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RIP Repeal & Replace

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The political situation in the United States just went from bad to worse and I’m not even talking about North Korea, I’m talking about something the market cares about much much more, legislative reform.

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The window of opportunity to repeal and replace Obamacare has now closed on the White House as Congress shut out the draft. Speaking as a person who has family in the United States I can tell you that the price for medical insurance and treatment is currently ridiculous. Most politicians agree that it needs to be changed but few can agree on how.

For now, the plan to fix America’s healthcare has been tabled as the government looks to focus on something that the stock markets care about most, reforming the tax code.

@MatiGreenspan
eToro, Senior Market Analyst

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Market Overview

As escalation continues between North Korea and the USA, many analysts confuse the surge in Gold and stronger Japanese Yen as a flight to safety. Though these analysts love to group assets into bundles and assign a single narrative, all movements can easily be explained independently.

Correlation =/= causation!!

The fact is that the markets have not shown any strong signs of correlating to the warmongering rhetoric of the aforementioned leaders. They have been batting insults at each other constantly over the last few weeks, yet the stock markets remain higher than they were since this started despite two missiles flying over Japan.

As we can see, on the days of both missile tests (yellow circles), the Dow Jones went up.

The Japanese Yen strength sometimes does indicate a flight to safety. However, in this case, it’s probably better to attribute it to the snap elections that were called yesterday in Japan. Prime Minister Shinzo Abe is a man who tries forcefully to weaken the Yen. The prospect that he may be replaced could certainly change the outlook quite drastically.

The surge in Gold is no big surprise either. The shiny metal has been one of the best performing assets since the beginning of the year and though the timing of yesterday’s surge correlates loosely with the DPRK’s statement it also correlates with a surge in Crude Oil, which began three hours prior.

Notice how the blue line began its journey up well before the white line and well before NK’s threats to down US planes.

The surge in Oil is most likely due to the expectation that the Kurds in Iraq have overwhelmingly voted for independence. The ballots are still being counted but so far it seems very strongly in favor of a yes vote.

Modest declines in the US Stock markets should be seen as a reshuffling of investor portfolios. The surge in Oil sent the energy sector up by about 1.3% while tech stocks fell about 1.4%.

Yellen Tonight

Thought this will not be an official FOMC statement, it will be important for the markets. The speech is titled: Inflation, Uncertainty, and Monetary Policy

In her last press conference, Yellen admitted that she does not fully understand inflation. According to the Fed’s best models, they should be hitting their target of 2% by now but are still coming up short.

Today’s speech should give us some insight into the Fed’s next move. Expectations of when the next rate hike will be are shifting at a rapid pace!

In this chart, we can see the implied probability of a rate hike in the December meeting going from 22% on September 7th all the way to 63% today.

So much for forward guidance!

Crypto Without China

Yesterday we saw some welcome surges in the alternative market. The question of course is where do we go from here?

We know now that most volumes from China have been shut down or shifted to neighboring countries. The loss of 13% of volumes is not insignificant but also not a show stopper.

In this graph from Cryptocompare, we can see that at the beginning of the year China was indeed the driving force of this market. However, by March the US and Japan have pretty much taken over.

The great experiment of bitcoin is now taking place in Japan where, as of April it has been declared as a legal currency and is now accepted in many stores throughout the country.

We also await news from Russia, where the Finance Ministry and the Central Bank are already drafting a law to legalize cryptocurrencies by the end of the year.

One more chart for you…

This shows us the total value of all cryptocurrencies in circulation. The black line extends from the peak on September 2nd until today.

As we can see the black line has now been broken. So according to technical analysis on this chart, the breakout could certainly indicate the beginning of a new trend depending on how things progress.

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 (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 69 rated postsSenior Market Analyst at Etoro.com.




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  1. embersburnbrightly

    September 27, 2017 at 7:21 am

    Very good analysis on all fronts; thank you!

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Analysis

Crypto Update: Ethereum Tops $700 as Short-Term Sell Signals Pop Up

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The major cryptocurrencies are having another strong session, with all of the top 10 coins sporting gains, adding more than 5% on average since yesterday. The largest digital currencies are trading in clear short-term uptrends, with the broad declining trendlines also being broken in most cases.

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That said, the short-term momentum indicators are overbought with regards to altcoins, and now several majors triggered short-term sell signals following the first signal by IOTA yesterday. While this doesn’t mean that traders should exit all short-term positions here, taking some profits and/or setting tighter stop losses is advised, as there will likely be opportunities with much better risk/reward profiles to re-enter the market.

BTC/USD, 4-Hour Chart Analysis

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Bitcoin finally topped the $9000-$9200 resistance zone after a period of relative weakness, further boosting the already positive overall picture. The momentum of the move is still not stellar, but the coin is still not severely overbought, and although a deeper pullback is still likely soon and short-term traders shouldn’t open new positions here, a test of the $10,000 level is still possible in the coming days. The long-term setup is clearly bullish, and investors could still add to their holdings during the short-term pullbacks, with further support found at $8400.

ETH/USD, 4-Hour Chart Analysis

Ethereum continued to rally, despite the already overbought reading, and now the coin is severely overbought, and a correction is very likely in the coming days, so short-term traders should exit their positions or use tight stop losses here. We expect the rally to continue after a correction, and long-term investors should hold on to their coins. Resistance zones are ahead near $735 and $780, while primary support is between $625 and $645.

Altcoins Overbought but Uptrend Intact

XMR/USD, 4-Hour Chart Analysis

While correlations are getting lower and lower among the major coins, which is a bullish sign, most of them are already overbought from a short-term perspective. Although further gains are still possible, chasing those coins higher here is not a good strategy, even as the long-term setups remain encouraging.

Litecoin, ETC, and NEO are not severely overbought yet, while Ripple, Stellar, and Cardano are already in short-term corrections clearing the overbought readings, but traders should be cautious with Dash, EOS, Monero, and IOTA as they are ripe for a move lower.

Featured image from Shutterstock

Disclaimer:  The analyst owns cryptocurrencies. He holds investment positions in the coins, but doesn’t engage in short-term or day-trading, nor does he hold short positions on any of the coins.

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 231 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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Analysis

Long-Term Cryptocurrency Analysis: Bitcoin and Ethereum Break-Out of Declining Trends

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The altcoin-led rally continued since our previous look at the long-term charts, and the major coins all confirmed a new short-term uptrend. Most of the largest digital currencies also broke out from their broad declining trends, as the total value of the segment is now more than 50% above the level around the correction low.

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BTC/USD, Daily Chart Analysis

The overall picture remained positive, with only Bitcoin’s weakness causing headaches for crypto bulls, as the most valuable coin is hovering close to declining trendline that dominated trading throughout the first quarter of the year.

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Despite the short-term weakness, BTC is still among the stronger majors from a long-term perspective, and with the secular uptrend clearly being intact, long-term investors should hold on to their coins and add to their holdings on the short-term pullbacks.

Crucial resistance is still just ahead between $9000-$9200, with further levels at $10,000 and $11,300, while support is found near $8400, $7650, and in the $6150-$6250 zone.

ETH/USD, Daily Chart Analysis

Ethereum built upon its recent relative strength, and the coin broke out convincingly above the declining trendline, and reached the next key resistance zone between $625 and $640 before the momentum of the move stalled.

While there are still several strong zones ahead, with the closest ones near $725 and $845, barring a quick move back below the declining trendline, the coin should continue the advance. With the long-term MACD still just in neutral territory, long-term investors could add to their holdings during short-term corrections, with key support levels at $500, $450, and $400.

(more…)

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 231 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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Altcoins

Multi-Week Rally Continues as Cryptocurrency Market Surpasses $400 Billion; Bitcoin Cash Up 16%

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The cryptocurrency market’s jaw-dropping rally continued on Monday, with the total value of all coins surpassing $400 billion for the first time since early March.

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Bitcoin Cash Leads Market Higher

Bitcoin cash has dominated the headlines recently amid a series of oversized gains. BCH was the undisputed leader on Monday, surging 16.3% to $1,433, its highest since mid-February. The cryptocurrency added a staggering 87% over a five-day stretch, bringing its total market capitalization to $24.3 billion.

While there was no immediate catalyst for the rally, an upcoming hard fork of the BCH protocol has been cited as the most compelling force driving prices higher. BCH, the world’s fourth-largest cryptocurrency, will undergo a split on May 15. The update, known as Bitcoin ABC, will quadruple the BCH block size from eight megabytes to 32 megabytes. Advocates say this will heighten adoption in retail settings.

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By comparison, bitcoin’s block size is a mere 1 megabyte, although efforts are underway to boost scalability. (Interestingly, Satoshi Nakamoto probably conceived of a maximum block size to keep the blockchain from splitting.)

However, others have accused BCH advocates of artificially inflating the cryptocurrency. Much of the criticism has been levied at Antpool, a large mining group that is burning bitcoin cash on a daily basis, potentially reducing its total supply.

The Antpool network announced last week that it confirms more than 8% of all bitcoin cash transactions. The announcement prompted a 25% surge in BCH prices heading into the weekend.

$400 Billion

Bitcoin cash has been at the center of a much larger cryptocurrency rally that shifted into higher gear on Monday. Cryptocurrencies added more than $8 billion in market cap, bringing their total value to $401.7 billion.

The altcoin surge has diminished bitcoin’s market share to less than 38%, the lowest since mid-February. The total value of all coins not named BTC rose $7 billion on Monday to $249.8 billion. The total crypto market, including bitcoin, bottomed at almost exactly that level earlier this month.

Outside of BCH, most of the large gainers on Monday were cryptocurrencies ranked outside the top-ten by market cap. IOTA rose nearly 5% to $2.13, Dash added 7.4% to $503 and bitcoin gold gained 16.8% to reach $77.36.

Total trade volumes amounted to $22.1 billion, which is considerably lower than the most recent peak. However, volumes are up substantially compared to last month, when daily turnover was roughly half of the current level.

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 348 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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