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Has Bitcoin Bottomed? A Closer Look at the Bullish and Bearish Cases

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The bitcoin bulls were back in force on Friday, as markets finally broke out of a prolonged stalemate that had kept price action fairly subdued. The rally, which occurred suddenly, threatened the underlying assertion that bitcoin still has room to fall before reaching a definitive bottom.

BTC/USD Price Update

The cryptocurrency market rose to nearly one-month highs on Friday in a rally that picked up speed around midday. Bitcoin printed a high of $3,800 on Bitfinex, having gained more than 8% during the session. Earlier in the week, bitcoin had traded at its lowest level in nearly two months.

Bitcoin was last seen trading just below $3,700 on Bitfinex, where it was little changed compared with 24 hours ago. Trade volumes amounted to $6.7 billion, down from a Friday peak of around $8.1 billion.

The Bullish Case

Bitcoin is still a long way away from its glory days, but the recent breakout suggests that the worst of the downtrend may be over.

The leading digital currency has witnessed a sharp drop in volatility in recent weeks. As Hacked recently reported, the 30-day volatility index has fallen to its lowest level in two-and-a-half months. This basically means that the magnitude of changes in the bitcoin price have narrowed significantly.

The sharp drop in volatility has been confirmed by SFOX, an institutional broker-dealer that analyzes a bevy of exchange data on bitcoin and other cryptocurrencies. Based on its January Volatility Report, SFOX said the top-four cryptocurrencies by market cap saw a major decline in volatility last month. As a result, the broker’s multi-factor market index improved to ‘mildly bullish’ from ‘mildly bearish’ previously. The shift in sentiment was noted in January prior to the recent recovery.

So, while volatility often works in favor of bitcoin, its decline during the depths of the bear market suggests that the bears are slowly loosening their grip.

But declining volatility is only the tip of the iceberg. For long-term investors, bitcoin’s fundamental picture is improving significantly as the market moves from a holding phase to a building phase. Case in point: Abra, the popular bitcoin wallet app, recently announced you can invest in stocks, exchange-traded funds and other cryptocurrencies on top of the Bitcoin network.

Optimism surrounding the recently resubmitted VanEck SolidX Bitcoin Trust has also boosted investor morale. While approval depends on a multitude of factors, it’s only a matter of time before the U.S. Securities and Exchange Commission (SEC) grants the first bitcoin ETF – at least, that’s the position of the Commission’s lone Democrat,  Robert J. Jackson, Jr. A bitcoin ETF, when it gets approved, will make crypto far more accessible for mainstream investors.

More on this story: Crypto Markets See Modest Gains as SEC Commissioner Hints at Bitcoin ETF Approval.

What’s more, Ethereum’s upcoming hard fork could provide bitcoin and the broader market with another catalyst in the near term. Ether rallied into the anticipated Constantinople hard fork in January before the upgrade was postponed over security concerns. The hard fork is now slated to occur on Feb. 27.

The Bearish Case

A bear case for bitcoin is easier to justify than the aforementioned bullish scenario. This stems from the fact that bitcoin has been subject to false breakouts before, the last of which occurring in late-December/early-January.

According to Murad Mahmudov, a leading crypto analyst, bitcoin is still on track to establish lower lows unless price action can pierce through the 15-week moving average at $4,200. Even reclaiming this level wouldn’t negate the long-term downtrend. To do that, bitcoin must return above $5,500 and eventually $6,800, the 50-week moving average.

Even with the latest rally factored in, bitcoin is still in “hell,” based on Mahmudov’s classification. It must still go through “purgatory” before reaching “heaven,” which is $6,000 and above. This classification was outlined in a Feb. 5 tweet (chart provided below).

Of course, Mahmudov’s chart gives us a bearish short-term picture. Like many other crypto advocates, he believes bitcoin will soon turn parabolic and become the dominant virtual currency of the future.

It’s also worth mentioning that it was Litecoin that paved the way for bitcoin’s dramatic surge on Friday. Litecoin, also known as the silver to bitcoin’s gold, rose double-digits through the early part of Friday amid reports that the cryptocurrency’s developers were moving closer to implementing confidential transactions. This is seen as a crucial development in the battle to make cryptocurrency a more dependable unit of transaction.

Read more: Litecoin Sparks Huge Crypto Rally as Bitcoin Smashes Through $3,700

If Friday’s rally was indeed a “false breakout,” bitcoin is likely headed lower in the near term. This means bitcoin is still in an accumulation zone, which allows long-term holders to cost average the virtual currency at attractive prices. Once again, this is bearish for the short term but bullish over longer horizons.

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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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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Crypto Update: Another Spike Fails in Crypto-Land

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The major cryptocurrencies continue to follow the pattern which consists of sudden spikes followed by choppy sideways periods. Today, the top coins jumped higher, with the strongest currencies testing their recent swing highs, but the move quickly failed. The market continues to be dominated by low liquidity and the bearish long-term forces, making it difficult to make money trading the long side.

That said, the short-term break-outs, which were formed one week ago, remain intact and our trend model is also on short-term buy signals in the case of the relatively stronger coins. Despite the buy signals, traders should remain cautious with new positions, as the long-term forces continue to work against bulls here.

The leadership of last week’s move continues to be weak and without a new batch of coins hitting new short-term highs, it’s hard to see what could propel the market higher. The top 3 coins haven’t been able to pull their weight either, so odds clearly favor the continuation of the bear market from a broader perspective.

BTC/USD, 4-Hour Chart Analysis

Bitcoin remains stuck below the $3600 level despite today’s spike, and the bearish drift that started last week in the coin continues. BTC’s relative weakness is a negative sign for the whole segment, and although it’s still above the support/resistance zone just north of $3450, the long-term setup continues to point of the $3250 and $300o support levels.

That said, the short-term buy signal is still in place in our trend model, and traders could open small, speculative positions in BTC, with strong resistance zones being ahead near $3850 and between $4000 and $4050.

XRP/USDT, 4-Hour Chart Analysis

Ripple has also been showing relative weakness in recent days, and today it dipped back below the key $0.30 support/resistance level following the failed rally attempt. While the coin once again avoided a move towards the next main level of interest at $0.28, it is still likely to violate that level and test the August low near $0.26.

With that in mind, traders should stay away from XRP, with our trend also being on short- and long-term trend signals, and barring a move above $0.32, the immediate outlook is also negative, with further resistance levels ahead near $0.3550 and $0.3750.

Litecoin Tests $44 Level Again as Ethereum Clings to $120

LTC/USD, 4-Hour Chart Analysis

After settling down near the $41 price level, last week’s star LTC spiked as high as $44 today, but it failed to break-out above the key resistance zone. While the break-out remains intact and the MACD indicator still only points to a correction, the market-wide trends remain negative, and the previously leading coin hasn’t shown signs of relative strength in the last couple of days.

Traders could still hold their positions here even though a swing low is not yet confirmed, but strict rsik management rules should still be applied. A move back below $38 would trigger a downgrade in our trend model, which is still on a short-term buy signal. Above the initial resistance at $44, further levels are ahead near the recent swing high near $46 and at $51, while support below $38 is found near $34.50 and between $30 and $30.50.

ETH/USD, 4-Hour Chart Analysis

Ethereum has been trading in a narrow range today and the recent short-term swing high capped the rally attempt in the second largest coin. While the coin is still holding on to most of its gains from last week, trading well above the $112 level, the lack of bullish follow-through is a negative sign even regarding the short-term outlook.

The hostile long-term setup raises the odds of a failed short-term rally, and although pour trend model remains on a short-term buy signal, traders should only consider small, speculative positions here. The $120 level continues to be at the center of attention, with another strong resistance above that being found near $130, while further support is found in the $95-$100 zone.

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 465 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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The “Accessibility Premium”: How Coinbase’s Overseas Expansion Could Affect Crypto Prices

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The accessibility premium refers to the affect on a cryptocurrency’s price when it is added to Coinbase. The $8 billion valued exchange is now looking to expand beyond its U.S-based institutional trading business to offer institutional services worldwide. Bitcoin, Bitcoin Cash, Ethereum, and Litecoin may end up being the greatest beneficiaries. These cryptocurrencies could gain from increased accessibility; the new “Coinbase Effect”.

In 2018, as the exchange added more cryptocurrencies, some writers wrote about a perceived “Coinbase Effect”, like Ari Paul. They theorize about an “accessibility premium”, in which those crypto-assets that are more accessible rise in price. With Coinbase bringing crypto to worldwide investors, it could bolster demand for those coins that are listed on the San Francisco-based “Goldman Sachs of Crypto”. They would be more accessible. When a new cryptocurrency or token hit the exchange, traders might expect a bump in price. 

On May 3, 2017 Coinbase integrated Litecoin, resulting in a 30% increase in the price. When Coinbase listed Bitcoin Cash on December 19, 2017, trading on global exchanges skyrocketed. Bitcoin cash closed at $4,000. Two days prior, its price had been $2,200. Volume increased from $2.5 billion on December 18 to nearly $12 billion on December 20 for a 380% increase.

Coinbase added Ethereum on July 21, 2016, resulting in a modest 14% rally. Things changed when Brave browser’s token, BAT, launched on Coinbase. It declined in price. Further data is needed to know the truthful dynamics. By the time BAT was listed, the price of crypto had long since started a consolidation, leaving sentiment low.

Fast forward Q1 2019, and Coinbase is expanding overseas. It is laying down infrastructure for the long-term as it looks towards Asian markets, amid moves to attract international institutional money to cryptocurrency trading. (Coinbase’s product GDAX offers US-based institutional trading) New traders might find Coinbase’s familiarity welcoming. Higher volumes would be to expected for the cryptocurrencies offered by the Silicon Valley giant. 

So, the popular exchange is undergoing an extensive expansion. Coinbase customers residing outside of the U.S. can now trade without a domestic bank account. This could be a boon to the prices of cryptos offered by Coinbase, led by Bitcoin.

There has been discussion about the correlation between simplicity and demand. Opinions on the effect ease of use has on demand are not entirely aligned. As Donald Norman says in his book “Living with Complexity”:

… the so-called demand for simplicity is a myth whose time has passed, if it ever existed.

Make it simple and people won’t buy. Given a choice, they will take the item that does more.

Features win over simplicity, even when people realize that features mean more complexity. You do too, I’ll bet. Haven’t you ever compared two products side by side, feature by feature, and preferred the one that did more? …

Would you pay more money for a washing machine with fewer controls? In the abstract, maybe. At the store, probably not.

Ultimately, Norman argues for managed complexity. But, the demand for simplicity – or at least clarity – seems logical in a chaotic, complex world. In a blog on their website called “The Customer Demand for Pervasive Simplicity”, Cisco writes of this perception, and how it tailors its products towards this end.

A bastion of crypto-simplicity, Coinbase has long courted institutional investors in the U.S., but now its targets are clearly set on a global institutional book. The stage is set for crypto’s first truly global exchange, though Coinbase will need to first successfully assimilate into new countries, with their unique business practices languages, laws, and regulations. Currently, differing regulations in different countries keep crypto’s exchange ecosystem quite regional.

Coinbase holds 5 percent of all bitcoin, 8 percent of all ethereum, and 25 percent of all litecoin in circulation in cold storage. Its success overseas would likely underpin their prices if the “accessibility premium” holds true.

Marcus Hughes, recently appointed as lead counsel for Coinbase in the United Kingdom, has been tasked with overseeing cross-border expansion: “Coinbase takes the long view on bitcoin and wider cryptocurrency prices,” Hughes said, “We need to move beyond the speculation phase of bitcoin and cryptocurrency to the utility phase.”

He added: “The utility phase will mean bitcoin and crypto becomes more widely accepted and understood.”

This solidifies bullish sentiment from the exchange which will be strengthened should it be successful in its bid to attract ‘big money’, not just from a core user base in the U.S. but also from thriving crypto markets in countries such as Japan.

Coinbase reports that, “In the past twelve months, hundreds of crypto-first hedge funds have launched around the world, and many hundreds more traditional institutions have begun [actively trading digital assets]. High-volume clients across Asia will now have access to Coinbase’s flagship trading platforms for institutions. As part of this rollout, we now support inbound and outbound international (SWIFT) wire transfers, allowing Coinbase clients in Asia to fund their accounts from non-US bank holdings.”

Coinbase predicts a bright future for digital currency in Asia, it says, and looks to enter into a market that could help it to cement a role as one of the global leaders in crypto trading. But there remains a big question mark over cryptocurrencies, prominently over how regulation is going to play a role.

Marcus Hughes opines that this year will see a “massive change” for global bitcoin regulation. He says that Europe will gradually lead the way out of a “crypto winter” into regulated digital currency markets with more potential for long-term stability. But, in the short term, irrational trading might paint an entirely different picture. 

As we see Coinbase invest in the long-term it bolsters confidence in a currently inhospitable climate for bitcoin. Should prices continue to fluctuate market sentiment may dip, but it is the notion of institutional money that may serve to give cryptocurrency markets much-needed price stability. 

Image: David McBee, Pexels

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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5 stars on average, based on 2 rated postsJustin O'Connell is the founder of financial technology focused CryptographicAsset.com. Justin organized the launch of the largest Bitcoin ATM hardware and software provider in the world at the historical Hotel del Coronado in southern California. His works appear in the U.S.'s third largest weekly, the San Diego Reader, VICE and elsewhere.




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Bitcoin

Bitcoin Price Sees Renewed Stability as Average Block Size Reaches All-Time High

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Bitcoin’s price drifted slightly higher on Friday, as the potential for further downside continued to erode following a week-long drop in volatility. In terms of fundamentals, bitcoin’s average block size has reached a new record high, reigniting a long-standing debate over full blocks and the so-called capacity cliff.

BTC/USD Update

The bitcoin price is currently trading at $3,684 on Bitfinex, a figure is much higher than comparable exchanges and well above the average price quoted by CoinMarketCap. In terms of averages, bitcoin is presently trading at $3,637.69, having gained 0.7%.

Trade volumes have declined steadily in the latter half of the week. On Friday, 24-hour volumes dropped below $6 billion for the first time since Sunday. Market activity tends to decline heading into the weekend, which is understandable given the continuous 24-hour cycle of cryptocurrency trading.

BitMEX continues to be the single-largest virtual exchange market for BTC trades, though its share of total volume has fallen below 8%. Spot trading accounts for the remaining 92%. As Hacked reported earlier this week, derivatives trading has witnessed a substantial boost over the past six months, with “private bilateral” contracts valued anywhere between $125 million and $500 million per month. Read more: Bitcoin and Derivatives: Why $4,200 is So Critical.

Bitcoin’s modest upside has resonated with the broader market. Most of the top 20 cryptocurrencies reported gains Friday, dragging the total market capitalization back above $121 billion.

Average Block Size Climbs

Bitcoin’s average block size has surged through the first half of February, reaching the highest level on record, according to data from blockchain.com. The average block size peaked at 1.305 MB on Feb. 11, up from 0.899 MB the week before. The following chart illustrates fluctuations in the average block size going back 60 days.

At the time of writing, the average block size was 1.08 MB. This figure is updated continuously every 10 minutes.

In any case, the recent surge in block size has exceeded the previous limit of 1 MB established by the Bitcoin network. It has also reignited the debate over full blocks and their impact on the network. For some, “full blocks” essentially mean a backlog of transactions waiting to be incorporated into future blocks. This not only clogs up the network if blocks are consistently full, it raises the risk of long transaction delays and even outright rejection. This is a painful tradeoff for a network that is promoting bitcoin for everyday use.

Some members of the bitcoin community still advocate for smaller block sizes. They argue that large block sizes could increase centralization because it would mean that full nodes could only be run in large data centers.The debate over how to alleviate these concerns is still ongoing.

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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4.7 stars on average, based on 770 rated postsChief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi




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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.

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