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Market Overview

Predicting Crypto Market Movements

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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.

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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.

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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.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • 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.

Traditional Markets

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.

(As before, the chart going up means the Ruble getting weaker.)

Lightning Fast

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.

Happening today

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.

Best regards,
Mati Greenspan
Senior Market Analyst

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

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 68 rated postsSenior Market Analyst at Etoro.com.




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4 Comments

4 Comments

  1. embersburnbrightly

    March 16, 2018 at 3:24 pm

    I always enjoy your articles, Mati. The first couple of paragraphs of this one are SO very true. I also enjoy the clever wordplay you use, especially in the outline section where you preview what will be discussed further down below in each article (i.e., “Therein Lies the Rub,” regarding the ruble and its USDRUB pairing). I just wanted to take a moment to acknowledge how much I appreciate the extra thought you put into your articles to keep them both informative and entertaining!

  2. Mati Greenspan

    March 16, 2018 at 3:42 pm

    Wow! Thanks a lot embers. Much appreciated.

  3. Carst

    March 16, 2018 at 9:30 pm

    Hi Mati, same here, always enjoy your views and birds-eye perspective.

    I am confused in the sense what is discussed in the March G20. As you said, more intense discussions about crypto are on the agenda for november. As i read the agenda (first meeting of finance ministers and central bank governors of 2018):

    “The technology behind crypto assets has the potential to promote financial inclusion. At the same time, however, it is important to analyse its implications to financial stability, tax evasion, and financing illegal activities. The issue is an important item on the meeting agenda; delegates will consider a common response that would mitigate the risks without discouraging innovation”..

    This tells me that there is more to be expected (a common response), but maybe its just the start of a (intense) long process ending in november.

    Just wanted to share.

  4. Mati Greenspan

    March 17, 2018 at 6:59 pm

    Thanks a lot carst.

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Analysis

Rally Fades in Stocks as Apple Weighs on Nasdaq

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We warned yesterday that stock markets got vulnerable as the major US indices reached short-term overbought readings, and after a choppy Wednesday session, equities turned lower today in early trading. Apple fell by more than 2% in early trading on a supplier report regarding declining orders from the smartphone giant, and the sliding stock dragged the tech segment lower.

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S&P 500 Futures, 4-Hour Chart Analysis

While the short-term technical picture deteriorated, the losses are muted so far, and the rising short-term trendlines are holding up. Volatility ticked higher, with the VIX bouncing off its two-month lows, but the index is well below the levels seen in the beginning of the month, as Syria-related fears continued to ease and the Chinese-US trade spat also took the back seat in the mainstream media.

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DAX, 4-Hour Chart Analysis

Stocks finished broadly lower in Europe, while Asian equities reversed their early gains, with trading volumes still being low across the board. The economic calendar was almost empty today, with only the much worse than expected British retail sales figure adding to the string of negative surprises coming out form the UK this week. In the US, the Philly Fed index came in higher than expected, while weekly jobless claims were in line with expectations.

Dollar Stable as Short Yields Hit New Highs

2-Year Treasury Yields, 4-Hour Chart Analysis

Treasury yields resumed their rise in the quiet environment, and as the short end of the curve continues to outperform the flattening of the yield curve continues in earnest. While forex markets are still mostly flat, the Dollar is drifting higher against most of its peers in US trading.

AUD/USD, 4-Hour Chart Analysis

Commodity-related currencies are little changed, although both the Aussie and the Canadian Dollar are off their recent highs, and should they roll over, the bullish case would receive another hit.  Despite the weakening of the risk rally, crude oil continues to hit multi-year highs, with the WTI contract getting close to the $70 per dollar level today. Gold fell back below $1350, as the choppy consolidation pattern is still intact, and the slight risk-off shift wasn’t enough to trigger meaningful safe-haven flows.

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 224 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

Market Update: S&P 500 Notches Third Straight Rally on Earnings; Cryptocurrencies Hit $340 Billion

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U.S. stocks finished mostly higher on Wednesday, as earnings optimism lifted the S&P 500 Index and Nasdaq to their third consecutive daily advance. Meanwhile, cryptocurrencies resumed their uptrend after a two-day pause as bitcoin returned above $8,000 and bitcoin cash surged double-digits.

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Stocks Finish Mostly Higher

Two out of the three major U.S. indexes notched gains, with the S&P 500 Index edging up 0.1% to 2,708.64.

Four of 11 sectors contributed to the rally, with energy shares jumping 1.6%. Other commodity-sensitive sectors such as materials and industrials also reported firm gains.

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The biggest laggards on Monday included consumer staples and financials, which fell 0.9% and 0.4%, respectively.

The technology-laden Nasdaq Composite Index rose 0.2% to finish at 7,295.24.

Meanwhile, the Dow Jones Industrial Average fell 38.56 points, or 0.2%, to close at 24,748.07. The blue-chip index is coming off two straight sessions of 200-point gains.

A measure of implied volatility known as the CBOE VIX rose 2.3% to 15.60, which was still well below the historic average near 20. Volatility has been creeping lower in anticipation of strong quarterly earnings from U.S. firms.

The first round of Q1 reports have not disappointed, with major banks and technology companies reporting above-trend growth. Analysts at FactSet are forecasting the strongest quarter of year-over-year growth since 2011.

Cryptos Extend Rally

After initial hesitation, the cryptocurrency market rose on Wednesday as the end of tax season offered temporary reprieve to volatility.

The total market cap for all cryptos in circulation reached a high of $342 billion, according to CoinMarketCap. That was a gain of $19 billion on the day and the highest in almost a month.

Bitcoin cash (BCH) was the biggest gainer percentage-wise, climbing nearly 16% to $880 per coin on the major exchanges. Original bitcoin (BTC) advanced 3.4% to $8,190. However, its total share of the market fell below 41%.

Other major cryptocurrencies also contributed to the rally, with Ethereum adding 3.3% to $521 and Ripple XRP gaining 7.6% to settle at $0.71.

There was no immediate catalyst for the recovery, although tax relief may have played a role. The IRS extended its deadline for U.S. tax filing by one day after servers overloaded on deadline day.

Americans cryptocurrency holders may have owed as much as $25 billion in capital gains taxes, according to Tom Lee of Fundstrat Global Advisors. However, data from Credit Karma showed that less than 100 of its 250,000 filers have reported cryptocurrency-related capital gains.

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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4.5 stars on average, based on 332 rated postsSam Bourgi is Chief Editor to Hacked.com, where he specializes in cryptocurrency, economics and the broader financial markets. Sam has nearly eight years of progressive experience as an analyst, writer and financial market commentator where he has contributed to the world's foremost newscasts.




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Analysis

Pre Market: Short-Covering Bounce Continues but Markets Look Vulnerable

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Stocks continued to drift higher gradually but relentlessly, as sentiment is still improving, quarterly earnings have been a tad better than expected so far, while the oversold momentum readings that developed in March are now erased.

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S&P 500 Futures, 4-Hour Chart Analysis

While we maintained a slight bullish bias amid the choppy consolidation, and the major US indices left the triangle patterns on the upside, the rally is far from being convincing, and we think that it’s time to look for entry points to trade the short side.

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Shanghai Composite, 4-Hour Chart Analysis

Trading volumes have been progressively declining as stocks rose, the momentum of the advance has also been suspicious, and Asian and European markets are still in much worse shape than their US peers, despite today’s early rally in most markets, with the Shanghai Composite actually breaching its February low just today, as we warned earlier this week.

As the easing of trade war fears was one of the main catalysts of the rally, the continued back-and-forth announcements between China and the US could rattle the weak trend, even as the escalation of the Syrian situation halted, for now. With the technicals now favoring a downswing, the market could be more vulnerable to negative news, so bulls should keep their stops tight here.

Another Calm day for Currencies as Commodities Jump

Gold Futures, 4-Hour Chart Analysis

Gold is showing surprising strength today, as although the Dollar is weak, safe-haven flows are still negative. Despite that, the precious metal is closing in on its crucial resistance zone near $1360 again, and given the lengthy consolidation phase, a breakout could setup a huge momentum move, especially if the current risk rally fades.

The oil rally also resumed after a brief correction, with the WTI contract reaching the $68 per barrel level for the first time since 2014 before today’s US inventory data. Although commodity currencies are stable, given the bullish backdrop, the performance of the Aussie and the Canadian Dollar is rather disappointing, and that also adds to our suspicions regarding the rally in equities.

The Great British Pound is the most active major fiat currency, but now the Pound is dropping following the miss in both producer and consumer prices, which cooled down rate hike expectations further together with yesterday’s lower than expected wage growth figure.

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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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