Connect with us

Analysis

Fed Explains The Bitcoin Crash: What Were They Thinking?

Published

on

I heard a really dumb idea the other day.  In fact, it was so ridiculous that I wanted to just laugh it off and forget about it.  But because it involved something that cost real money and that money was paid by taxpayers like you and me, I had to share it.  OK, so here we go.

On Monday, the Federal Reserve Bank of San Francisco and a Stanford University professor released a report concluding the launch of bitcoin futures last December contributed to the ensuing price collapse.  

With all respect due the brilliant minds that are nestled into Stanford or the San Francisco Fed, this is more than just far fetched stuff. Quite frankly, it is junk.  The advent of futures trading in bitcoin had as much to do will falling bitcoin prices as the swallows returning to Capistrano: totally ridiculous.

A Few Facts

After reading through the report, I realized that much of their conclusion was based on a favorite tool of statistical research: correlation.  Bitcoin futures trading began on December 10, about the time that the price peaked on December 18th at just over $19,000. Drawing from the Fed’s data bank showed how other asset prices corrected when future contract trading was started.  For them, that was enough to prove their case.

Birds flying north correlate almost 100% to the arrival of  spring. But they don’t cause it. Here are just a few facts to illustrate the lack of cause and effect.  In the first month of bitcoin futures trading, reports were coming from all over of the sheer lack of volume in bitcoin futures.  In fact BarChart.com shows the CME traded a measly 932 contracts while the CBOE handled 3,887. Of that total some 2,828 contracts were still “Open Contracts” on December 29th.

Open interest measures how many contracts had been bought but not sold during the period. In other words, not only was there almost no interest in bitcoin futures but more than half remained open at the end of the month.

To be clear, unlike other futures contracts, a bitcoin future is equal to one single bitcoin not thousands of barrels of oil, for example.  So let’s put this total of less than 5,000 futures into context. During the month of December and for the months that followed up to April 1,  itcoin traded an average about 1.4 million digital coins per week.

Fed Bias Or Just Bitcoin Bias

To many readers the San Francisco/Stanford report may be just another headline to be filed away on your hard drive.  So you may ask, what is the point of all the fuss? 

The first reason has to with SFO Fed Chair and soon to be President of the New York Fed, John Williams.  This guy is no friend of crypto. He holds an outspoken opinion that cryptocurrencies don’t represent a storehouse of value. Clearly crypto investors won’t have a friend when Williams takes over the largest position in the Fed system next to the Chair.

Extraordinary Popular Delusions And The Madness of Crowds

In explaining the movement of asset prices there is one correlation that is almost never mentioned.  It is the correlation between asset prices and the public assessment of those prices. The correlation is proven everyday in the changes of prices for bitcoin, Ethereum, Ripple and the bazillion of altcoins out there.

Way back in 1841, Charles Mackay published a three part volume titled Extraordinary Popular Delusions And The Madness of Crowds.  For the record, he broke down into Natural Delusions, Peculiar Follies and Philosophical Delusions.

Mackay’s work may be older than your great grandmother but it is suggested reading for crypto investors in general and specifically for anyone trying to make sense of the crypto crash.  It explains in clear terms how, when certain events take place, mankind desperately searches for reasons to explain the happening.

Just for the record, the official celebration for the return of the swallows to Capistrano was March 19, which correlates with the beginning of the most recent crypto rally.  Well, finally we now have irrefutable evidence of why things have been going so well lately.  

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
9 votes, average: 4.00 out of 59 votes, average: 4.00 out of 59 votes, average: 4.00 out of 59 votes, average: 4.00 out of 59 votes, average: 4.00 out of 5 (9 votes, average: 4.00 out of 5)
You need to be a registered member to rate this.
Loading...

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.




Feedback or Requests?

3 Comments

3 Comments

  1. mvppvm_07

    May 11, 2018 at 3:33 am

    Shall we just name future Fed assessments of correlation the Capistrano effect? After all, they’re just wingin it.

  2. Dr_shibeh

    May 11, 2018 at 3:44 am

    You’re right. He is not the friend of BTC but do u think really the people who buy FUD instead of BTC ( specially the bankers and stockers like Goldmansachs that involved once again before the crash)are friend of BTC?

  3. Dr_shibeh

    May 11, 2018 at 3:49 am

    And the readers of the San Francisco/Stanford report had more Volume and effect as FUD and all other investors in the World?

You must be logged in to post a comment Login

Leave a Reply

Altcoins

Tron Price Analysis: TRX/USD Looks Set to Give Up $0.02000 Territory Again

Published

on

  • TRX/USD under heavy selling pressure late on Tuesday, dropping over 7%.
  • Bears are gunning for another retest of vital support, seen above a breached pennant patterns structure.

TRX/USD has been under heavy selling pressure on Tuesday, nursing chunky losses at the time of writing of 7%. Bears remain well in the driver’s seat in the latter stages of the day, with momentum picking up pace to the downside. The bulls lost much wind behind their sails on 10th January, this coming after enjoying a strong period in a run to the north. TRX/USD from 4th January – 10th January had gained a massive 75%, breaking out of a bullish pennant pattern structure. It also managed to briefly extend above a known area of supply, which exacerbated the upside pressure.

TRX/USD daily chart.

The above-described move saw the price print its highest level seen since 31st July 2018. Shortly after this high print, a big wave of selling kicked in. As a result, a very bearish daily candlestick was produced on 10th January. Daily sessions since this have closed in the red, apart from 14th January. TRX/USD managed to receive strong support on top of the breached pennant, providing some brief relief after the reversal was well underway. Despite the current trend south, news flow around the Tron foundation continues to be plentiful and upbeat.

OKCoin Supports TRX

As reported by the CCN team, OKCoin announced it has listed TRX on its trading platform. This coming via the exchange’s Medium blog today. OKCoin detailed that “starting today, authorized OKCoin customers can deposit TRX, and starting on January 17th they’ll be able to trade TRX against USD, BTC, and ETH.” Of note, the OKCoin platform was founded by the same people behind OKEx; however, OKCoin primarily focuses on traditional swaps and allows for bank deposits. In addition, OKCoin accommodates U.S clients, whereas OKEx do not.

Justin Sun Welcomes New Partner ABCC Exchange

ABCC Exchange, a cryptocurrency exchange platform, announced it is partnering with the Tron Foundation. The company tweeted, “ABCC is the 1st exchange that will list TRX 10 tokens. We are one of the top exchanges with great security and user interface. Stay tuned!” On the back of this, Tron founder Justin Sun replied, “ABCC is truly an awesome platform that has witnessed great development. We are glad to partner with ABCC as it’s the first exchange listing TRX10 tokens”.

Technical Review – TRX/USD

Given the current downside momentum, eyes are on another retest the breached pennant pattern structure. Where the two trend lines cross, support will be sought here, which could see the $0.02000 territory come under threat. Should the bears manage to force a breach, then a prior action demand zone will be called into play, within the $0.01700 price region.

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

4.6 stars on average, based on 106 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.




Feedback or Requests?

Continue Reading

Analysis

Futures Update: Deeper Correction Looms for S&P 500

Published

on

The S&P 500 FUTURES (SP) has been in a multi-year uptrend ever since it recorded lows of 665.70 in March 2009 closer to the end of the financial meltdown. If you are one of those who rode this trend early on, you would have substantially grown your capital over time. Even with the recent correction, you likely believe that the market will resume its uptrend very soon just like it did before.

Nevertheless, this is not the time to be complacent. The recent SP bounce is looking like the dead-cat type. This gives us reasons to believe that there might be more pain ahead for investors. In this article, we show how there’s a deeper correction looming for the S&P 500 index and, by extension, its futures.

Bearish Short-Term

S&P 500 futures may have rejected lower prices when it bounced off lows of 2,371 on December 26, 2018. However, there’s very little about this bounce telling us that the market remains bullish. In fact, several technical indicators suggest that this is a relief rally rather than a true recovery.

Daily chart of SP

First, we can see the SP creating a V-shaped pattern. While a market can reverse using this pattern, it rarely happens. When it does, there’s always time given for accumulation at the bottom. This is something that we do not see in the market’s V-shaped structure. Without some form of accumulation to keep the move up sustainable, the market is at risk of giving up all of its gains.

Gold (XAU/USD) as sample of V-shaped reversal

Speaking of a solid base, the rally somehow materialized even with declining volume. This usually happens in an oversold market where sellers take a step back and allow the market to recover so they can short the bounce. We can see this possibility playing out in the S&P 500 futures as the market approaches resistance of 2,619.60.

With weak volume and fading bullish momentum, we expect the S&P 500 futures to resume their slide in the next few days.

Weak Long-term Technical Setups

The technical setups in the longer time frame affirm our assumption that more pain is ahead for this futures market. First and most importantly, there seems to be a divergence between volume and price. In a healthy bullish market, price goes up as volume increases. This makes sense as a growing demand in the form of increasing volume lifts prices.

On the other hand, a rising market with weakening volume is a red flag for most investors. It hints that the market is unhealthy and may be manipulated by an unknown entity. We’re seeing  this divergence in the S&P 500 futures.

Volume divergence on the monthly chart

On top of that, the 100 MA on the weekly chart is acting as a firm resistance. It is crawling closely to our immediate resistance of 2,619.60. In addition, the weekly RSI appears to face heavy resistance at 50. All these indicators suggest that bears are primed to take over the market.

Weekly chart of SP

Projected Move

With all these bearish signals in front of us, bulls must now do everything they can to take back resistance of 2,619.60 in order to dissipate the growing bearish sentiment. Failure to do so would mean that the market has flipped 2,619.60 support into a firm resistance (S/R flip). This would send a strong message that bears are flexing their muscles.

Should this happen, we expect SP to revisit lows of 2,317 where a technical bounce is likely to happen. However, this bounce will likely be weak and would not have the steam to go above 2,469. That S/R flip should be the final nail in SP’s coffin.

Projected SP price action

A break below 2,317 would ignite panic selling in the market. The next support below that level is 1,920. Interestingly, the 100 MA on the monthly chart is also crawling around that price area. This is the target for those who want to short the market once SP takes out support of 2,317.

Bottom Line

The S&P 500 futures may have recently bounced. However, all signs point to an even deeper correction. With bearish short-term and long-term setups, the market may be headed for more pain.

 

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
0 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 50 votes, average: 0.00 out of 5 (0 votes, average: 0.00 out of 5)
You need to be a registered member to rate this.
Loading...

3.8 stars on average, based on 308 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.




Feedback or Requests?

Continue Reading

Analysis

Crypto Update: Coins Retreat After Rally Attempt

Published

on

While yesterday the major cryptocurrencies recovered their weekend losses and bounced back above their prior lows, the bounce got halted before changing the short-term technical setup. As the world is focused on today’s key Brexit vote, trading volumes are once again very low, but the lack of bullish follow-through is a warning sign for traders here even considering the low level of trading activity.

We haven’t seen signs of a developing leadership in recent days, with correlations remaining high and with the top coins failing at the first major levels of resistance for now. That said, should the coins hold above yesterday’s lows and push above consolidation range, the formation of a bear-trap pattern is still possible even as odds still favor the continuation of the bear market.

In light of the short- and long-term setups, traders and investors should still stay away from entering new positions, with our trend model still being on sell signals on both time frames for the majority of the top coins.

BTC/USD, 4-Hour Chart Analysis

While the breakdown in Bitcoin got bought yesterday, the bounce failed to reach the $3850 level and the most valuable coin is still hovering near the $3600 level, leaving both the neutral short-term, and of course, the long-term sell signal intact in our trend model.

A move above $3850 would be a positive sign for bulls, but odds still favor a negative outcome and a likely test of the $3000 level in the coming weeks, so even short-term traders should still away from entering new positions here. Further, weaker support is found near $3250, with resistance ahead between $4000 and $4050, and near $4450.

ETH/USD, 4-Hour Chart Analysis

Although Ethereum briefly topped the $130 level after plunging below the $120 support, a failed breakdown pattern hasn’t been confirmed in the previously leading coin, and the short-term sell signal remains in place in our trend model.

With the bearish long-term picture in mind, and with the oversold short-term momentum readings now cleared, the outlook for the coin remains negative, even as the resumption the counter-trend rally is still a possibility here. Further support below $120 is found between $95 and $100, while resistance is ahead at $160 and near $180.

Altcoins Still Stuck in Downtrends Across the Board

LTC/USD, 4-Hour Chart Analysis

Litecoin’s rally stooped near the upper boundary of last week’s consolidation range, and although the coin is safely above the key $30-$30.50 support zone, the momentum of the bounce is waning. The bearish long-term forces still seem to be dominant, and the coin is well below the primary resistance level near $34.50, so our trend model remains on sell signals on both time-frames. Further strong resistance ahead near $38 and $44 and with support is found near $26 and $23.

XRP/USDT, 4-Hour Chart Analysis

Ripple experienced a brief period of relative stability after the weekend sell-off, but that didn’t change the bearish overall picture for the coin, and technicals are still hostile for bulls here. The coin continues to hover around the $0.32 price level, but we still expect a move below $0.30 in the coming weeks with a test of the bear market lows being the most likely scenario.

Another strong support level is found near the $0.26 level, with resistance ahead near $0.3550, $0.3750, and in the key long-term zone between $0.42 and $0.46.

XMR/USDT, 4-Hour Chart Analysis

Monero is also among the weaker majors and although it bounced back together with the broader market, it failed to sustainably recapture the $45 level, and it remains in clear short- and long-term downtrend. Our trend model is o sell signals on both time-frames as well, and the re-test of the bear market low just below $38 seems very likely in the coming weeks.

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.

Rate this post:

Important for improving the service. Please add a comment in the comment field below explaining what you rated and why you gave it that rate. Failed Trade Recommendations should not be rated as that is considered a failure either way.
3 votes, average: 4.67 out of 53 votes, average: 4.67 out of 53 votes, average: 4.67 out of 53 votes, average: 4.67 out of 53 votes, average: 4.67 out of 5 (3 votes, average: 4.67 out of 5)
You need to be a registered member to rate this.
Loading...

4.7 stars on average, based on 441 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.




Feedback or Requests?

Continue Reading

Recent Posts

A part of CCN

Hacked.com is Neutral and Unbiased

Hacked.com and its team members have pledged to reject any form of advertisement or sponsorships from 3rd parties. We will always be neutral and we strive towards a fully unbiased view on all topics. Whenever an author has a conflicting interest, that should be clearly stated in the post itself with a disclaimer. If you suspect that one of our team members are biased, please notify me immediately at jonas.borchgrevink(at)hacked.com.

Trending