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Long-Term Cryptocurrency Analysis: The Anatomy of a Crash

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Although the extent and the actual weight of the Chinese cryptocurrency trade ban are still questionable, the major coins outright crashed this week, accelerating the projected deep correction. The segment lost 40% of its total market value before a roaring snapback rally that eased some of the pain of crypto-bulls. Bitcoin was at the forefront of the decline, although coupled with the ICO ban, the likes of Ethereum and NEO are more affected by the new legislation, and indeed ETH fell more during the correction than BTC.

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Bitcoin is now trading back near $3600 in a very volatile environment, after breaching the $3800 level in early trading. The long-term momentum readings are quickly reaching oversold levels, and although we still expect the correction to go on in time, and a re-test of the lows is possible, the price low might already be in. Long-term investors should already be adding to their positions on the short-term dips, but a spike below the prior high could reach down to the $2800 support.

BTC/USD, Daily Chart Analysis

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The other majors are also expected to trade in volatile ranges that could be damaging for leveraged traders, but even the most overbought coins like Litecoin, Monero, and Dash are now neutral regarding the long-term picture and investors could already be looking for buying opportunities as the correction unfolds.  Let’s see the details of the daily setups.

Ethereum

ETH/USD, Daily Chart Analysis

Ethereum reached and dipped below our primary target zone for the correction yesterday, as the crash brought the coin down to $200. Now the token is trading near $250, the upper boundary of the strong support/resistance zone. The long-term picture is now slightly oversold, and the $200 level will likely be the bottom for the correction.

Litecoin

LTC/USD, Daily Chart Analysis

Litecoin spiked lower together with the broad market and found it only found support inside the long-term base formation before the huge rebound. We don’t expect the coin to re-test its lows, as several strong support levels are below the current price level, at $51, $44, and $38. The MACD indicator is neutral, and more sideways price action is likely before a sustained move higher.

Ripple

XRP/USDT, Daily Chart Analysis

Ripple held up relatively well during yesterday’s sell-off, and the coin is back at $0.18 today, as the long-term base formation stopped the decline. XRP is holding up above the prior declining trend channel, and we still expect the currency to move towards the $0.30 level in the coming weeks, and investors could still add to their positions.

Dash

DASH/USD, Daily Chart Analysis

Dash completed a roundtrip between $300 and the prior high near $220 since last week, and the coin remains among the strongest majors. A dip back towards $265 is likely in the coming week, but we don’t expect the crash lows to be broken. Long-term investors should add to their positions short-term dips.

Ethereum Classic

ETC/USD, Daily Chart Analysis

Ethereum Classic is alarmingly weak after the bounce, trading well below the long-term base formation. The coin decoupled from Ripple after an extended period of similar movements, and it is now one of the weakest majors concerning the technical picture. Strong resistance is ahead around the $14 level, while support is only found near the $9.

Monero

XMR/USD, Daily Chart Analysis

Monero is also among the strongest majors, similarly to Dash, and it was among the few currencies which stayed above the June highs during the crash. The long-term MACD is back to neutral, but we expect more range trading, likely between $80 and $100, before a  sustained move higher as the broad correction concludes. Support is still found at $80 and $68, while resistance is still ahead at $125.

How to Use These Charts?

As we stressed in our article on Bitcoin: “…not all strategies are binary (either holding an asset or not).There are many long- and short-term investment and trading strategies that can be successful in a roaring bull market like the one that the crypto-coin segment is experiencing, but mixing the time-frames and mixing trading and investing (see our article on the topic) could lead to troubles.”

Here is a reminder of some of the possible strategies once again:

  • Buy and hold, without caring about day-to-day (or even month-month) fluctuations
  • Buy and hold a core position and add on the major dips; a very powerful strategy
  • Buy a certain amount every week or month, and even-out your entry price, without the hassle of timing the market
  • Try to catch major turning points to reduce and “re-boost” your position
  • Trade short-term movements with stop-losses, targets, and strict risk management (this is trading not investing)”

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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4.5 stars on average, based on 233 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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1 Comment

  1. RH2302

    September 17, 2017 at 4:06 am

    Why is NEO excluded all of a sudden?

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Analysis

Euro hits 3-Month Low Despite Hawkish Draghi

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All eyes were on the European Central Bank and Mario Draghi today, as the recent string of disappointing economic data put pressure on the Euro. Investors started questioning that the ECB will follow through with its monetary tightening plans. As far as the actual momentary policies are concerned, the central bank left everything unchanged today, while the head of the bank signaled that he is confident about growth in the Euro-zone, sparking initial buying in the common currency.

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EUR/USD, 4-Hour Chart Analysis

Despite the hawkish words of “Super Mario” the Euro took a sharp turn lower right at the US open, and the EUR/USD dipped below 1.2150, hitting the lowest level since January. From a technical standpoint, the most traded pair is at a very important juncture, and should the break below support hold, a quick move below $1.20 is likely.

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S&P 500 Futures, 4-Hour Chart Analysis

Stocks are higher for the second day in a row after the strong bearish move in Tuesday, with the NASDAQ leading the way higher, led by Facebook, as the recently troubled social media giant is staging a strong bounce following yesterday’s positive quarterly earnings report. Despite the rally, the charts still suggest that there are more troubles ahead for bulls, with the short-term downtrend clearly being intact in the major indices.

Facebook (FB), 4-Hour Chart Analysis

US Treasury yields which have been in the focus in the last days are slightly lower today, especially regarding the longer end of the curve, as core durable goods orders came in much lower than expected, even as the less reliable headline number beat the consensus estimate. While it’s unlikely that the rising trend in yields will be broken, a correction is in the cards after the strong move higher in rates.

Dollar Rally Dominates Forex Markets

USD/JPY, 4-Hour Chart Analysis

Should Treasury yields pull back substantially from their highs that could mean that a correction the Dollar rally is also ahead, as the Greenback looks stretched from a short-term standpoint too. The Dollar’s strength also weighs on commodities, with gold dropping below $1320 and WTI crude oil falling back below $68 per barrel.

Commodity currencies are still under pressure too, while European and Asian stocks are benefiting from the USD rally, which will remain in the center of attention this week.

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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4.5 stars on average, based on 233 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: Correction Continues but Uptrend Not in Danger

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The major cryptocurrencies are consolidating in a choppy range today following yesterday’s sharp pullback, with the total value of the market stabilizing near the $400 billion level. All of the largest coins found support above key support levels, keeping the bullish trend intact, as the overbought readings are being cleared.

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While the correction will likely continue and our trend model is still only neutral from a short-term perspective in the case of most of the coins, the underlying trend is positive, and we expect the recovery to resume after the dip.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin fell below the $9000-$9200 support/resistance zone during the pullback, but it remained above the $8400 level that marks the previous swing high. The MACD indicator is still showing a downswing, but it is now in neutral territory, and the coin could already be ready to resume the uptrend and aggressive traders could enter new positions, using the overnight low as a stop loss level. Below $8400, further support is found near the $7650 level, while targets are ahead at $10,000 and $10,500.

ETH/USD, 4-Hour Chart Analysis

Ethereum found support just below the $600 level and moved back to the vicinity of the $625 support level holding within the steep short-term uptrend.  A break below the trendline is still likely, and a test of the $555 to $575 zone is possible after the strong rally. That said, ETH, one of the leaders of the upswing is expected to resume the recovery after the correction, and long-term investors should hold on to their coins despite the move. Further support is at $500, with targets still ahead near $735, $780, and $845.

EOS Holding Up Well Amid Broad Correction

EOS/USD, 4-Hour Chart Analysis

EOS has been spearheading the broad rally in the segment, and the coin got close to the prior all-time high before the current correction, being the largest coin to do so since January. Although the currency retreated somewhat from the highs, it remains from a short-term perspective and traders should use tight stop losses or reduce their positions as correction risk is high here.

IOTA is the closest to giving a short-term buy signal among the majors, as it began the correction earlier and found strong support near the previous swing high, while there are no negative outliers that would hint on a failed rally off the recent multi-month lows. With that in mind, long-term investors could still use the current correction to boost their altcoin holdings.

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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Analysis

The Crypto Bull Is Off Of Life Support

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There may be some bad days for cryptocurrencies in the future.  There may even be a few bad weeks. But crypto markets survived the worst shellacking in their brief history.  The soon to be ending month of April is an appropriate time for Mark Twain: “Reports of my demise have been greatly exaggerated”.

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Anytime an asset class gains $100 billion in value over the course just under 30 days, the death watch is over.  Anytime the largest member (bitcoin) gains 30% in value and still ends up being the weakest major performer, the crypto bull market is not only off life support, it is alive and in recovery.

Signs of Better Times

Making highly successful predictions about the direction and magnitude of stocks, bonds or cryptocurrency is a 51% proposition. What this means is that at least 49% of the time, you are going to be wrong.  

At least with stocks and bonds there is a huge database that can be massaged in the hope of  accurately predicting the future. None of that applies to crypto. So here are some of the things that create confidence that the future will be far better than the most recent past.

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Relative Value

When the stock market is near a record high,  interest rates are headed much higher and the market fear index, the VIX, suddenly shoots up, this is a clear sign of an overvalued market for conventional intangible assets.  The same can be said for tangible things like real estate.

After having lost more than half their value in something like 90 days, cryptocurrencies offer comparative value.  Most interesting is how the smallest and most speculative cryptos experienced the best performance. That type of recovery never took place in the post dotcom period.

This is a measure of long term vision investors are applying.  Many of these Gen III projects are little more than white papers and promises at this stage.  This is good to remember the next time someone drags up the notion of a crypto bubble.

Skeptics will point out the thin trading in many of these Gen III names as the underlying reason for their quantum moves.  There is probably some truth here, but simple risk analysis argues in favor of the big familiar names like bitcoin holding leadership.  Crypto investors obviously see things differently.

Cryptocurrencies Can Take A Punch

While watching the favorable price action in recent weeks, there was little obvious impact from the same regulators that contributed to the Q1 price avalanche.  What we are referring to is the April 23rd talk at the MIT Technology Review: Business of Blockchain.

The secession was headlined by an address by Gary Gensler the former chair of the CFTC. The issue at hand: are cryptocurrencies securities and thus regulated by the SEC?  In my mind, Gensler exploded a bomb: Ethereum and Ripple were securities while bitcoin fit the description of a medium of exchange.

Wow, think about this for a second.  If Ethereum was truly a security that could spell a miserable amount of registration work to conform with SEC regs.  While that would be unpleasant, the implications for the thousands of ICO tokens using the Ethereum platform could be far worse.  Fortunately, Gensler isn’t running the SEC but his legal arguments can and probably will be used at some point.

Back in February, when crypto prices were tumbling, Gensler’s comments would surely added to the fear and selling pressure.  On the day of Gensler’s talk, ether rose in price by nearly 7% according to Coinbase while Ripple gained 8%. This shows that cryptocurrency investors are learning to take a punch without losing perspective.

Trade Signs Are Good

We can all pretty much agree that we are relieved when see prices are rising.  However, when price increases are driven by higher volume, that gets technical analysts buzzing. Since the beginning of April, bitcoin transactions have increased 90% and Ethereum by 50%.  While all of this has been happening the median fee for bitcoin has been $0.16 and ETH is an even lower $0.07. While this isn’t exactly free, it is a gargantuan improvement over the $30 bitcoin investors were paying back in December.

A Two Way Street

Not every period will be as profitable as the month of April. Double digit price changes, the hallmark of this market, are part of the drill.  But even after the April rally, cryptocurrencies will still offer better value than the average Nasdaq technology stock.

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 64 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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