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Let’s Be Optimistic Here

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Today we witness history.

Just about every government and bank on the planet has toyed with the idea of making their own cryptocurrency. Today, of all people and places, Nicolas Maduro will make this a reality in Venezuela.

This new experiment is actually a milestone in blockchain technology and could very well provide an excellent case study for economists for generations to come.

Big thanks to the author of this excellent article for his praise of my analysis…

Wait a second… am I the only one? Maybe I’m being naive…

Indeed, everybody, I speak with and everything I read about this seems to indicate that this project is doomed to fail. However, the more I think about it, the more I can’t help but be tempted by the possibility that a plagued nation may finally be on the cusp of salvation and a stable economy.

To me, this just doesn’t seem to be a Kodak moment or just another ICO scam. Of course, if it is it won’t take long before it’s completely exposed.

By putting the entire economy on a decentralized blockchain, Nicolas Maduro is actually opening up the books. Every person on the planet will have the option to scrutinize every transaction with indisputable evidence.

Maduro is plagued by a lack of trust from his people. He’s made many efforts to change his image but they have often been met with skepticism. This effort is really a Hail Mary for him and if it doesn’t work there will be consequences.

As with many other ICOs I’ve seen, information on the website isn’t exactly clear or organized. Of course, as with any other ICO the risk element is through the roof and there is a high probability that this will not work. However, that doesn’t always stop alternative investors from participating.

Personally, I will likely put a small amount of Ether on this project. Not because I think the price will go to the moon (this is highly unlikely given that this will be a commodity-backed currency) but because I would like to be part of this fascinating experiment.

Ultimately the success of this project will depend on the people of Venezuela. If they choose to adopt the new currency then it will actually have a fighting chance of survival.

@MatiGreenspan
eToro, Senior Market Analyst

(Reminder: Today’s Webinar will be at 15:00 GMT. If you haven’t registered yet, please do so now: eToro.tw/Webinar)

Today’s Highlights

  • Back in Business
  • $250 Billion Bonds Coming
  • Crypto Momentum Building

Please note: All data, figures & graphs are valid as of February 20th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

China is still on holiday until Thursday, so it will be Europe leading this session. The ECB’s minutes from their last meeting will be released at 12:30 GMT, which should kick things off nicely several hours before Wall Street returns from their long weekend.

During the stocks downtime, we did see a bit of movement in the currency markets. Especially on the US Dollar, which recovered a bit from the extreme lows of last week.

Lots of Bonds

For those of you who have been paying attention to the markets over the last 3 weeks, you’ve probably noticed that the bond market has been holding an increased significance in the global investment narrative.

So it should be noted that about $250 Billion worth of new bond notes will be put auctioned off by the US government over the next three days.

It will be very interesting to see how much appetite the market has for these treasures at this time. Who knows, perhaps oversupply really does spark demand.

Here we can see the US 20 Year Bond, which has fallen sharply since December.

Now for Crypto

We’re well off the lows now. Bitcoin is rallying and finally, we’re seeing some very welcome divergence in the crypto-market.

Since the lows two weeks ago (February 6th), we can see a massive difference in the performance of some of the top cryptocurrencies with Ethereum gaining 51% while Litecoin has rocketed 109%.

This is an excellent sign and one we’ve been waiting for.

However, the main downward trendline (purple) on Bitcoin has not yet been broken. If we do see that broken soon, there’s a fair chance the next leg could take us above $15,000.

As always, please feel free to send me any questions, comments, feedback, or resources. I’m always happy to receive them. 🙂

Have an amazing day.

This content is provided for information and educational purposes only and should not be considered to be investment advice or recommendation. The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro. Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose. Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

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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9 Comments

  1. elcloche

    February 20, 2018 at 2:11 pm

    Hi Mati,

    I’m going to star saying that I’m Venezuelan.

    The people in power are thugs, criminals, scam artists, they have kidnaped every institution in the country and has been declared a dictatorship by many countrys.

    Since 1999 when Chavez took over, they have only looted the country for personal gains.

    They are pulling this out just to keep robbing people because USA block them from getting new or negotiate their debt .

    They are not there to “try to make things better for the people”, people in Venezuela are starving and they do not care.

    You wrote “However, the more I think about it, the more I can’t help but be tempted by the possibility that a plagued nation may finally be on the cusp of salvation and a stable economy.”, but I’m sorry to disappoint you by telling you that they are going to take all your money (and anyone’s who invest in it) and will waste it all up, and then make another emission and keep it up until they bleed everybody’s trust and money (just as they did with their national bonds, that they just missed their payments by the way).

    I’m not saying it might not be good to buy some coins and sell them for some gain later as some people did with the bonds (maybe the Russian and Chinese government buys it too), but beware that at the end somebody will get ripped off, when the coin tumbles and the Venezuelan Government refuses to pay with the reserves (there is no enforceability whatsoever compared to the bonds).

    Maybe Russia and China will be the new owners of the Venezuelan’s Oil, who knows?.

    • Mati Greenspan

      February 20, 2018 at 2:18 pm

      Thanks a lot for the unique insight elcloche. It’s highly appreciated.

      Yes, you’re probably right. It is very likely to be a scam, but if it is, it will be exposed very quickly. Over many years in the markets, I’ve learned that in many cases it pays to be an optimist.

      • elcloche

        February 20, 2018 at 2:46 pm

        As investor/trader yes, you could be optimistic.

        As for me and my country, I just see more debt and robbery on the long run. We are just doomed while this f*ers have the power.

        • Mati Greenspan

          February 20, 2018 at 2:48 pm

          In fact, as an investor I don’t feel there is potential here. Though the downside risk is astronomical there is very little potential for upside. If the project works well, the price of the coin should be stable, so no moon potential for the Petro.

          My optimism is purely to see the robbery exposed by an open-book system.

  2. westgarthwines

    February 20, 2018 at 5:35 pm

    My Venezuelan friend confirmed elcloche’s comments.

    He also added that he simply doesn’t trust their technical, financial or management capabilities. This is the same group of individuals that has basically destroyed the oil production and associated with the colombian drug trafficking FARC to stay afloat. The US is also toying with the idea of cutting their oil via sanctions due to their dictatorial practices.

    Venezuelan oil production: https://www.bloomberg.com/gadfly/articles/2018-01-18/venezuela-s-oil-production-collapse-bad-news-worse-news

  3. jhmblvd

    February 20, 2018 at 6:02 pm

    I think it’s a great idea. It could have impact we don’t expect. It should certainly raise awareness about how blockchain can provide a transparent system. I know little about the situation in the country except that it’s bad and people are hurting. Governments have power, power must be checked and when it’s not checked people suffer. I don’t see much investment potential here, but who knows. I may buy in a bit just to be part of the story and in support of blockchain.

  4. douglash

    February 20, 2018 at 9:23 pm

    Petro is just an effort by the Maduro regime to hold out a bit longer and wring more money from their people and country. They are thoroughly corrupt. They laugh at their “investors”. Anyone buying the Petro is helping prop up this cruel dictatorship.

    Ask yourself, if you support petro, where would you draw the line? SyriaCoin? NorthKoreaCoin? These totalitarian regimes that murder their own people will soon launch crypto projects to fund themselves and evade economic sanctions.

    Crypto is supposed to be the people’s money. What a cruel reversal to let it prop up murderers and despots. Please revise your article, since few will read the comments. Your optimism is misplaced here. Any investment gains from petro will be blood money.

    • Mati Greenspan

      February 20, 2018 at 9:30 pm

      Thanks Douglash. My point here is that if this is a blockchain project it carries the possibility of making the economy transparent. That is all.

      I hope it was clear that this is not a great investment idea.

      • douglash

        February 21, 2018 at 9:39 am

        But you still seem to miss the point. Who cares if it is potentially profitable or not, this is quite clearly blood money. Any money contributed to petro helps keep this murderous, illegitimate regime in power and allows it to bypass sanctions and continue to starve its own people.

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Market Overview

Signs of Slowing China Rattle U.S. Stocks; Cryptos on the Verge of New Lows

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U.S. stocks sold off anew Friday after Chinese retail sales data pointed to a severe slowdown in the nation’s consumption-oriented growth, triggering fresh concern over the health of the global economy. Meanwhile, the cryptocurrency market approached $100 billion for the first time since August 2017, a level that would have seemed unfathomable just six months ago.

Learn more about the factors that influenced the market in our weekly review.

Hard Fall on Wall Street

The benchmark U.S. indexes fell hard in the final session of the week. The Dow Jones Industrial Average plunged 496.87 points, or 2%, to close a 24,100.51. The Dow 30 is down a staggering 2,700 points from its October peak.

The much broader S&P 500 Index fell 1.9% to 2,599.95, the lowest in over eight months. All 11 primary sectors finished in the red, with health care and energy stocks leading the market lower. Health stocks plunged by an average 3.4%. Shares of energy companies were down 2.4%. Information technology and consumer staples also posted heavy losses.

A hard slide for information technology dragged the Nasdaq Composite Index sharply lower. In doing so, the tech-heavy index nearly joined its counterparts in negative territory for the year. The Nasdaq closed at 6,910.67, having lost 2.3%.

The CBOE Volatility Index, also known as the VIX, rose in the final session of the week, painting a grim picture for Wall Street over the next 30 days. VIX climbed 4.8% to close at 21.63 on a scale of 1-100 where 20 represents the historic mean. The so-called “fear index” has gained a whopping 87% this year.

Investors are exiting U.S. stocks in nearly record fashion, according to Bank of America Merrill Lynch. In a note obtained by Bloomberg, the bank said U.S. equity funds have experienced their second-biggest run in history, bleeding $27.6 billion through Dec. 12. As Bloomberg notes, the bloodbath on Wall Street has erased up to $4 trillion in U.S. stocks since the end of September, a period that was characterized by record highs.

China’s Cause for Alarm

Once again, China was at the center of the selloff on Friday after Beijing reported the biggest slowdown in retail sales in over 15 years. Receipts at Chinese retail stores rose just 8.1% annually in November, which was well below forecasts calling for 8.8%. Industrial production also languished, rising just 5.4% annually during the same month.

The world’s second-largest economy is in the midst of a multi-year cooldown marked by slowing industrial output and a gradual shift away from export-oriented industries. This is part of a much broader strategy to transform China into a consumer-oriented economy. However, heavy reliance on traditional smokestack industries remains a focal point to the nation’s short-term economic well-being.

China remains heavily dependent on exports, which means it relies on a strong U.S. economy as a destination market. This has given the Trump administration considerable leeway in pressuring Beijing to reform its trade policies. China and the U.S. have made considerable progress on trade talks in recent weeks but a comprehensive deal has yet to be reached.

Cryptos Locked in Bearish Retreat

Cryptocurrency prices on Friday touched new lows for the year, offering little doubt that a new bear-market bottom was around the corner. The combined value of all coins in circulation fell to $102 billion, the lowest in 16 months.

Bitcoin’s price briefly fell below $3,200 for the first time this year, extending its daily loss to more than 4%. The leading digital currency is down roughly 5% for the week, though its share of the overall market continues to grow amid a mass exodus from altcoins.

XRP, Ethereum and EOS each recorded declines of at least 3% on Friday; Stellar XLM was down 9%, falling below 10 cents for the first time this year.

With the exception of Tether, a dollar-backed stablecoin valued at $1.00, all cryptocurrencies in the top-20 were down at least 4% during the session. Twentieth ranked Maker (MKR) was the biggest laggard, falling 13% on the day.

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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4.6 stars on average, based on 699 rated postsSam Bourgi is Chief Editor to Hacked.com, where he leads content development for one of the world's foremost cryptocurrency resources. Over the past eight years Sam has authored more than 10,000 articles and over 40 whitepapers in the fields of labor market economics, emerging technologies, cryptocurrency and traditional finance. Sam's work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Contact: sam@hacked.com Twitter: @hsbourgi




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Analysis

Forex Update: Dismal Chinese Data Causes Turmoil in Markets

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Forex Market Snapshot

Asset Current Value Daily Change
EUR/USD 1.1302 -0.47%
GBP/USD 1.2571 -0.68%
USD/JPY 113.35 -0.21%
AUD/USD 0.7179 -0.66%
GOLD 1,243 -0.20%
WTI Crude Oil 51.16 -3.18%
BTC/USD 3,180 -2.54%

We continue to have an unusually active December in traditional financial markets, as the recent bearish shift, the continued Brexit woes and the slowing global economy add up to a very nervous trading environment. Volatility is especially high in stock markets compared to seasonal averages but currencies are also having very active days, with the Dollar clearly being in focus.

Today we had negative headlines in China with both industrial production and retail sales missing the consensus estimates by a mile, and the history of manufactured economic releases from the country makes that even scarier.

It’s no surprise that the Chinese stock market is leading the way lower globally, while the Chinese Yuan is also among the weakest currencies globally, even amid the improving trade-related sentiment. Risk-on currencies got it hard today, and the Dollar is defying its bearish seasonality, trading very close to its recent lows, confirming the broad risk-off shift.

Technical Analysis

GBP/USD, 4-Hour Chart Analysis

The Great British Pound continues to trade with pronounced relative weakness, and as Prime Minister Theresa May was sent home empty-handed from Brussels, with the leaders of the EU refusing to renegotiate the draft Brexit plan, the currency’s position just got even shakier.

From a technical standpoint, the Cable confirmed the key breakdown with a failed pullback in the past couple of days, and with no major support found above the generational lows near 1.20, long-term odds now favor a test of that zone, and bulls shouldn’t enter positions below the key 1.27 level.

EUR/USD, 4-Hour Chart Analysis

The EUR/USD pair dipped below the 1.13 level after yesterday’s the dovish growth and inflation forecast by the European Central Bank and today’s strong US Retail Sales report. The US economy continues to perform relatively well compared to its global peers, and although we think that the slowdown will eventually reach the US, the fiscal stimulus and the labor momentum could keep the engines going for a while.

That only adds to the buying pressure which is pushing the USD higher, and the troubles in the European financial system are also mounting, which could lead to another leg lower in the common currency next year. The main technical levels to watch are still the 1.12 support and the 1.1440 resistance, and with the broader downtrend clearly being intact in the most traded currency pair.

AUD/USD, 4-Hour Chart Analysis

The AUD/USD pair fell below the bearish wedge pattern on the negative Chinese news as we expected, and it’s now testing the 0.7165 support zone. A move towards the 0.70 level is likely in the coming weeks, should the pair violate the support zone, and the short-term trend change is close to being confirmed, while the broader downtrend is clearly intact, with strong resistance ahead near 0.7250 and 0.74.

WTI Crude Oil, 4-Hour Chart Analysis

Another rally attempt faded away today in crude oil, and the crucial commodity continues to trade in a bearish consolidation range following the series of dead-cat-bounces. The top of the range is found near the $54.25 per barrel price level, while strong support is found in the $49.50-$50 per barrel range.

Given the deeply oversold long-term momentum readings, bulls can open speculative long positions near the bottom of the range, despite the clearly intact long-term downtrend, while bears should wait for a larger scale bounce to reenter the market.

Key Economic Events on Monday

ChartBook

Forex

USD/JPY, 4-Hour Chart Analysis

EUR/GBP, 4-Hour Chart Analysis

EUR/JPY, 4-Hour Chart Analysis

AUD/JPY, 4-Hour Chart Analysis

GBP/JPY, 4-Hour Chart Analysis

USD/CHF, 4-Hour Chart Analysis

USD/CNH, 4-Hour Chart Analysis

Commodities

Gold Futures, 4-Hour Chart Analysis

Copper Futures, 4-Hour Chart Analysis

Major Stock Indices

S&P 500 Futures, 4-Hour Chart Analysis

DAX 30 Index CFD, 4-Hour Chart Analysis

Nikkei 225 Futures, 4-Hour Chart Analysis

Shanghai Composite Index CFD, 4-Hour Chart Analysis

Featured image from 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 417 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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Market Overview

Tighten that Belt!!

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Hi Everyone,

Over the last four years, the European Central Bank has managed to inject €2.6 trillion into the banking system in order to maintain economic stability.

To be clear, these cash injections have been one of the only things propping up the economy, and even the Governor of the ECB has now admitted that.

Now, €2.6 trillion may not sound like a lot of money but we need to consider that this money is then multiplied by the fractional reserve banking system with each Euro created then being lent out multiple times. So the actual amount of money that went into the system is much higher.

Here we can see the level of M3 money in the Eurozone going from less than €10 quadrillion to more than €12.27 quadrillion in just four years.

Yesterday, the ECB announced that they will stop injecting new money into the system. In the United States, they are already starting to extract money by allowing the bonds they’d purchased to lapse. In Europe, they’ll be renewing their bonds for now.

So, for those of you reading these daily updates and wondering what monetary tightening is, this is how it works and it is having a massive impact on the markets.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Poor China Data
  • USD Getting Strong
  • Bitcoin Bulls are Still Bullish

Please note: All data, figures & graphs are valid as of December 24th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

Stocks declined during the New York session yesterday. There were a bunch of headlines about a possible government shutdown but that’s probably not the catalyst for falling stocks. Just a sideshow distraction.

As we mentioned above tightening monetary policy is the driver here. During most of the year, stock bulls were able to say that the economy is still doing very well, but unfortunately, they don’t even have that leg to stand on anymore.

The US jobs report last week was dismal and the GDP in Q3 was a clip below the national average.

Things didn’t get much better in the Asian session either. Chinese investors drank their morning coffee reading headlines like this

To put the numbers into perspective, here is a graph of China’s industrial production since the crisis.


… and here is one for the retails sales. These are the lowest figures in more than a decade. An outright shock for economists whose forecasts were already low.

As you can probably imagine, the entire global stock markets are in risk-off mode by now.

USD Strength

In line with the risk-off mood, it’s likely that many traders are moving to cash. This could be the reason the US Dollar is testing new highs at the moment.

Here’s the graph we’ve been tracking that shows a rather clear ascending triangle for the US Dollar index. Definitely looks like a breakout pattern.

Similar to what we saw in August, the emerging market currencies are getting the biggest wallop. Here we can see the Lira, Rand, and Peso getting bucked.

At this point, only the Japanese Yen is a bigger safe haven but only slightly.

Bulls Gotta Bull It

To say that I’m bullish on bitcoin is an understatement, but even my extreme optimism is overshadowed by some of the other analysts in the industry.

As much as I respect Mr. Lee and appreciate his view, the above headline did raise a few alarm bells in my head.

In my personal philosophy, the market is never wrong. Fair value is what someone is willing to pay for it. I can understand how using metrics to try and determine what the price of an asset should be can be helpful. However, if nobody is willing to pay that amount, then it isn’t the correct value.

During the interview, Thomas even went as far as trying to reverse engineer his own calculations showing how given the current price of bitcoin, there should be far fewer active wallets. This thinking sounded a bit silly to me as well.

Sure, I believe that bitcoin can grow in value very quickly. After all, there is an extremely limited supply. But for that to happen demand needs to pick up first.

Have an amazing weekend!!

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

Past performance is not an indication of future results. All trading involves risk; only risk capital you are prepared to lose.

The outlook presented is a personal opinion of the analyst and does not represent an official position of eToro.

eToro is a multi-asset platform which offers both investing in stocks and cryptocurrencies, as well as trading CFD assets.

Please note that CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 65% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

Best regards,
Mati Greenspan
Senior Market Analyst

Connect with me on….

eToro: @MatiGreenspan | Twitter: @MatiGreenspan | LinkedIn: MatiGreenspan |Facebook:MatiGreenspa

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 139 rated postsSenior Market Analyst at Etoro.com.




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