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Redrawing The Lines

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Shock and horror grip the entire world. Yesterday’s events in Las Vegas have set a new record for human brutality and is a reminder that no matter how far we’ve come as a society, we need to do better.

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My humble request is that each reader of today’s market update does one thing today to help somebody else. Any act of kindness that you can think of. This is the only way to change the world for the better.

@MatiGreenspan
eToro, Senior Market Analyst

 

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Please note: All data, figures, and graphs are valid as of October 3rd. All trading carries risk. Only risk capital you can afford to lose.

Market Overview

We all know that most politicians don’t like to play by the rules. Or rather, they like to rewrite the rules in order to suit their own purposes.

In the United States, they have a process of redrawing lines on a map within a state to benefit the political party who is doing the drawing. This process is known as gerrymandering.

In the state of Wisconsin, a key battleground that frequently decides the outcome of presidential elections, about half of the citizens are Republicans. However, thanks to creative boundaries they win about 66% of assembly seats.

Today the Supreme Court will review this process for the first time since 2004 and possibly pass a ruling. Though the status quo is largely expected to be upheld, one can’t help but hope that action may be taken to ensure that democracy remains democratic.


Dollar is Gaining

The US Dollar continued to climb at the start of this week. Markets are focused on the interest rate decision that the Fed will publish in December. Currently, there is a 70% chance of a rate hike and it’s driving the currently undervalued Dollar upward.

After reaching an extremely low level on September 8th, the Dollar has been on a bullish swing for the past two weeks. The move was spurred largely by the FOMC meeting of September 20th (big green candle in the center of the chart).

The Dollar strength is indeed having a knock-on effect on the commodities, which are priced in Dollars.

Gold has now reached its lowest level since August and Oil fell 2% yesterday. Here we can see both Oil and Gold getting bucked by the US Dollar over the past week.

US stocks on the other hand, which are also priced in Dollars, don’t seem to notice anything. They continue to climb despite deteriorating geopolitics, extreme weather, a national tragedy, and mounting unsustainable US debt.

Both the Dow Jones and the SP500 closed on record highs yesterday and the Nasdaq didn’t do so bad either.

The reason for this extreme move is likely due to the lack of trading activity. The low volatility has a way of influencing prices because each buy order that is made on a market where nobody is selling tends to drive prices upward.

The VIX volatility index has just opened very close to its lowest level ever at 9.31 points.

Crypto Divergence

Yesterday we saw some divergence in the cryptocurrency market for the first time since August. All throughout September, all cryptos were moving together as a pack. Yesterday we saw Bitcoin rise about 1.5% while Ethereum fell by an approximately equal margin.

This morning it seems we’re back inline with the single market though as we see declines across all the top 10 cryptos.

One comforting thing that is on the minds of alternative investors is the headline that Goldman Sachs is now considering to add bitcoin as a tradable asset for their clients. If they do, it would no doubt be a large boost of confidence in the young borderless global currency.

Wishing you an amazing day ahead!

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.

Important: Never invest money you can't afford to lose. Always do your own research and due diligence before placing a trade. Read our Terms & Conditions here.



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3 Comments

3 Comments

  1. mvppvm_07

    October 3, 2017 at 3:56 pm

    Key to the Goldman Sachs approach: Bitcoin as an asset, not as a currency. While crypto traders argue about a store of value comparisons among the “coins”, they (we) have become like blacksmiths arguing about the purity of the horseshoes we put on the animal while the new (old grizzled wise man) decides to buy a car to get around. Goldman Sachs is revving their engine while crypto bellows out the hot air of better horseshoes.
    As always, follow the money.
    As almost never, follow by leading.

  2. embersburnbrightly

    October 3, 2017 at 5:14 pm

    Gerrymandering is ridiculous. The U.S. stock market, when it does finally fall, is going to fall horribly, given its unnatural rise despite all indicators that it should be psusing by now (“irrational exuberance,” anyone? But the main reason for my comment here is to give a hearty second motion to your request: “My humble request is that each reader of today’s market update does one thing today to help somebody else. Any act of kindness that you can think of. This is the only way to change the world for the better.” Indeed, and agreed!

  3. embersburnbrightly

    October 3, 2017 at 5:16 pm

    *pausing, not “psusing”. Perhaps I should have “psused” and proof read that comment before submitting it…

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Bitcoin

Bitcoin Returns to Health After Flash Crash

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The value of bitcoin stabilized Thursday after a flash crash wiped nearly 9% from its value, a sign that investors are getting over the initial fear of regulatory encroachment on their tokens.

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Bitcoin’s Epic Drop

Beginning at around 12:45 UTC, the BTC/USD began an epic decline that continued for 90 minutes until prices bottomed in the low $5,100 region. At its worst, bitcoin was down nearly 9% on the day.

Prices would soon recover, and do so in a big way. BTC/USD regained more than $300 over the next two hours before continuing higher for the rest of the day. At press time, bitcoin is up 1.3% at $5,646, having traded within a $180 range early Thursday.

At present values, bitcoin is capitalized at $94 billion, according to CoinMarketCap. The token peaked above $97 billion last week as it set multiple record highs.

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Bitcoin continues to trade in overbought territory, according to the Relative Strength Index (RSI). As the following chart illustrates, the BTC/USD has been technically overbought on several occasions over the past six months.

As CCN reports, bitcoin wasn’t the only digital currency to experience a sharp drop. Ripple plunged by 12% and Ethereum shed 8%. For bitcoin and ether, the losses would later prove to be a healthy correction after last week’s run-up. The ETH/USD is currently trading around $314.

Ripple is still down roughly 9%, where it is trading near three-week lows.

Bitcoin, ether and Ripple are the world’s top-three digital currencies by market cap. Combined, they’re worth more than $131 billion.

Regulatory Fears Emerge

The plunge came just a day after the U.S. Commodity Futures Trading Commission said it has jurisdiction to regulate bitcoin derivatives. In a report titled A CFTC Primer on Virtual Currencies, analysts at the Commission reaffirmed that bitcoin and others like it are commodities.

The report said:

The CFTC’s jurisdiction is implicated when a virtual currency is used in a derivatives contract, or if there is fraud or manipulation involving a virtual currency traded in interstate commerce.

A commodity is defined in various ways by the CFTC. It can be a physical commodity or natural resource, a currency or interest rate and “services, rights, and interests… in which contracts for future delivery are presently or in the future dealt in.”

Three bitcoin exchanges were listed as examples of permitted cryptocurrency activity. They included TeraExchange, LLC, North American Derivatives Inc. (NADEX) and LedgerX, LLC.

The report also said there was no inconsistency between how it defines cryptocurrency and how the Securities and Exchange Commission (SEC) dealt with The DAO. SEC regulators deemed The DAO tokens to be “securities” under federal law.

There is no inconsistency between the SEC’s analysis and the CFTC’s determination that virtual currencies are commodities and that virtual tokens may be commodities or derivatives contracts depending on the particular facts and circumstances. (CFTC)

As cryptocurrency trading expands in scope, investors can expect a slew of products designed to track the market. The Chicago Board Options Exchange (CBOE) plans to launch its own bitcoin derivatives product next year.

Meanwhile, Grayscale currently operates the Bitcoin Investment Trust, a traditional investment vehicle with shares solely invested in BTC.

Featured image courtesy of Shutterstock. 

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Analysis

Technical Analysis: Bitcoin Dumps and Pumps amid Broad Volatile Correction

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The crypto segment has been in turmoil today, as the most valuable coins turned significantly lower, leading to a mini-panic, but they rallied strongly off their slows as buyers stepped in the second half of the session.

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Bitcoin fell as low as $5100, for a 15% correction top-to-bottom, but it is now trading near the prior short-term support at $5400. As the long-term picture remains overbought, investors shouldn’t open new positions here, but traders could play a likely move towards the $6000 level, although we still advise small sizes, as correction risks remain elevated.

BTC/USD, 4-Hour Chart Analysis

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The other majors were also declining in early trading, led by Ripple, with only NEO and IOTA, holding up well during the sell-off.  Both of the latter coins faded away as the rest of the market recovered, but Ripple continued to suffer. For now, the long-term bullish picture is unchanged for the segment, but BTC’s overbought correction could still cause volatility in the coming period. Let’s see the short-term charts after the busy session.

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Cryptocurrencies

Trade Recommendation: DigiByte

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Based on the daily chart we have a buy opportunity. Possible upward movement is confirmed  by RSI reversal in the oversold zone and MACD histogram. We can use lower time frame for getting a better entry level. If we look at the 4H chart, we can see a bullish divergence at the support level. It gives us a trend reversal signal. MACD supports upward movement. We can place pending orders for buy at 0.00000220 level with stop orders at 0.00000150 level. Profit targets are 0.00000300 and 0.00000450 levels. Also the part of long positions can be left for long run. If you don’t use leverage, recommended trading volume for this trade is up to 5% from your deposit.

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Market: DGBBTC
Buy: 0.00000220
Stop: 0.00000150
Profit Targets: 0.00000300 and 0.00000450

The trading signal is based on Poloniex chart.

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