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Analysis

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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Analysis

The Crypto Correction: What You Need To Know

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In the short span of about 24 hours prices of cryptocurrencies have fallen like a stone. Investors have either given back or taken losses of sizable amounts. Measuring the one-day drop: bitcoin -21%, Ether -29%, Litecoin -29%.

From its December all time high near $20,000, bitcoin has given back more than $200 billion in value. This amounts to more than 80% of the companies on the New York Stock Exchange or Nasdaq. Even for those who have experience-trading crypto, the events of the last few days can challenge nerves.

What is the right plan of action? Possibly no plan at all, by that I mean sitting tight and doing nothing, could be the best plan. What ever you choose, the first thing to do is to shut down your computer and turn off CNBC. These are all entirely emotion driven groups and right now they are making loud negative headlines reminding us of quotes from JP Morgan CEO Jamie Dimon and Warren Buffett.

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The same sources are painting a dark case today. These are the very same folks that were gaga over crypto last year while prices were rising. Now these sources are quoting Warren Buffett who predicted with a high degree of confidence that cryptocurrencies will have a bad ending.

If you listen to Christopher Harvey, Head of Equity Strategy at Wells Fargo, you get an even more dire prediction. He recently appeared on CNBC stating that the cryptocurrency price correction could spill over into the overall stock market.

There is a rule of thumb on Wall Street. If you are right 51% of the time, you are considered an investment genius. This means most opinions are wrong at least half of the time. This could be the case with today’s crypto naysayers.

Prices And Business Fundamentals Don’t Always Match

The number of true experts in cryptocurrencies is small relative to the number of investors. That means there is more emotion than usual driving prices in both directions. It is this volatility that keeps certain investors on the sidelines.

But if you have done your research and have a view of the world in 2028 short-term volatility is not your enemy. Warren Buffett, the biggest crypto naysayer is a master of long term investing. During the 2008 financial crisis, when the world was close to the brink of financial disaster, Buffett was standing by with billions to loan Goldman Sachs charging an outrageous 10% rate of interest. There is a lesson for us here.

Don’t Get Distracted By Short Term Issues

Korea is a big market for crypto demand and, along with China has produced headlines threatening to close down cryptocurrency exchanges. I have not dealt directly with any of these so the analysis of others is necessary.

These folks point out the excessive price premiums as evidence of the behavior of bad actors in the game. So any action by governments to clean up the exchanges could produce a better experience for investors. And let us not forget cryptocurrencies are global. There are plenty of exchanges in the world that make markets.

Korea does not have a monopoly on bad actors. The exchange and lending platform Bitconnect, in recent days, announced that it is closing. The company was recently served with a cease and desist order. Ethereum founders had criticized the exchange for their practices that many believe were bordering on a Bernie Madoff style Ponzi scheme.

The Tipping Point Has Been Reached

The jury is no longer debating the verdict. Cryptocurrencies have become embedded in the global economy. According to Google’s Annual Report on Search Facts, bitcoin and cryptocurrencies were the second most important topic in the world during 2017.

Bitcoin is all about fast, anonymous, low cost movement of money anywhere on the planet. Those lofty goals have not yet been achieved but with tens of thousands of businesses now accepting bitcoin including some hefty Fortune 500 companies and with the Bitcoin Lightning Network coming on, bitcoin’s shortcomings are being addressed.

Bitcoin Futures: Acceptance Is Spreading

When I learned that bitcoin futures would be traded in the US by the CME and CBOE, the only question was how long it would be before other countries recognized the legitimacy of bitcoin futures. Well, it didn’t take long. The Hong Kong securities regulators, SFC issued a report on December 11th giving investors a green light.

Within less than a year futures contracts will be available on Ethereum and possibly others.

Ethereum: The Future Is Here

Ethereum has always had a more obtuse purpose. It was never intended as a medium of exchange like bitcoin. For what it is worth, Ethereum is less likely to be singled out by governments and central banks that fear loss of economic control.

Descriptions like decentralized blockchain platform offering smart contracts and driven by Ether require some time to appreciate. Ethereum is open sourced and applications oriented. You don’t need to understand the technology you only need to envision what it can be applied to.

Ethereum co-founder Steven Nerayoff tells us the number of Ethereum projects today is already ten times the number of last year. Here are just two examples.

Unilever

Unilever, the $52+billion food and packaged goods giant, is working on a blockchain based project to better manage its massive global supply chain. So far it is only being tested but consider the size: 10,000 Malawian tea farmers. And this is just the start of their massive corporate wide supply chain. Imagine what this will look like if Unilever starts to take things seriously: stay tuned.

On The Vanguard

Now the $5 trillion Vanguard group is getting the blockchain bug.  They are the investment industry’s low cost provider. Now they are embarking on test to apply blockchain technology for data sharing.

Caveat Emptor

The reality is the cryptocurrencies are embedded in the global economy and likely to grow dynamically for a long while. This doesn’t protect us from short-term events. That is why huge price corrections are so interesting. The Warren Buffett habit of always having deep cash reserves to pounce on opportunity when frightened investors run is a strategy that has worked well over multiple decades.

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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10 votes, average: 4.90 out of 510 votes, average: 4.90 out of 510 votes, average: 4.90 out of 510 votes, average: 4.90 out of 510 votes, average: 4.90 out of 5 (10 votes, average: 4.90 out of 5)
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