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Daily Analysis: Pound Falls Again as Stocks Decline Globally

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Monday Market Recap

Asset Current Value Daily Change
S&P 500 2580 -0.02%
DAX 13074 -0.40%
WTI Crude Oil 56.72 0.12%
GOLD 1278.00 0.31%
Bitcoin 6480 10.89%
He 1.1662 -0.10%

The decline in Asian and European equities continued, but the major US indices are still holding on strong, even as a large number of stocks are not confirming the rosy picture. The Middle East situation continues to weigh on global sentiment, as the tensions between Saudi Arabia and Iran are still in the center of attention.

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In the UK, Theresa May’s positions are shakier than ever, and that added to the downward pressure in the region today, with the DAX and the EuroStoxx 50 both underperforming their US peers. British sources reported a declining support for the PM’s on party, with 40 tory members signing a letter of no-confidence.

DAX, 4-Hour Chart Analysis

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Apart from the tumbling Pound, currencies have been quiet, although the Dollar has a slight edge compared to the other majors, even as the struggle regarding the GOP tax plan continues. Commodity currencies were notably struggling, despite the bounce in the price of gold and oil’s drift higher. Crude oil’s fundamental outlook improved according to the OPEC, as the cartel’s production declined substantially in October, while demand is forecasted to increase next year.

GBP/USD, 4-Hour Chart Analysis

Cryptocurrencies

The crypto segment saw record trading activity in recent days, thanks to the unprecedented rise and fall of Bitcoin Cash that basically exchanged market share with the Bitcoin in gigantic amounts. Today’s session was all about the vicious oversold rally in BTC that decimated its contender compare to BCH’s weekend highs, even though the coin remains well above its previous all-time high, not to mention its recent lows near $300.

BCH/USD, 4-Hour Chart Analysis

Altcoins are also very active today after the crazy weekend, with Dash still being in the spotlight thanks to its spike and the following correction, while the rest of the market has been hectic and divergent. Ethereum Classic got dumped below the $16 level after a spike above $20, while IOTA struggled at the $0.64 level after a strong rally, not unlike Monero concerning the $125-$130 price zone. Ethereum and Litecoin showed signs of relative strength, while NEO also recovered well after a period of weakness, with only Ripple being stuck in no man’s land.

IOTA/USD, 4-Hour Chart Analysis

 

Key Economic Releases on Monday

Time, CET Country Release Actual Expected Previous
19:45 JAPAN BOJ Governor Kuroda Speaks

Key Economic Releases on Tuesday

Time, CET Country Release Expected Previous
02:30 AUSTRALIA NAB Business Confidence 7
04:00 CHINA Industrial Production 6.3% 6.6%
09:00 GERMANY Prelim GDP 0.6% 0.6%
11:30 UK CPI Index 3.1% 3%
11:30 UK PPI 0.8% 0.4%
12:00 EUROZONE ECB President Draghi Speaks
12:00 EUROZONE Flash GDP 0.6% 0.6%
12:00 GERMANY ZEW Economic Sentiment 19.8 17.6
15:30 US PPI 0.4% 0.1%

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Analysis

The Crypto Correction: What You Need To Know

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In the short span of about 24 hours prices of cryptocurrencies have fallen like a stone. Investors have either given back or taken losses of sizable amounts. Measuring the one-day drop: bitcoin -21%, Ether -29%, Litecoin -29%.

From its December all time high near $20,000, bitcoin has given back more than $200 billion in value. This amounts to more than 80% of the companies on the New York Stock Exchange or Nasdaq. Even for those who have experience-trading crypto, the events of the last few days can challenge nerves.

What is the right plan of action? Possibly no plan at all, by that I mean sitting tight and doing nothing, could be the best plan. What ever you choose, the first thing to do is to shut down your computer and turn off CNBC. These are all entirely emotion driven groups and right now they are making loud negative headlines reminding us of quotes from JP Morgan CEO Jamie Dimon and Warren Buffett.

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The same sources are painting a dark case today. These are the very same folks that were gaga over crypto last year while prices were rising. Now these sources are quoting Warren Buffett who predicted with a high degree of confidence that cryptocurrencies will have a bad ending.

If you listen to Christopher Harvey, Head of Equity Strategy at Wells Fargo, you get an even more dire prediction. He recently appeared on CNBC stating that the cryptocurrency price correction could spill over into the overall stock market.

There is a rule of thumb on Wall Street. If you are right 51% of the time, you are considered an investment genius. This means most opinions are wrong at least half of the time. This could be the case with today’s crypto naysayers.

Prices And Business Fundamentals Don’t Always Match

The number of true experts in cryptocurrencies is small relative to the number of investors. That means there is more emotion than usual driving prices in both directions. It is this volatility that keeps certain investors on the sidelines.

But if you have done your research and have a view of the world in 2028 short-term volatility is not your enemy. Warren Buffett, the biggest crypto naysayer is a master of long term investing. During the 2008 financial crisis, when the world was close to the brink of financial disaster, Buffett was standing by with billions to loan Goldman Sachs charging an outrageous 10% rate of interest. There is a lesson for us here.

Don’t Get Distracted By Short Term Issues

Korea is a big market for crypto demand and, along with China has produced headlines threatening to close down cryptocurrency exchanges. I have not dealt directly with any of these so the analysis of others is necessary.

These folks point out the excessive price premiums as evidence of the behavior of bad actors in the game. So any action by governments to clean up the exchanges could produce a better experience for investors. And let us not forget cryptocurrencies are global. There are plenty of exchanges in the world that make markets.

Korea does not have a monopoly on bad actors. The exchange and lending platform Bitconnect, in recent days, announced that it is closing. The company was recently served with a cease and desist order. Ethereum founders had criticized the exchange for their practices that many believe were bordering on a Bernie Madoff style Ponzi scheme.

The Tipping Point Has Been Reached

The jury is no longer debating the verdict. Cryptocurrencies have become embedded in the global economy. According to Google’s Annual Report on Search Facts, bitcoin and cryptocurrencies were the second most important topic in the world during 2017.

Bitcoin is all about fast, anonymous, low cost movement of money anywhere on the planet. Those lofty goals have not yet been achieved but with tens of thousands of businesses now accepting bitcoin including some hefty Fortune 500 companies and with the Bitcoin Lightning Network coming on, bitcoin’s shortcomings are being addressed.

Bitcoin Futures: Acceptance Is Spreading

When I learned that bitcoin futures would be traded in the US by the CME and CBOE, the only question was how long it would be before other countries recognized the legitimacy of bitcoin futures. Well, it didn’t take long. The Hong Kong securities regulators, SFC issued a report on December 11th giving investors a green light.

Within less than a year futures contracts will be available on Ethereum and possibly others.

Ethereum: The Future Is Here

Ethereum has always had a more obtuse purpose. It was never intended as a medium of exchange like bitcoin. For what it is worth, Ethereum is less likely to be singled out by governments and central banks that fear loss of economic control.

Descriptions like decentralized blockchain platform offering smart contracts and driven by Ether require some time to appreciate. Ethereum is open sourced and applications oriented. You don’t need to understand the technology you only need to envision what it can be applied to.

Ethereum co-founder Steven Nerayoff tells us the number of Ethereum projects today is already ten times the number of last year. Here are just two examples.

Unilever

Unilever, the $52+billion food and packaged goods giant, is working on a blockchain based project to better manage its massive global supply chain. So far it is only being tested but consider the size: 10,000 Malawian tea farmers. And this is just the start of their massive corporate wide supply chain. Imagine what this will look like if Unilever starts to take things seriously: stay tuned.

On The Vanguard

Now the $5 trillion Vanguard group is getting the blockchain bug.  They are the investment industry’s low cost provider. Now they are embarking on test to apply blockchain technology for data sharing.

Caveat Emptor

The reality is the cryptocurrencies are embedded in the global economy and likely to grow dynamically for a long while. This doesn’t protect us from short-term events. That is why huge price corrections are so interesting. The Warren Buffett habit of always having deep cash reserves to pounce on opportunity when frightened investors run is a strategy that has worked well over multiple decades.

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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Analysis

Technical Analysis: Bitcoin Hits First Correction Target as Volatility Reigns Supreme

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The violent correction that created a full-on panic in the cryptocurrency segment continues to unfold in a rather orderly way from a technical standpoint, reflecting the extreme nature of the preceding rally. That said, the percentage losses in some of the coins are huge, and the collapse of Bitconnect accelerated the process, spreading uncertainty among investors, and sentiment quickly got bleak.

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Bitcoin remains in the center of attention, and the most valuable coin finally breached the $10,000 level today, causing another strong wave of liquidation in the majors, that could be the base of a more durable bottom, and a consolidation in the coming days after the crazy last couple of days.

The coin is now oversold from a short-term perspective, and although further losses are likely before the end of the cycle, given the still only neutral long-term momentum readings, a counter-trend move is possible in the coming days. Below, $9000, strong support levels are still found at $8200 and near $7650.

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BTC/USD, 4-Hour Chart Analysis

Altcoins got slaughtered in the two-day crash with Ripple leading the way lower, while Ethereum also lost its relative strength amid the broad sell-off and its recent trendline break. ETH got close to the next major support level at $740 during today’s move, and as the short-term momentum is now oversold, a bounce to the zone around $1000 could be ahead. We still expect the correction to continue in the token, as the long-term momentum remains overbought, with key support at $625 and near $575.

ETH/USD, 4-Hour Chart Analysis

Ripple fell as low as the $0.85 support level during the crash, and although the coin rebounded above $1 afterward, it remains 70% off its recent all-time highs. Long-term investors could already accumulate small positions on the short-term sell-offs, although the correction will likely continue, and a prolonged consolidation phase might also be ahead. Key support levels are now found at $0.85 and $0.68, while resistance is ahead at $1.25.

XRP/USDT, 4-Hour Chart Analysis

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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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Analysis

Market Update: Bitcoin at $10,000, Ripple at $1, Ethereum below $1000 as Carnage Continues

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Yesterday’s China induced technical breakdown led to an unmitigated disaster in the crypto segment, as all of the majors crashed, erasing hundreds of billions of market cap in the process. The collapse of the alleged Ponzi scheme of Bitconnect added insult to injury and caused another wave of selling in late trading, driving the price of Bitcoin to $10,000, a bit earlier than expected.

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BTC/USD, 4-Hour Chart Analysis

The most valuable digital currency rebounded as much as 15% after the late-session crash, but the selling pressure remained strong and today BTC briefly traded below yesterday’s low, with most of the majors holding up above the crash low.

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That said, the sell-off is unlikely to be over and volatility is probably here to stay for the week, with violent swings in both directions. The coin is still likely to push lower, with a possibly lengthy bottoming phase, so a quick recovery to the record highs is unlikely, but strong support is found below $10,000 at $9200, $8200, and $7650.

Traders should be aware of the elevated risk in short-term positions here, while long-term investors could slowly accumulate positions on the sell-offs, as the coins are headed to oversold territory.

A Little Perspective

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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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