Ethereum continues to exceed expectations. As these words are being written, Ethereum’s daily chart is sitting at the All Time High set last June. It seems highly likely to break that ATH soon. Having said that, it should come as no surprise when/if at some point shortly thereafter it comes back down to test support at that point. But assuming that support holds, this trade will likely get rather fun.
Regular readers will know I have been suggesting to readers for the past week or two that ETH is the trade to watch (see here and here) , and that has certainly been proven to be the case so far. I realize that many traders do not accept the possibility that geometry and other esoterica can be useful as a trading system. But regardless, it is still interesting to look at today’s markets through the lens of the work of some of the greats of the past. I typically use the Gann square (as developed by Eduardo Altmann) to model support and resistance. But in today’s column I will use a variety of other geometric tools to look at where price might go.
This Fibonacci Vortex (developed by Erik Beann) correctly forecasted the resistance at $13.5, and again more recently at $20. As you can see, price has broken through the resistance pretty hard. Barring an unexpected reversal later in the day with a close back below resistance, the next resistance shown on this setup is quite a bit higher.
A long-term Andrew’s Pitchfork correctly forecasted several recent support and resistance points in the current rally, as marked by the red arrows. What is more interesting is that the area highlighted in yellow marks forecasted support from the recent swing low. This point was clearly identified as a buying area.
But it is the green highlighted area that is the most interesting, in my opinion. The “0 line” which caused so much problems (as expected) has yielded to buying pressure. This is not trivial. Indeed it is a buying signal on the daily chart.
A rather successful trader of yesteryear by the name of George Bayer made his fortune with the use of ellipses. My (rather rudimentary) understanding of his work is reflected in the picture above.
In this case, the ellipse shown above shows many places, highlighted with arrows, where significant S/R was forecasted by the ellipse. Whether it will continue to do so remains to be seen of course. However, it is worth noting that the top of the ellipse is $35, which happens to be in the same ballpark as the possible target area we identified in a recent column.
Suffice to say, we have seen more than enough to recognize that ETH is a market to watch and trade at this time.
Bitcoin has seen some wild fluctuations in the past couple weeks. No doubt this was due in part to the anticipated launch (and then rejection of) a Bitcoin ETF. I for one am very happy to hear that the ETF was rejected. In my opinion the existence of such a publically traded entity might have given the FED a narrow window through which they could exercise a degree of regulation over the cryptocurrency space, and that would have been a terrible development. (See here for more on that topic.)
In addition, wall street would have used such an ETF as a vehicle through which they would have been able to use fiat currency to (naked) short sell Bitcoin. As the powers-that-be have the ability to create fiat out of thin air, they would for the first time be able to have a cost-free means to disrupt the cryptocurrency space. Of course, malevolent actors such as those found on wall street routinely disrupt the crypto markets already; but they can not do so without cost, as they must either mine, or buy the coins first.
It can be argued that they can already buy the coins without cost , since they create fiat out of thin air. That is arguably true, but the problem for them is when they buy the coins in bulk, they drive the remaining coins value ever higher. This inadvertently destroys the illusion that the coins are not a good investment. A classic catch-22. Regardless, I am happy that the ETF failed, though I’m sure opinions differ on this point.
Utilizing the Fibonacci Vortex again, we can see that the huge selloff in bitcoin few days back came exactly at forecasted resistance.
The red arrows all mark where significant S/R was forecasted in the past, and the big blue arrow at the top shows where the selloff hit the vortex a few days ago. I’m sure there are many traders who bought the top who wished they had seen this picture LAST week…
This picture is decidedly bearish. Before seeing this picture I was inclined to think we are looking at a good short-term buying opportunity at present levels. Now I am not so sure. I think I will pass on this trade and stay focused on ETH.
Remember: The author is a trader who is subject to all manner of error in judgement. Do your own research, and be prepared to take full responsibility for your own trades.
Fidelity Investments is Mining Cryptocurrency
Fidelity Investments is a multi-billion dollar brokerage that just so happens to be mining cryptocurrency. In fact, it has been at it for three years, using its own computers to harvest bitcoin and Ethereum.
CEO Abby Johnson recently told Fortune that its U.S.-based mining operation is “making a lot of money.” This comes despite running a relatively modest operation.
Hadley Stern, Senior VP of Fidelity Labs, described his company’s venture as an “experiment.”
The real reason we began mining, and still do, is to learn how the network works, how consensus works, how difficulty levels work,” he said in reference to the mining process.
The key to profitability has been the dramatic rise in cryptocurrency over the past year. Bitcoin and Ethereum are the world’s No. 1 and 2 cryptocurrencies by market capitalization, and no-one else comes close.
Well Ahead of the Pack
The fact that Fidelity has been at this for three years speaks volumes about the company. Other, much bigger players are still dipping their toes in the market, but are unsure about how to proceed. Goldman Sachs is reportedly on the fence about starting a cryptocurrency trading operation, while J.P. Morgan has already begun handling customer orders for bitcoin-based instruments.
Fidelity is doing a lot more than just mining tokens. Earlier this year, it reached an agreement with Coinbase to let customers view cryptocurrency prices alongside other assets on their Fidelity homepage.
Coinbase is the world’s most funded cryptocurrency exchange with more than 7.4 million users.
The cryptocurrency market ended the week on a firm note, with bitcoin (BTC/USD) reaching a session high of $4,425.00. At press time, the index was up 1.6% at $4,368.
Ether is also trading higher against the dollar, with the ETH/USD rallying more than 3% to $305.
Ripple (XRP) lost momentum on Friday, but still managed a weekly gain of 21%.
Chinese Government Eyeing Fresh Bitcoin Legislation?
The Chinese government could roll out fresh cryptocurrency regulation in the coming months permitting licensed brokers to operate, based on recent information from Xinhua.
The state-owned news publication recently revealed that the government is mostly concerned with stamping out illegal activity involving bitcoin and other cryptos. Government authorities could be planning to regulate the market by creating a licensing program with strict Know Your Customer (KYC) and Anti-Money Laundering (AML) systems.
The Case for AML
The need for KYC/AML protocols has long been raised by cryptocurrency proponents, especially in reference to initial coin offerings (ICOs). In response, the blockchain community has come together to create the Simple Agreement for Future Tokens (SAFT). The SAFT is both an instrument and open-source framework for token sales that vets accredited investors.
SAFT activity is quickly gaining traction, with the likes of Gizer recently issuing a presale of its ICO through SAFTLaunch.
SAFT was officially created by Protocol Labs in close collaboration with AngelList and Cooley.
China’s Stance Looms Large for Cryptocurrency Market
Although digital assets have recovered from the China-induced flash crash of September, favorable regulations on the mainland could mean big business for bitcoin exchanges. Prior to the ban on ICOs and bitcoin brokers, Chinese investors were responsible for a quarter of all BTC trades.
According to Xinhua, China is likely to pursue a licensing program similar to Japan, a country that recently approved 11 cryptocurrency exchanges. CnLedger, a leading source of cryptocurrency news in China, recently had this to say:
“Xinhua News, official press agency of CN: Virtual currencies have become the top choices of underground economies. We shall adopt ‘0-tolerance policies’ towards crimes hidden underneath and take measures such as record-keeping, licensing, AML processes, real-name, limiting large transactions.”
Is China’s cryptocurrency ban temporary? It certainly looks that way. Regulators must already know that the ban hasn’t stopped mainland investors from buying cryptocurrencies next door in Hong Kong or Singapore. A saner approach to an all-out blanket ban is a tighter regulatory framework that will stamp out money laundering and other underground activities.
«Featured image from Shutterstock.»
Tim Draper Has Made Over $110 Million Since 2014 With his Bitcoin Investment
Tim Draper, the billionaire technology investor and prominent venture capitalist who has invested in some of the most successful technology startups in the likes of Coinbase, Patreon, SpaceX, Tesla, Box, FourSquare, has profited over $110 million from his investment in bitcoin less than three years ago.
In 2014, Draper participated in the auction of 144,336 bitcoins by the US government and the US Justice Department, which were seized during the investigation into Silk Road, a dark web marketplace. Draper was granted the permission to purchase a batch of 30,000 at around $600 from the US government.
Upon securing 30,000 bitcoins, Draper told Fox Business:
“[I’m] very excited about bitcoin and what it can do for the world. Bitcoin is as big a transformation to the finance and commerce industry as the internet was for information and communications. If bitcoin were here in 2008, it would be a stability source for our world economy. Everybody should go out there and buy a bitcoin. Every investor who’s a fiduciary should at least be partially involved in bitcoin because it’s a hedge against all the other currencies. There’s a whole ecosystem being built that’s going to make commerce much easier with much less friction and safer.”
Today, Draper’s 30,000 bitcoins are worth $129.9 million. Considering that Draper had spent $19 million purchasing the batch of 30,000 bitcoins in 2014, Draper has recorded a profit of over $110 million in less than three years.
While Draper held onto his investment in bitcoin, the US Justice Department was quick all of the 144,336 bitcoins seized during the Silk Road operation. According to various sources, the US government sold the majority of its 144,336 bitcoins at a price of $336, at $48 million. If the US government had sold its bitcoins in 2017, it would have generated an additional profit of around $573 million, as 144,336 bitcoins at today’s bitcoin price of $4,330 are worth $624.9 million.
Since 2014, in addition to purchasing tens of thousands of bitcoins, Draper has funded some of the most successful bitcoin companies in the cryptocurrency market including Coinbase and Korbit. Earlier this year, Coinbase secured a $100 million investment at a $1.6 billion valuation, while Korbit was acquired by the parent company of a $10 billion gaming company in Nexon at a $140 million valuation.
Furthermore, Draper has not sold his stake in Coinbase and earlier this year, Brian Armstrong, the CEO of Coinbase, revealed that Coinbase is still at an early stage in terms of developing and scaling. Armstrong noted that it will evolve into the safest and most trusted exchange in the global market.
“Digital currencies are having their ‘Netscape’ moment. The pace of innovation has been accelerating and we are now seeing exciting projects and companies being built on top of digital currencies. We’re beginning to transition into phase three of our secret master plan. Our goal is to be the safest, most trusted and compliant, and easiest to use. Not the first to market with new assets. Especially at scale, it takes time to ensure any new asset we add is well tested and secure,” said Armstrong.
Coinbase is also one of the two exchanges in the US market apart from Gemini that is targeting institutional and retail investors by providing sufficient liquidity. As Coinbase and its flagship cryptocurrency trading platform GDAX continue evolve, Draper will position himself at the forefront of cryptocurrency innovation and disruption.
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