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Analysis

Eerie Similarities Between Crypto Market Cap and the Dow Jones

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Very few charts are as compelling as the total market capitalization for cryptocurrencies. This simple chart depicts the progress of one of the biggest bull markets of all time. Interestingly enough, the market’s upward trajectory has eerie similarities to another chart: the Dow Jones Industrial Average.

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To be fair, this similarity was raised by Hacked member Jure Vizjak. He aptly noted the following:

“Two different indexes, two different periods, same shape of the charts?”

Well, that’s exactly what appears when we compare the crypto market cap to the Dow. Case in point:

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Dow Jones Industrial Average

Cryptocurrency Market Cap

Eerie Similarity

Both the Dow and the broader crypto market have had an amazing year. The blue-chip stock index has returned more than 19% since Jan. 1. By comparison, the global cryptocurrency universe has added more than 1,600%. While both markets are on an upward trajectory, the Dow has a 110-year head start, which means its movements aren’t nearly as dramatic.

Although it’s pure speculation at this point, the charting patterns suggest that markets follow a similar trajectory, and that this is true across multiple time frames. The dips and peaks in the Dow have occurred over a much longer time horizon, but investors did what crypto traders seem to be doing now: buying the major dips, corrections and recessions. The crypto market has certainly experienced dips and corrections, with each being followed by a stronger buying spree.

That investors buy the dips is conventional wisdom. Any value investor will tell you that the major indexes have a historical trajectory that is very much upward, making periods after recession an optimal time to buy stocks on the cheap.

Overvalued? 

Another common theme that intersects the Dow and the crypto-sphere is fear of overvaluation. For the past year, market participants have been concerned that the U.S. equities rally is running too hot to handle, especially when one considers the (lack of) fundamental factors driving the market. Earnings have been positive (because they reflect a weak year-over-year starting point), the economy is improving (if you ignore wages, quality of jobs and export weakness) and investor sentiment is high (because participants are hopeful that the Trump administration can stimulate growth), but do these justify having the top highs and highest lows since 1929? Because that’s what the Dow has experienced this year.

To make a long story short: Wall Street is currently in the middle of its second-longest bull market ever. Many investors, including the author, are failing to justify it from a purely fundamental perspective.

Critics have been even harsher on cryptocurrencies, with many in the mainstream absolutely convinced we are in the midst of a major speculative bubble. At this point, very few analysts disagree that speculation isn’t part of the equation; where they diverge is on the nature and sustainability of the rally.

To give you the contrarian perspective, consider this: prior to 2017, bitcoin was the world’s best performing currency in six of the past seven years. Investors have long been bullish on cryptocurrency in general and bitcoin in particular. Of course, the market’s previous trajectory was nothing like we’ve seen in 2017, but to act like there is no precedent ignores the facts, not to mention the bevy of high-quality altcoins making their way to market.

And before we split hairs over bitcoin vs. cryptocurrencies, the original blockchain currency still controls more than half of the total market cap. It’s very difficult to have a discussion on the crypto market cap without referencing bitcoin both directly and indirectly. After all, BTC has been absolutely critical in driving adoption of altcoins.

For the time being, the overlap between the Dow’s historical chart and the one-year trajectory of cryptocurrency is an interesting observation. Only time will tell whether there is a more profound meaning.

The Dow Jones Industrial Average closed at 23,580.78 on Monday, or roughly 10 points shy of all-time highs.

The total market capitalization for cryptocurrencies is currently $305 billion.

Disclaimer: The author is actively invested in cryptocurrencies and has passive exposure to the Dow.

Featured image courtesy of Shutterstock. 

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Analysis

Cryptocurrency Analysis: Ripple Continues Rampage as Litecoin and Ethereum Enter Correction

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Ripple remained in the center of attention in the segment after breaking out to a new all-time high yesterday, and the coin almost doubled in value, climbing above the $0.80 level. The currency concluded a 6-month long consolidation pattern with the move after being the only major on a long-term buy signal in our trend model.

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XRP gave a short-term sell signal today, while turning neutral regarding the long-term setup. Investors now shouldn’t add to their positions, although further gains are still possible, and reducing holdings somewhat is a good idea here. Major support is still found at the prior high near $0.4250 and in the $0.30-$0.32 range.

XRP/USDT, 4-Hour Chart Analysis

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While Bitcoin stagnated, and Bitcoin Cash jumped, Ethereum, Litecoin, Dash, and IOTA has been drifting slightly lower, although the recent gains are still mostly intact, and the basic setup in the segment is unchanged.

Litecoin fell below the $300 level after yesterday’s consolidation, and the coin faced strong selling pressure in the latter half of the session. The currency remains extremely stretched regarding the long-term momentum indicators, and although the short-term uptrend is still intact, a deeper correction is likely in the coming weeks, with key support levels found at $125 and $100, and weaker levels at $260 and $170.

LTC/USD, 4-Hour Chart Analysis

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Analysis

Daily Analysis: Dollar Falls, Gold Jumps after Yellen’s Final Move

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Wednesday Market Recap

Asset Current Value Daily Change
S&P 500 2668 -0.02%
DAX 13125 -0.45%
WTI Crude Oil 56.65 -0.68%
GOLD 1258.00 1.35%
Bitcoin 16,100 -6.32%
EUR/USD 1.1842 0.73%

The Federal Reserve hiked interest rates as expected today, and although the central bank’s monetary statement was slightly more hawkish than expected, the market’s reaction didn’t reflect the much-anticipated move. The worse than expected Core CPI reading that underlined the low-inflation narrative weighed on the recently strong Greenback, while stocks were unchanged after decision and bonds gained ground as yields retreated.

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EUR/USD, 4-Hour Chart Analysis

The major indices are hovering near their all-time highs with the DOW leading the way higher, hitting a new record for the second day in a row. While volatility Is expected to remain low as we approach the end of the year, market internals and valuation levels are still concerning from a long-term perspective, and stocks outside the US are also negatively diverging. The action in crude oil could be slightly more interesting as the commodity is starting to act in a slightly bearish manner after a grinding multi-month rally.

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WTI Crude Oil, 4-Hour Chart Analysis

The Brexit process is still in the center of attention in Europe, although volatility took a nosedive on the old continent as well, and it’s unlikely that the Christmas period will be much different, given the predictable drop in volumes and trading activity. The date of the next election in the financially and politically troubled Italy has been set to March 4th next year, and the early date caused some turmoil in the countries assets, which dragged the Euro Stoxx 50 lower today, together with the DAX and the other major indices.

Cryptocurrencies

As the total market cap of the crypto-market crossed the incredible $500 billion mark, Ripple, NEO, and Ethereum made headlines with lofty gains in the face of the severely overbought readings elsewhere in the segment. While XRP and NEO are still not overbought from an investment perspective, Ethereum reached our final target for its break-out and triggered a long-term sell signal.

ETH/USD, 4-Hour Chart Analysis

The previously surging IOTA continued its correction, Litecoin consolidated in a relatively narrow range, while Dash, ETC, and Monero scored marginal new highs before turning lower together with BTC. The most valuable coin that has lost some of its momentum “mojo” in recent days fell back below last week’s highs, and that could mark a failed break-out and a start of the deeper correction that seems more and more likely.

BTC/USD, 4-Hour Chart Analysis

Key Economic Releases on Wednesday

Time, CET Country Release Actual Expected Previous
11:30 UK Average Earnings 2.5% 2.5% 2.3%
11:30 UK Claimant Count Change 5,900 3,300 6,500
11:30 UK Unemployment Rate 4.3% 4.2% 4.35
15:30 US Core CPI 0.1% 0.2% 0.2%
15:30 US Crude Oil Inventories -5.1 mill -3.6 mill -5.6 mill
21:00 US Fed Rate Decision 1.5% 1.5% 1.25%
21:00 US FOMC Statement

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Analysis

Technical Analysis: Volatility on the Rise Again, as Ripple and Ethereum Hit Targets

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Ripple has been the star of today’s session in the cryptocurrency segment, as the only major coin on a long-term buy signal in our trend model continued yesterday’s break-out, and surged to a new all-time high. The currency cleared the $0.425 level that marked the top in May, and after the more than 6-month long consolidation phase, it promptly neared the $0.50 level.

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While the short-term momentum indicators are now stretched, the coin is still in an encouraging long-term setup, although the best period to buy already passed. The coin could be dragged lower in the case of the expected broad correction in the segment, but we expect XRP to outperform in the coming period, with support levels found at the prior high and below that in the range between $0.30-$0.32.

XRP/USDT, 4-Hour Chart Analysis

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Ethereum has been the other top coin on the rise, as the second largest digital currency surged past the final range projection target of the break-out two weeks ago at $685 in the aftermath of the launch of the BTC futures on Monday. The ETH token is now also on a sell signal on all time-frames, and we advise investors and investors to wait for the next major correction to establish new positions. Support levels are now found at $575, $500, $480, and $400.

ETH/USD, 4-Hour Chart Analysis

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