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Goldilocks and the Three Investors

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You may have heard a similar story before but I assure you this is something completely different.

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There once was a young millennial named Goldilocks. One day she looked at her bank account and realized that the money sitting there was not earning her any interest and that due to inflation she was actually losing money every year.

So she naively wandered into the world of investments. A world that is full of hungry wolves who would just as soon eat Goldy than help her.

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Finally, after a ton of research, she spotted a broker that she felt she could trust. But the broker had so many assets to trade that Goldy’s head started spinning as soon as she walked in the door.

First, she tried the cryptocurrencies. But this market was too young and way too volatile.

Next, she tried the stock markets. But the markets were way too high and Goldy had no way of getting into this market without grossly overpaying for the shares she wanted to buy.

Finally, she tried the bond markets. But the Fed had already bought all of the good bonds and there was nothing left at a reasonable price for poor Goldilocks.

I forget how the story ends but I hope it’ something along the lines of all the investors coming back to their senses, valuations slowly returning to normal, and Goldilocks living happily ever in peace and harmony with the financial markets.

Mati Greenspan
eToro, Senior Market Analyst

 

Please note: All data, figures, and graphs below are valid as of July 10th. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

Pheww. The G20 meetings are over without any drastic headlines. In fact, the leaders of the world seem to be surprisingly on the same page. They were even able to put out a unified statement.

The G20 reaffirmed their commitment to the Paris Climate Accords, even while noting the US’s planned departure from the deal. The statement contained no mention of North Korea. So it seems that issue is safely under the rug for now.

The Trump-Putin meeting produced some interesting headlines as well. Most notable, that Trump asked Putin if Russia interfered in the US elections. Putin said no. Some are now considering this issue as a closed case as well. Of course, we’ll wait until special investigator Robert Mueller gives the final word.

The Jobs Report last Friday was also quite eventful. The US economy managed to add an astonishing 222,000 jobs. The job market is certainly running hot at this point, some might say it’s running too hot.

The only issue is that despite the diminishing labor force wages don’t seem to be rising. Over the past year, average hourly wages grew by just 0.2%.

The market did much of nothing. First it went too high, then too low and ended up finding something that was just right… where it started.

The stocks on the other hand, were very happy about this report and we can see the Dow Jones rose sharply on the news.

Of course. it doesn’t take much to please the stock markets these days.

Gold reversal

According to an article on Bloomberg this morning, over the past month investors have gone from extremely bullish to extremely bearish.

The reason seems to be the expectations of rising rates in the United States. However, this doesn’t make much sense. The expectation of rising rates has been happening for months. It’s not some new piece of information that now needs to be priced in.

The following chart was posted by a guy named Mark Baillie and shows the price of gold over the last hundred years compared to the supply of US Dollars in the market.

So, it does appear that we’re seeing some sort of long-term divergence in the market over the past 4 years.

Less than $100B

The Crypto market is currently seeing the most pressure it’s seen since 2013, and arguably the most pressure ever as we see yet another completely red day for this industry.

Of the top 30 most valuable cryptos only 3 are currently in the green. This as the total market cap of all cryptocurrencies has dropped significantly below $100 Billion.

Still, if we look at the last three months it’s quite clear that we’re still up exponentially since April.

As with gold, one of the best strategies I’ve seen for the crypto markets is to think long term. Don’t be surprised or startled by short-term movements.

Buy low sell high, and always have sufficient diversity in your account.

Have an amazing week ahead!

This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. 

Past performance is not an indication of future results. All trading carries risk. Only risk capital you’re prepared to lose.

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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Altcoins

BitConnect Cryptocurrency Tanks After Company Shuts Exchange

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The value of BitConnect’s BCC token plunged on Wednesday, just one day after it abruptly announced it was closing down its controversial lending and exchange operation.

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BCC Fire Sale

BitConnect’s native token plunged to a session low of $5.69 as investors rushed for the exit. At last check, the cryptocurrency was down 90% to trade at $18.97, according to data provider CoinMarketCap. That was the lowest level since June, bringing BCC’s total market cap to $149 million.

Total daily trade volume for BCC amounted to $23.4 million, with HitBTC accounting for roughly 37% of the transactions.

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More pain is coming for BCC as investors rush to erase any exposure they once had to the controversial parent company. Various reports have indicated that holders of BCC have struggled to sell their tokens despite the platform appearing operational. This suggests that another fire sale may be on the horizon.

BitConnnect announced Wednesday that the rapid decline of its token’s price was a direct result of releasing all of its members’ coins at once.

The decline also happened to coincide with a broad selloff in the broader cryptocurrency market. The total market cap of all cryptocurrencies in circulation has declined by roughly $250 billion since Saturday, with all the major coins suffering heavy losses.

Halting Operations

BitConnect closed down shop after receiving two cease-and-desist letters from the Texas State Securities Board and the North Carolina Secretary of State Securities Division.

The company was honest about the reasons for exiting the market in a blog post that appeared on Jan. 16. According to the post, continuous bad press and multiple DDoS attacks also factored into its decision to close the operation. According to the blog post, all active loans will be transferred to users’ BitConnect wallet in a deposit worth $363.62, a rate that was calculated based on the coin’s average closing price for the past 15 days.

“In short, we are closing lending service and exchange service while BitConnect.co website will operate for wallet service, news and educational purposes,” the post said.

Prior to the announcement, BitConnect was accused by many in the blockchain community of being a Ponzi scheme. The criticisms have been levied by voices as diverse as day traders to Vitalik Buterin, the founder of Ethereum. The company operated a four-tier business model that promised users higher returns for bigger initial deposits. Through proprietary “volatility software” and other tools, BitConnect guaranteed users 1% ROI on a daily basis and up to 40% per month. Value investors rarely take such promises seriously.

If we take the blog post at face value, the team has no plans to abandon the project entirely. The post added: “This is not the end of this community, but we are closing some of the services on the website platform and we will continue offering other cyptocurrency services in the future.”

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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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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