Predicting Crypto Market Movements
One of the most difficult aspects of trading cryptocurrencies is the reactionary nature of the market. Most of the news events that influence prices are the type of things that are difficult to foresee.
In traditional finance, we know in advance when there will be an economic data releasee. Things like inflation figures, GDP data, interest rate decisions are all scheduled in advance and we can even look at an economic calendar to understand the timing and expectations of the event.
Though we may still be a while away from a comprehensive crypto calendar, we are seeing that as we go there is more awareness of future events. For example, on Wednesday we had a Congressional Hearing about cryptocurrencies that traders were able to tune in to.
On Monday and Tuesday, the first of five G20 meetings will be held in Argentina and will be a primary focus of traditional finance players. It has recently been confirmed that representatives from Japan will use this meeting to address cryptocurrencies, specifically to provide ideas on how to limit the use of cryptos for laundering money.
Japan is currently the world’s leader when it comes to cryptocurrency usage and regulations after completely legalizing Bitcoin on March 31st of last year. So their opinions in this matter carry a lot of weight with other world leaders.
More intense crypto talks are expected at the November G20 meeting, and with the price of Bitcoin and other cryptos more than 50% off their all-time highs crypto-skeptics are getting louder, so seeing one of their main concerns being addressed on the largest global financial stage is a very reassuring thought.
eToro, Senior Market Analyst
- Ritual Suicide
- Therein Lies the Rub
- Bitcoin Lightening
Please note: All data, figures & graphs are valid as of March 16th. All trading carries risk. Only risk capital you can afford to lose.
It’s not often that we lead this section of the update with Japan but it is the world’s third-largest economy and they’re going through a bit of a rough patch which could potentially lead to some market movements that are worth highlighting.
Prime Minister Shinzo Abe is having a bad month right now. A suicide note left by a government official revealed that he was forced to rewrite several official documents to cover up the Prime Minister’s connection with a particular sale of land.
Though political analysts are saying that the Prime Minister himself is safe from the scandal, the Finance Minister Taro Aso is clearly in the thick of it and will be sitting out the above mentioned G20 meetings.
Why this matters to the markets
Abe and Aso, along with the Bank of Japan have been acting since 2012 to proactively devalue the Japanese Yen. A weak Yen policy is considered a cornerstone of ‘Abenomics’.
The idea is to keep the currency weak in order to promote exports. The weaker the Yen, the more foreigners will be able to afford products that are made in Japan. And with Japan exporting more than they import, this policy makes a lot of sense.
In this chart, we can see the Yen’s massive depreciation since Abe was elected in September 2012.
(Remember, this is the USDJPY pair so an upward movement on the graph indicates a weaker Yen.)
So far the Yen has been getting stronger, acting as a barometer of Abe’s dwindling popularity. Any progression in this saga can and likely will have a direct impact on these markets.
Therein Lies the Rub
The current UK investigation into the poisoning of a former Russian spy has brought the Russian Ruble into full focus.
In an unrelated matter, yesterday Donald Trump ended up slapping sanctions on Russia for their alleged meddling in the 2016 elections.
All this adds up to volatility in the USDRUB.
A huge congratulations to the Bitcoin network for completing a major upgrade!!
Bitcoin scaling is particularly difficult. Due to the decentralized nature of the network, it’s hard to get all the programmers and participants to agree on a path forward but all agreed that bitcoin needs to be more efficient so this was a long time coming.
The new lightening network that was deployed to the bitcoin main-net yesterday allows trusted parties to set up their own private networks to facilitate off-blockchain transactions. These sidechains allow the participants to trade freely among themselves and only upload a periodic summary of the transactions to the main blockchain.
What this means is, fewer transactions will require the approval and confirmation of the energy-intensive miners. Transactions that happen on lightening are also much quicker and are only a fraction of the cost of regular transactions.
As we mentioned in January and many times since, this dip in price should be seen as a good thing for the progression of cryptocurrencies as it allows much-needed breathing space to advance and scale up the technology.
One of our top FX traders, @Goodgoing, will be in our London office this morning for a live Q&A on Twitch at 11:00 AM GMT. All things FX and technical analysis will be on the agenda. You can tune in and interact here.
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. 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.
Senior Market Analyst