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Analysis

Falling Crypto Markets Signal Buying Opportunity

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After the spectacular performance of crypto prices in April, any person with a dose of common sense would have expected a big pull back this month.  By big pull back we are taking a page from the playbook of technical analysis so a 50% retrenchment would not be unusual.

Until just recently, May was shaping up as a calm consolidation of prices.  With the exception of Ethereum, most of the major market caps pulled back around 10-12% in relatively calm trading.  Crypto skeptics will point out how bitcoin and others have underperformed stock indices like the Nasdaq Composite that is heading for a positive return of over 4%. But there there are more important signs taking place.

This week calm has turned into a sizable selling wave with bitcoin, bitcoin cash and Ethereum falling 11%, 23% and 24% respectively.  So suddenly, what’s causing this to happen?

According to a headline in CCN:

The recent correction of the cryptocurrency market and the short-term decline in the price of bitcoin, Ethereum, and other major cryptocurrencies and tokens can be mainly attributed to three major factors: Bitfinex taxation policy, scandal of South Korea’s two largest cryptocurrency exchanges UPbit and Bithumb, and the initial sell-off of the Mt. Gox trustee’s bitcoin funds.

Accepting each of these factors in the face of the dramatic price declines should warm the hearts of investors.  Here is why it is a time for joy starting with the Bitfinex situation.

Bitfinex is the biggest bitcoin-to-USD exchange. Headquartered in the crypto tax haven of BVI, Bitfinex has requested personal information about it customers such as tax ID and social security numbers.  BVI is the home not only of Bitfinex but the chosen domicile of many ICOs.

The obvious source of this change in reporting policy can be drawn to U.S. pressure on BVI and the effect is clear.  Those investors who chose to resist the Bitfinex request sold their crypto.

We won’t go into all of the details of UPbit and Bithumb only to point out that this created a selling panic similar to Bitfinex.  Investors sell their crypto for good and obvious reasons but the reasons have little to do with the role of blockchain technology in the global economy.  In other words, when investment decisions are driven by fear, that spells opportunity nearly every time.

How Much Is the Downside?

Each of the factors mentioned is likely to be forgotten before any of us can imagine. Disaffected investors will simply find other exchanges to transact their business. This is not to condone those who choose to hide their identity.  It is simply a fact that there will will always be a location somewhere in the world that has loose tax reporting policies.

Knowing this means we need not fall into panic mode but actually welcome the crypto price correction and get ready to add to our portfolio.  The logical question that comes up is which name will produce the highest upside. The answer is that there is 30%-50% upside on average so choose your favorite flavor.

One thing worth remembering:  big cap names like bitcoin and Ethereun underperformed most altcoins during April, but are now showing the better downside relative performance.

So, in the next up leg, more risk orientated crypto investors will most likely get more action from names like EOS and Zcash to mention just two of many options. The market is displaying signs of rational analysis of risk and that is the sign of a maturing market.  In the long term scheme this is great news.

So answering the question, how much downside remains, is always an impossible task and can be a distraction.  Prices are back in a value range and that is the important conclusion.

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 115 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 Comment

  1. simonjr75

    May 26, 2018 at 1:42 pm

    James,

    I mean, your post reads well, but saying “any person with a dose of common sense would have expected a big pull back this month” is pretty ridiculous. Especially when you have posted several times in May and have never suggested this before. In fact once in May you said that “a surprise on the upside isn’t ridiculous”. We can google.

    I don’t think we want clairvoyants here – but don’t purport to be one in hindsight as your posts suggest otherwise (i wont quote all your posts).

    No one expects expect faultless experts/commentators – humility and recognition of ongoing-learning in this new marketplace is fine by me.

    Sorry for being a bit harsh, but I expect a bit better out of this paid service, especially if in fact this pull back was a “common sense expectation”.

    best

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Analysis

Crypto Update: Weekend Bounce Fails to Turn Bearish Tide

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The major cryptocurrencies continue to be stuck in declining trends, despite the bounce that followed the latest technical breakdown in the segment. The top coins failed to recover above the prior bear market lows sustainably, and today, the market turned lower again, with the weakest currencies already threatening with new lows.

The long-term picture remains overwhelmingly bearish, and out trend model is negative across the board, with only Bitcoin showing relative stability, still holding up near its prior low. There is no sign of bullish momentum among the majors and traders and investors should remain defensive here, until at least a short-term trend change, as despite the negative sentiment and the deeply oversold broader picture, odds still favor new bear market lows in the coming period.

BTC/USD, 4-Hour Chart Analysis

Bitcoin bounced back after last week’s breakdown and tested the $3600 level before turning lower again. Since the coin failed at the key level, the short-term sell signal in our trend model remains in place, together with the clear long-term sell signal.

A move towards the long-term support zone near $3000 remains likely, and traders still shouldn’t enter new positions here. The coin is well below the key $4000-$4050 zone, and the short-term downtrend is still intact, despite the recent rally attempts.

ETH/USD, 4-Hour Chart Analysis

Ethereum is also stuck below the prior bear market low and the key 95-$100 support zone, similarly to Bitcoin, and although the coin is not showing clear relative weakness anymore, it is still bearish on both time-frames in our trend model, with the steep downtrend being intact.

New lows are still likely in the coming weeks, and traders and investors should stay away from the coin Strong resistance above the primary zone is ahead near $120, $130, and $150, while long-term support is found in the $73-$75 zone.

Bearish Leaders Remain Weak

XRP/USDT, 4-Hour Chart Analysis

Ripple continues to be relatively weak from a short-term perspective and the coin is hovering near the $0.30 following the failed rally attempts, which were capped by the $0.32 resistance level. The coin is on sell signals on both time-frames due to the recent weakness and technical breakdown, and a test of the bear market low near $0.26 now seems likely. Primary support is now found at $0.28, with further resistance levels ahead at $0.3550 and $0.3750.

Litecoin/USD, 4-Hour Chart Analysis

Litecoin is also showing relative weakness, despite its brief period of strength in November and the coin is trading just above the next major support zone which is found near the $23 price level. The steep long-term downtrend is clearly intact and our trend model bearish both time-frames, and new lows are likely in the coming days, with strong resistance ahead near $26 and between $30 and $30.50.

Monero/USDT, 4-Hour Chart Analysis

On another negative note, the bearish leaders are still not showing signs of stability, barely bouncing off their lows during the broad rally attempt. Monero is still among the weakest majors, and the coin looks ready for another leg lower, with last week’s breakdown clearly being intact.

We expect the downtrend to continue in XMR and the other relatively weak coin, and traders shouldn’t enter even new positions here, despite the oversold long-term momentum readings in the segment.

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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4.7 stars on average, based on 411 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

Crypto Update: 5 Altcoins to Watch This Week

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Bitcoin had another rough week. As a result, altcoins that were included on last week’s list either dumped or stayed close to support. Nevertheless, having a clearly defined range enables you to quickly react when an altcoin either goes below the support or breaches the resistance. You can form expectations as to where the market might go next.

We’ll do more of the same this week. Here are five altcoins to watch this week.

Waves (WAVES/BTC)

Waves pumped hard last week. It climbed as high as 0.0005965 on December 4 from a low of 0.0002336 on November 21. If you failed to ride the early stages of a huge rally, the next best thing is to wait for the pullback.

Daily chart WAVES/BTC

Waves appears to have retested resistance of 0.0004715. It is also in overbought territory so we can expect a deeper retrace this week.

A good pick up area would be between 0.000352 and 0.0003835. These are solid weekly support areas. On top of that, the 200-day moving average is moving around those levels.

If Waves moves below 0.000352, it is likely that there will be a full retrace back to 0.0002336.

EOS (EOS/BTC)

EOS breached range support of 0.000697 on December 1. Considering that the market had been relying on this support since August 14, the breakdown sparked panic selling. Participants who bought within the range raced to dump their positions. As a result, the market nosedived to 0.0004721 on December 7.

Daily chart EOS/BTC

With this breakdown, EOS is now trading within a new range. The range low is weekly support of 0.0005021, midpoint is 0.0006015, and the range resistance is 0.000697. You know the drill: to trade this range, a trader needs to buy the support and sell the resistance.

Bitcoin Cash (BCH/BTC)

Bitcoin Cash (BCH/BTC) has been feeling the effects of gravitational pull after a glorious first week of November. The meteoric rise to 0.098035 on November 7 is now being met by a massive dump. So far, the market is en route for a full retrace. That’s perfect for those who want to play the range.

Daily chart BCH/BTC

0.06815 is a good pick up point if you’re looking to bottom pick the market. However, don’t immediately buy the drop because there’s a chance that market makers will push prices further down to liquidate range low buyers. Instead, wait for Bitcoin Cash to retest the support on the 1-hour chart. This should increase the likelihood of a strong bounce.

Republic Protocol (REN/BTC)

Republic Protocol (REN/BTC) has the makings of the next Ravencoin (RVN/BTC) in terms of price action. The market skyrocketed to a high of 0.00000838 on December 9 from a low of 0.00000551 on December 8. That was an increase of over 52% within 24 hours.

As expected, the pump was followed by a pullback. This is where it gets interesting for us.

1-hour chart REN/BTC

For REN to continue its bullish sentiment, it must recover support of 0.0000704. That should give the market the momentum to test 0.00000816 resistance. On the other hand, a breach below immediate support of 0.00000672 is bearish. It can lead to a full retrace to 0.00000551. If that happens, you can always bottom pick the market.

YOYOW (YOYO/BTC)

YOYOW is the last coin in our altcoins list. From a low of 0.00000290 on September 12, YOYOW (YOYO/BTC) had a beautiful run that saw the market climb as high as 0.00000755 on November 2, 2018. That’s an increase of 160% in less than three weeks. If you see a move like this in a bear market, expect a dump to ensue. That’s exactly what happened.

Daily chart YOYO/BTC

With this dump, the market’s current range is between 0.00000290 and 0.00000550 with a midpoint at 0.00000420. YOYO made it on this week’s list because it just retested the midpoint. The price action makes it very likely for the market to revisit the range support. If the support holds, YOYO/BTC would form a triple bottom structure.

Bottom Line

With Bitcoin printing new lows last week, this week’s list involved altcoins that are ripe for bottom picking. If you’re planning to trade one or more of these coins, you can follow the range that we’ve put together for you. As always, consider buying the support and selling the resistance.

 

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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3.8 stars on average, based on 286 rated postsKiril is a CFA Charterholder and financial professional with 5+ 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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Altcoins

Litecoin Price Analysis: If Current Demand Zone Fails to Hold Then Next Stop is $3

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  • LTC/USD is at serious danger of another hard fall should the range-block seen be breached.
  • Back in December 2013, the price was at current levels and fell down to $1 over a two-year period.

Litecoin has been heavily weighted to the downside of late. The selling pressure intensified through the month of November. This month, December, has seen the pace of that bearish trend intensify. As a result, LTC/USD is trading at its lowest levels seen since May 2017. These moves of course are very much in-line with the rest of the market that has been in decline since the back-end of 2017 – start of 2018. Litecoin is down well over 90% from the start of this decline.

Deadly Range-Block

LTC/USD 4-hour chart

LTC/USD was allowed some time to breath after the chunky pressure south, through November. The price stabilized from 25th November, to then move into range-trading. This was the case right up until 6th December. Confined within a range-block, which technically trend to occur after such excessive movement, to then be resumed in that original aggressive trend of direction. The most recent, moving between a low of $29 to a high of $36, ahead of the firm breach lower on 6th December. This resulted in the price moving down to another fresh low of $22.55, on 7th December.

Once again, a similar observation can be seen via the 4-hour chart view. Since the 7th December, some stabilization has materialized. Currently it is shaping up another range-block, which is subject to a further extensive move to the downside. The low within this new formation, can be seen around the $23 mark; to the upside, this is capped at $28. A breakout south from this block could catastrophic and much more damaging than the prior. There isn’t much in the way of support for quite some way lower, should the price not be able to defy the odds and break higher from the block.

Downside Targets

LTC/USD weekly chart

Should the bears maintain the current course of downside, then the lower support of the current range will be broken. As an extreme target south, eyes could be on a complete reversal of the 2017 bull run. This could see another 500% drop, this of course being a worse case scenario for LTC/USD. Given how fast the bulls ran up to the north, it can come back down just as hard. Back in December 2013, the price was around current levels within the $20 territory. The bears pushed for a hard fall of over 200%, down to $1 territory, over a two year period.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

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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4.5 stars on average, based on 78 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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