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Analysis

Why Prominent Bitcoin Researchers Perceive Chinese Exchange Ban Positively

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Earlier this week, the People’s Bank of China (PBoC), the Chinese government, and its financial regulators have officially requested local bitcoin exchanges and trading platforms to halt their services by the end of September. OKCoin and Huobi, two largest exchanges in China, were granted leeway to operate until the end of October.

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Throughout the past two weeks, amidst anticipation on the nationwide ban on Chinese exchanges, bitcoin price fell from $4,100 to $2,950. But, as soon as the ban was finalized and was announced by state-owned finance news publication Caixin, bitcoin price rebounded from $2,900 to $3,850. Analysts including WhalePanda noted that many traders were looking to buy the dip as bitcoin price dipped below the $3,000 mark.

The vast majority of analysts perceive the major drop in bitcoin price as a result of the nationwide ban on Chinese bitcoin exchanges as an overreaction from traders. China only accounted for around 10 to 13 percent of global bitcoin trades prior to the ban and thus, the ban should really have only affected 10 to 13 percent of traders. Yet, speculators in the US, Japan and South Korea panic sold as rumors surfaced, leading to a major correction on bitcoin price.

Still, prominent bitcoin researchers including Tuur Demeester, long-time bitcoin investor and editor in chief at Adamant Research, explained that in the long-term, the exit of the Chinese bitcoin exchange market could be positive for bitcoin. More to that, he explained that even a nationwide ban on bitcoin itself, or bitcoin transactions, could positively affect the global bitcoin market.

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Demeester noted that if the Chinese government decides to censor bitcoin transactions, hashrate will decline and cause slower transactions. He emphasized that it will most likely cause major problems for BitcoinCash because most of its mining activities are conducted by Chinese mining pool operators.

But, Demeester also explained that China’s censorship of bitcoin will also lead to rapid emergence of decentralized exchanges (peer to peer trading platforms), bitcoin mixing tools, tor and satellite nodes, which will drastically improve privacy and security measures for bitcoin users.

In the past two weeks, the Chinese government has banned initial coin offerings (ICOs) and bitcoin trading platforms. Local financial regulators clarified that they do not intend to ban bitcoin as a whole and some analysts in Beijing expect the bitcoin exchange ban to be temporary until the PBoC releases a licensing program for trading platforms.

However, key figures within the cryptocurrency sector that were in China amidst the controversial ICO and bitcoin exchange ban including Simon Dixon revealed the possibility of the Chinese government banning bitcoin as a whole. Although the rumor or the source remain unverified, BnkToTheFuture co-founder and CEO Simon Dixon stated:

The report remains unverified and unconfirmed by local sources and trusted news publications such as Caixin. But, in consideration of China’s unpredictable nature, it is difficult to dismiss the premise in which the government pursues a general ban on bitcoin itself, as it did in 2013.

There are several analysts that believe the report is true and that a ban on bitcoin transactions could come in effect. While it is hard to imagine how such a policy and regulation would be implemented, the Chinese government’s strong restriction on bitcoin could completely isolate the Chinese market from the global bitcoin industry.

Already, traders have begun to move out of China to Japan and South Korea. Overnight, Japan has become the largest bitcoin exchange market in the world, overtaking the US. China’s ban on bitcoin exchanges will likely allow Japan and Hong Kong to evolve as new powerhouse markets within the global bitcoin market.

Some speculate that if Chinese President Xi Jinping becomes re-elected in November of 2017, President Xi, who is widely known as an avid advocate for free markets, could indirectly encourage local financial regulators to re-enable bitcoin trading and other cryptocurrency-related activities such as ICOs.

As cryptocurrency investor Jon Creasy wrote:

“My prediction is this: as soon as President Xi Jinping is reelected — and he will be — conservative, free(er)-trade legislation will be put in place, and Bitcoin exchanges will be reinstated. In fact, I wouldn’t be surprised to see the Chinese government encouraging certain exchanges and cryptocurrencies, once this legislation hits. NEO already seems to be in their good graces.”

Not only will the ban on bitcoin exchanges strengthen other well regulated markets such as Japan and South Korea, it will also lead to the emergence of more advanced peer to peer bitcoin markets and decentralized trading platforms.

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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3.4 stars on average, based on 3 rated postsJoseph Young is a finance and tech journalist based in Hong Kong. He has worked with leading media and news agencies in the technology and finance industries, offering exclusive content, interviews, insights and analysis of cryptocurrencies, innovative and futuristic technologies.




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2 Comments

2 Comments

  1. FalconX

    September 17, 2017 at 8:26 pm

    More Power to the People. Bitcoin is going to explode even more once China gets back in the game.

  2. Lakshmana

    September 18, 2017 at 12:56 am

    Good read, thank you for this one, Joseph.

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Analysis

More Chance to Go Up for Litecoin

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Litecoin short term outlook is quite positive, while in a longer term, it’s somewhat mixed. Shortly, the digital coin may face a very strong resistance at $141, being currently priced at $140. As Dmitriy Gurkovskiy, Chief Analyst at RoboForex, says, Litecoin already tried to test this level earlier this week, but did not succeed.

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In the mid-term Litecoin is trying to break out the current range, and in case it finally manages to break out $141 and stay above, it may go up to $168. Before reaching this target, however, another downtrend may be formed, with Litecoin plunging to the support at $114 again. If the bears succeed in breaking out this level, too, another sell-off target will be at $87.

Current outlook, however, is mostly positive, with the key support being at $114 and the key resistances at $141 and $168. The MACD on D1 is in its negatives, but is going up, issuing a buy signal, while the Stochastic is in the positive area and confirms its buy signal, already issued some time ago.

Fundamentally, Litecoin has got much support this week. The market started buying out the coin once the news on the token being listed at Korbit appeared. As the recent reports say, the crypto started being traded on Korbit yesterday, while withdrawal should be available starting today, Apr 19. This is important for Litecoin: first, Korbit is one of the oldest and most reliable exchanges in Korea; second, as we have already stated a few times, if the crypto becomes widespread across multiple exchanges, its liquidity gets boosted, while the accessibility simplifies the transaction processes.

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Korbit decided to hold a contest, with the top 6 LTC/KRW traders getting prizes in Litecoin (the winner gets LTC 50, the runner-up will walk away with LTC 25). Meanwhile, Litecoin being available on Korbit also helped the crypto to rise on Bitfinex.

Currently, Litecoin is one of the most volatile currencies, mostly because of it always being in the news, which does good to its promotion. As such, it was announced a few days ago that LTC would be used as a payment method, and TenX already started developing a prepaid card for that purpose.

By: Dmitriy Gurkovskiy, Chief Analyst at RoboForex

Disclaimer
Any predictions contained herein are based on the authors' particular opinion. This analysis shall not be treated as trading advice. RoboForex shall not be held liable for the results of the trades arising from relying upon trading recommendations and reviews contained herein.

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

Bitcoin Prices and Whale Sightings: Evaluating the Latest Trends

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Bitcoin’s value has skyrocketed 20% over the past eight days, but some say the upward trajectory isn’t as linear as it should be given the length of the most recent correction. The market’s sudden gyrations have left us with only one explanation: the bitcoin whales are back.

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Whale Spotting

It has been reported that the so-called bitcoin whales (those who hold oversized positions in the digital asset) dumped $100 million worth of BTC in less than 24 hours. For example, the anonymous balance of wallet 3D2oetdNuZUqQHPJmcMDDHYoqkyNVsFk9r declined by 6,500 BTC on Tuesday, which is equivalent to $50 million. As a result, bitcoin fell more than $200 on the major exchanges in just a few minutes.

Just one day earlier, bitcoin’s third-biggest wallet shed 6,600 units of the virtual currency at an average price of around $8,026.

Interestingly, a whale may have been responsible for the initial spike in BTC just one week ago. As we reported, a large order on Bitfinex triggered the initial spike in BTC as prices crossed $7,000 on the exchange. For the next two days, bitcoin would surge double-digits to breach $8,000 for the first time since late March.

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Investors are also keeping tabs on a high-profile whale based out of Tokyo, Japan. Nobuaki Kobayashi is in the process of liquidating billions of dollars on behalf of Mt Gox creditors. At last check, the trustee had sold about $400 million in bitcoin for an average sales price of $10,105. He’s expected to offload another $1.9 billion.

Speculation Grows

While advocates of bitcoin’s long-term value have barely flinched amid the latest downturn, speculators all but disappeared from the market. A simple analysis of Google search trends also reveals that laypeople have been losing interest in digital currencies since early February.

All that could be changing.

Cryptocurrencies have added nearly $100 billion to their market cap over the past week, with bitcoin doing much of the work. This appears to have compelled bitcoin’s large owners to sell their assets for reasons that are not yet unclear.

Of course, the multiple selloffs could just be coincidence or a bet that future prices will fall again. In the eyes of leading analysts, the latter appears to be less likely.

The head of Pantera Capital, who rarely predicts bitcoin’s future and is thus never wrong when he does, recently told clients that the digital currency has already bottom. Appearing on CNBC’s Fast Money, Dan Morehead said bitcoin’s bear market was just about over and that prices would continue rising from here on.

That said, choppy trading for bitcoin is hardly unusual and has come to be expected in a market that still lacks maturity. Whales or not, recent moves have made it harder to gauge the strength of the recovery.

That’s the message Thomas Lee of Fundstrat Global Advisors recently shared, according to Bloomberg.

“I think it feels off right now because, you know, we’ve been on a down trend since December, and now, even though the volatility hasn’t changed much, it’s hard to tell if bitcoin is trying to stage a recovery or if it’s continuing its down trend,” he said.

At the time of writing, bitcoin was valued at $8,175, having gained 3% over the past 24 hours.

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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Recommendations

Trade Recommendation: The Travelers Group

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Technical Overview

  • On January 23, The Travelers Company’s stock jumped nearly 5% after releasing their 4Q17 earnings (violet arrow in Figure 1). Then, during the “Feb Correction”, the stock pulled back to wipe out the entire gain, and more, over a couple of trading sessions.
  • Since then, the stock has been trading within a 7.5% trading range ($133 – $143.50 trading range – orange horizontal lines). In comparison, the broader markets have been swinging by more than 10% after the Feb 9 low was set.
  • More recently, over the past month, the stock has traded within an even tighter trading range, finding support at $135 and resistance at $140. On one hand, a key resistance continues to push prices lower upon every retest (red trendline and arrows). On the other hand, the stock has bounced off of a 6-month support over half-a-dozen times (green trendline and arrows).
  • The stock has been a laggard over the last 8 trading sessions, while markets recovered significantly and broke above key resistance levels.

Figure 1. TRV Daily Chart

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Implications

  • The stock’s tight trading range has resulted in options selling at below 20% IV for some expiries.
  • A break below the 6-month support is expected to result in a swift leg down, especially if the $133 level gets broken immediately after that.
  • A break above the red trendline likely to have the stock retest $140.

Outlook

  • Neutral with a bearish bias while the stock is trading between the red and green trendlines.
  • Bearish if the stock breaks the green trendline (currently at nearly $136).
  • If the stock breaks the red trendline, outlook will remain neutral, however with a bullish bias, as the stock will likely move higher by at least $3-$4 to retest $140.

Trading Recommendation

  • Buy the May, strike 135 put for roughly $2.40 – $2.60 or short the stock once the green trendline is broken. Use a close below $136 for a confirmation.  At the time of writing, at 11:20 am EST on April 18, the put is trading at $2.40 and the stock at $136.05.
  • Target: Cover stock/sell put when the stock reaches $130.
  • Stop: Cover stock/sell put if the stock closes above the red trendline (currently at $137.95 and falling by roughly 25 cents/day).

Benefit of Recommended Trade

  • A play on both direction and volatility (in the case of the put purchase).
  • A sloping-down resistance used as a stop, resulting in an improving risk-reward profile of the trade as time goes by.

Disclosure: Have a small put position and may buy more contracts based on the trading recommendation’s guidelines.

Featured image courtesy of Shutterstock. 

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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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