then a quick rebound.

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Analysis

Ethereum’s Tumble:  ICOs Aren’t The Problem

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Trying to come up with a rational explanation for crypto price movements is a thankless task. Sure, there are several attempts being made by quant jocks to develop a model for valuing coins and tokens.  Most of these that I have reviewed suggest that prices undervalue both the underlying asset or the eventual demand.

In other words, crypto prices are cheap: what a surprise.

This bit of wisdom may be of some comfort to committed long term investors, but it hasn’t translated into higher market prices. A good example of this is Ether. Over the past six months, while Bitcoin has been treading water (down 7%), the price of Ether has been cut in half.  This altcoin was the topic of one of my recent articles called: Has Ethereum Lost It’s Cache?

The essence of this article was to point out how Ethereum, the platform preferred by 75%-80% of all ICOs, was suffering from investor indifference.  When you measure the activity of the top 100 tokens according to CoinMarketCap.com, the US dollar value of 9 of the top 10 most actively traded amounted to an average of $14,000 over the previous 24 hours.  Please keep in mind, trading activity in ETH over the same 24 hour period amounted to $1.8 billion USD.

Bloomberg Speak

One of the more interesting contradictions to my research into Ethereum’s plight comes from an article originating from a highly respected source: Bloomberg News.  The headline reads: “Ether Tumbles as Concern Increases That ICOs Are Cashing Out”.  It is totally defies the data to believe that every ICO cashing out when there is almost no volume to confirm this claim.

Quoting from an August 13th article:

Initial coin offerings using the Ethereum blockchain are seen as one of the main catalysts for sending Ether’s price surging last year. Now they’re being blamed for its decline.

It is quite true that initial coin offerings using the Ethereum blockchain was a catalyst for sending Ether’s price surging last year. It gave investors a reason to buy Ether even if they didn’t tell an ICO from a UFO. But are ICOs the real blame for both the good and the bad of Ethereum price?  I will step aside and let you be the judge.

For starters it is important to remember that ICOs raised $2.4 billion last year while ETH value appreciated almost $70 billion. The concept of ICOs may have fueled blind speculation but the math tells us that real demand was much less.

As for taking the blame for falling ETH prices, consider this notion. At its peak in January ETH was valued at $133 billion.  Currently that value is $100 billion+ lower than just eights months ago.

Using the data from ICOWatchList.com, since the beginning of 2017 ICOs have raised a total of $8.5 billion.  The statistical experts claim the Ethereum platform was used by between 80%-83% of all ICOs, thus reducing the $8.5 billion number to $5.7 billion.  

There is no question that ICOs influenced ETH speculators but that doesn’t begin to explain the more than $600 billion in aggregate losses for all crypto assets.   

Criticism Of Startup Managements

Critics claim that ICOs give startups the ability to raise lots of capital but they are proving weak in management on the funds once they are in their crypto wallet.  There is a certain validity to this since the number of founders with deep experience as CEOs and CFOs is pretty limited. But how can anyone separate insider selling activity from all other volume?

Research website Santiment, which compiles a selection of Ethereum-based projects, estimates startups have spent over 110,000 Ether in the past 30 days. At current prices that amounts to about $33 million.  For sake of discussion, let’s assume this high rate of token liquidation took place each and every month this year. Then use and average ETH price of $700 and that brings the total to $616 million.

There is no question that ICO sellers have contributed to the decline in ETH.  It would even be fair to call it a catalyst that created fear of losing all (FOLA).  Now if we could only quantify fear with an index like the VIX used by stock investors, we would see the major cause of the decline.

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 97 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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Analysis

Commodity Update: Wheat Not Yet Out of the Woods

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Wheat (WHEAT/USD) is up 29.12% year-to-date as the market came to life early this year. The successful defense of a key support level attracted investors who were staying on the sidelines for years while waiting for a tradeable bottom. This ignited a powerful rally that saw the pair generate volume that’s never been seen in over 15 years. As a result, many investors believe that Wheat may have finally reversed its trend.

In the midst of the bullish rally, it appears that bears are pulling the biggest trick that’s up their sleeve. In this article, we explore why Wheat is not yet out of the woods.

Premature Reversal for Wheat

A quick look at the daily and weekly charts reveals that the commodity appears to have broken out of a cup and handle pattern. From a short-term perspective, the market registered a higher low of $3.908 in December 2017. This gave bulls the confidence to stage a massive rally. The rally eradicated resistance of $5.00 in July 2018 with colossal volume.

Weekly chart of Wheat

The price action has led many to believe that the multi-year downtrend is over. But what if it isn’t?    

Major Roadblocks Ahead

A long-term view of the commodity reveals that it’s still in a downtrend. The market’s inability to close above $5.50 on the weekly and monthly charts is a signal that bears are not yet ready to hand over the keys to the kingdom. They are fighting back and so far, it seems that they have the upper hand.

Monthly chart of Wheat

Wheat is not reversing the trend as long as it respects the long-term resistance. This trendline has existed for 10 years and it is responsible for the commodity’s multi-year downtrend. From this perspective, it is easy to see that the pair continues to post lower highs and a lower low, which is the textbook definition of a downtrend.

Wheat still in a downtrend

Projected Movements

It’s not gloom and doom for bulls however. Even though a major resistance is staring down at them, they might still be able to come out on top. Keep in mind, bulls posted a record-shattering volume in July when Wheat went above $5.00. That means $5.00 has now become a key support level. It might just be strong enough to ignite a new rally and finally take out the long-term resistance.

Possible movements of Wheat

Otherwise, the record-breaking volume would work against bulls. All of those who bought above $5.00 are most likely using the support as a stop loss. Breach of this support would ignite a selling frenzy that can drive the market to even lower levels.

It is very possible that Wheat could capitulate during this plummet. When it does, there will be a long-term support where bulls can stage a rally to break out of the large falling wedge on the monthly chart.

Bottom Line

Wheat’s recent move above $5.00 with massive volume has attracted a lot of investors. The market may look bullish but in reality, it needs to deal with a long-term resistance before it can reverse its trend. In other words, Wheat is not yet out of the woods.

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 223 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

Pre-Market: Turkey Back in the Crosshairs Amid Sanction Threats

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The “red-bar-green-bar-madness” continues in global stock markets, as after yesterday’s rally, today the major markets are all in the red once again. Emerging market woes are still feeding the bearish narrative, with the Turkish Lira being back in the center of attention. The currency which enjoyed a three-day relief rally slid lower following threats regarding further retaliatory US sanctions, should turkey keep Pastor Brunson in custody.

USD/TRY, 4-Hour Chart Analysis

The diplomatic troubles only add to the problems of the country, while also helping the rhetoric of the Turkish leadership that focuses on a western “attack” on the nation. With the vague budget plans in mind, the endgame for the Lira still seems ugly, even as at the current levels, strong Turkish companies can offer great bargains for a long-term investment portfolio.

DAX Index, 4-Hour Chart Analysis

The divergence between the US and the rest of the world seems to be getting wider by the day, as the Shanghai Composite closed on a fresh bear market low, while most of Asia is also stuck in short-term downtrends, while Europe is looking wounded too from a technical perspective. The main US indices, on the other hand, are still near their all-time highs, and today’s selloff is also just a small blip in the ongoing uptrend.

S&P 500, 4-Hour Chart Analysis

On a slightly negative note, the Nasdaq has been underperforming the broader market ever since Tencent’s earnings miss on Wednesday, and today, it’s also the worst performing benchmark on Wall Street in the wake of Nvidia’s (NVDA) lackluster guidance that came out yesterday after the closing bell.

Today’ session could still go either way in the US, as the overnight losses are moderate, and yesterday’s trade war optimism could still fuel a recovery in the worlds strongest stock market, even amid the deepening emerging market crisis.

Forex Markets Stable As Dollar Consolidates

Dollar Index (DXY), 4-Hour Chart Analysis

The Dollar is consolidating just below its recent 13-month highs, with the EUR/USD pair rebounding to 1.14, and the broader Dollar index settling down near 96.5. The reserve currency is still clearly in a rising trend, and as the short-term overbought momentum readings are almost cleared, the rally could soon continue, especially if risk-off sentiment remains dominant outside of the US.

Copper Futures, 4-Hour Chart Analysis

Commodities are virtually unchanged before the US open, with gold still hovering just above its 17-month low near the $1185 level, crude oil being stuck near $65 per barrel regarding the WTI contract, while copper trying to hold its ground after the recent key breakdown.

Dr. Copper is still signaling troubles ahead for China and the global economy, as although the commodity outperformed today, it’s clearly below the break-down level near $2.7, and the downtrend will likely continue 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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