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Market Overview

The Sudsy Crypto Market & Other Financial Bubbles

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As a market analyst who is focused on Cryptocurrencies, many people ask if the crypto-market is a bubble. Yesterday, while amusing my children with actual soap bubbles I managed to gain some unique perspective on how to better answer this question.

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The first thing we need to realize about bubbles is that they only exist given the proper conditions. One of my favorite economists on Twitter, who goes by the username @TheBubbleBubble, has been warning about financial bubbles since before 2008 and recently posted this graph showing how bubbles usually form when financial stress is low.

This feeling that the economy is doing great represents the soap in our analogy. As we can see, financial stress is at extreme lows right now.

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The amount of cash that’s been pumped into the system over the last decade represents a reservoir of water. With soap and water both in abundance, I’d say we have enough solution at this time to create as many bubbles as we need.

The third ingredient of course, is hot air and there’s certainly no shortage of analysts out there ready to talk up their asset of choice.

The second thing I noticed is that bubbles are never lonely. A single breath can easily produce 10 or 20 bubbles of different sizes. Not only that, you’ll also notice the formation of hundreds of microbubbles known as suds.

Each tiny bubble, similar to a penny stock or a new digital token, will probably never amount to much but has the potential to become a monster.

The funny thing is, you never really know what the growth potential of a specific bubble is just by looking at it. Sometimes you can catch a large bubble with the wand, blow on it, and watch it get even bigger. With the right equipment and enough solution, there really is no limit to how big a bubble can get.

@MatiGreenspan
eToro, Senior Market Analyst

 

Please note: All data, figures & graphs are valid as of January 2nd. All trading carries risk. Only risk capital you’re prepared to lose.

Traditional Markets

By the time Wall Street rings them first opening bell of 2018, few will be thinking about Kim Jong Un’s upgraded nuclear desk. What more likely be on the minds and TV screens of traders this morning are the protests in Iran.

With the war in Syria seemingly nearing its end, the last thing we need is another conflict in the Middle East. The most direct impact this would be on the price of oil. Since Oil is a highly speculative market, if we do see supply disruptions in the third largest OPEC producer it could send the price even higher.

Oil has been holding well above $60 a barrel and if we go much higher, technical analysts might start to view the upward momentum as a new trend.

Generally speaking, stocks do well when the price of oil is steady. Wild swings have a way of destabilizing other markets.

On a side note, it is interesting to see the correlation between economic issues in Iran and a recent rise in Bitcoin volumes in the country. On the week of December 23rd, local bitcoin volumes peaked at 86 BTC.

Even more than the situation in Iran, American investors will be thinking about the new tax laws that went into effect yesterday and how they’ll impact various sectors.

Asian markets have opened the year on a positive note, with gains of 1.5% in Chinese Stocks. Europe on the other hand is looking a bit red at the open.

Also, as I’m writing we can see another dip in the US Dollar, which could be significant if the move is sustained.

ETH Vs XRP

A fierce battle is playing out in the crypto world at the moment between Ethereum and Ripple.

While Bitcoin has been declining in market share, Ripple was on a massive run. The logic is that if bitcoin fails to replace the banking system, the current institutions may just use the Ripple network to integrate blockchain technology, speed up transactions, and lower prices.

On December 29th, the total supply (market cap) of Ripple’s XRP tokens surpassed that of Ethereum making it the second most valuable cryptocurrency network.

This morning, Ethereum is fighting back with its own price surge and seeing a fresh new all-time high of $882.

XRP and ETH are now fighting neck and neck for the number two spot. We can probably expect some great memes coming out today.

BTC Japan

Without a doubt, bitcoin is big in Japan. After gaining legal status in March, Japanese citizens have been trading the new digital asset like crazy.

The Japanese are among the most zealous traders in the world and according to one economist that I spoke with in October 2016, Japan accounted for more than 90% of total Forex volumes at that time.

According to a recent report from Deutsche Bank, a lot of those volumes have now moved to bitcoin. Analysts at the Japanese Investment bank Nomura, one of the world’s largest financial institutions in the world, are now projecting that the rise in bitcoin may actually boost the Japanese GDP by as much as 0.3%.

This may not sound like much but it actually represents massive economic growth. Arguably, this factor may have an even greater effect on the economy than the ridiculous amounts of stimulus that have been deployed by the Bank of Japan in recent years.

For now, it seems that Japanese citizens are hodling. Meaning, they’re not selling the bitcoin to realize their gains but letting them ride. However, the fact that individuals were able to vastly increase their net worth, even if it’s just on paper, has encouraged consumers to spend money.
.
As the price of bitcoin looks for a floor, the thing that I want to watch is volumes in Japan. These guys are no dummies, so only if/when they feel confident the price will rise again will they start pouring back into the market.

For now, Japan is only creating about 35% of global BTC volumes. Far from the 68% they were doing on November 26th. A rise in Japanese volumes together with a notable spike on bitcoin could be a great signal to re-enter the market.

Let’s have a fantastic 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.

Cryptocurrencies can widely fluctuate in prices and are not appropriate for all investors. Trading cryptocurrencies is not supervised by any EU regulatory framework.

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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Market Overview

Crypto Proxy Stocks Follow Market Lower on ‘Bloody Tuesday’

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“Bloody Tuesday” wasn’t just limited to cryptocurrencies, but stocks with direct and indirect exposure to the digital asset class. These once celebrated companies posted sharp losses on Tuesday alongside the world’s biggest cryptocurrencies.

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The Decline of Crypto Proxy Stocks

In terms of losses, shares of Riot Blockchain Inc. (RIOT) were among the hardest hit. The firm plunged 16.5% to $18.28, the lowest since early December. Riot  is the first pure play blockchain company to be listed on the Nasdaq.

LongFin Corp (LFIN), a U.S.-based alternative finance company, shed 8.5% to close at $39.96.

Meanwhile, tZero parent Overstock.com (OSTK) plunged 11% to $70.25 for its lowest settlement in nearly a month.

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Other crypto proxy stocks to fall on Tuesday included chipmaker Nvidia Corp (NVDA), Canada-based Hive Blockchain Technologies Ltd. (HIVE) and Eastman Kodak Co. (KODK), the imaging company that has its eye on the mining enterprise.

These companies are no stronger to crypto-related volatility, having routinely been dragged around by the performance of bitcoin. Losses for these stocks were practically inevitable on Tuesday as the global cryptocurrency market declined by as much as $190 billion.

Virtually every cryptocurrency in the top 100 was down on rumblings that South Korea was considering extreme measures to eliminate speculation from the cryptocurrency market. At the time of writing, authorities were still weighing proposals to rein in speculation on domestic exchanges. Seoul announced Monday it would decide on a next course of action after “sufficient consultation and coordination of opinions.”

The Future of Crypto Stocks

Although it’s difficult to project where the crypto equity class is headed, it’s important to distinguish established technology companies from those looking to pivot into digital currency for some publicity. The likes of Overstock.com and Nividia are certainly some of the more promising businesses to venture into cryptocurrency. However, the lesser-known players will still be snatched up by investors given the relative dearth of traditional assets tied to cryptocurrency.

That being said, institutional investors are starting to get a taste of cryptocurrency. Last month, bitcoin futures hit the market, joining a small list of traditional assets with direct exposure to the crypto market. In addition to futures contracts, Grayscale operates the Bitcoin Investment Trust (GBTC), which recently launched a 91-for-1 stock split. This means that each investor in the fund will get an additional 91 shares for every one share they own.

GBTC also declined sharply on Tuesday, with the market price per share falling 11.8% to $1,731.50. The fund could be vulnerable to bigger declines on Wednesday as bitcoin prices continue drifting lower. The world’s biggest cryptocurrency touched a session low of $10,047.06 on Tuesday, its lowest since early October.

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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Market Overview

I Have a Dream Today: HK, Oil & Gold Up, ETC and Ethereum

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Today we celebrate the birthday of a true American hero. One who fought for freedom for all in a country that promised the world and delivered nothing.

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“In a sense, we have come to our nation’s capital to cash a check.”

King said in his famous speech, referring directly to the promise of freedom on which the United States was founded but “it is obvious today that America has defaulted on this promissory note…”

Indeed, the United States seems to enjoy writing checks that it cannot cash. Still, Martin Luther King Jr. was quite optimistic. He believed that his people need only demand payment on that check for its promises of freedom to be redeemed.

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By now many of Dr. King’s initial demands have been met but the fight has evolved. Victims of inequality are not necessarily defined by the color of their skin, nor do they reside solely within the borders of the United States.

We must press on in his symbolic shadow and demand freedom for everyone throughout this entire planet that we all call home.

@MatiGreenspan
eToro, Senior Market Analyst

Today’s Highlights

  • Record Run in HK
  • Oil & Gold up on Weaker USD
  • Crypto Atmosphere

Please note: All data, figures & graphs are valid as of January 15th. All trading carries risk. Only risk capital you can afford to lose.

Traditional Markets

The Asian markets have put on a fantastic show so far today. The China A50 index has now surpassed it’s highs from April of 2015 and is now the highest it’s been since 2008.

The gains in China were propelled further by what’s happening in Hong Kong. The founder and CEO of Alibaba, Jack Ma announced that he is considering listing Alibaba shares on the Hang Seng.

Alibaba’s shares in the US currently hold a record for most stocks sales in an IPO and the company’s daily turnover is about 30% of the entire Hong Kong Stock Exchange.

Furthermore, there are rumors that a subsidiary of the Chinese Insurance giant Ping An will be looking to raise $60 Billion from the Hong Kong market in April.

Money comes to money, and as we’ve seen so many times in the crypto market. More activity on an exchange means that everything listed on that exchange can see a boost.

Sinking Buck

The second strongest trend of 2017 was the declining US Dollar. The Dollar Index went from a high of about 103.50 in January to a low of 91.4 in December.

2018 hasn’t been great for the buck either and it’s gotten off to a rather rotten start.

Along with the weakening Dollar comes a strength in commodities. Gold and Oil are priced in USD so they have a very strong reverse corolation.

As we can see here, since Thursday morning the USD has declined 1.8% and Gold has climbed by the same amount.

Though Oil has been a lot more volatile than gold or the buck, it’s strength lately has been astounding. This strong breakout above $60 was certainly unexpected by many…

Don’t get me wrong, oil rising against a weaker Dollar is understandable, but oil rising against more production in the United States is baffeling.

Friday’s Baker Hughes report shows that 280 new rigs came online in the United States over the last year.

Very likely we could see those rigs really get going now that they can get $60+ a barrel for their output.

Crypto Market

It’s easy to make money when everything is rising but when thing get choppy like they are now it can start to get a bit frustrating, especially for beginning traders.

Over the last few weeks, we’ve seen a general pumping pattern where one specific crypto will dominate the market for a few days before flatlining or even pulling back.

Over the weekend, this momentum has been on Ethereum Classic, which went from $31 to $46 in about 60 hours but now may have lost the propulsion.

Ether Classic (ETC) is the hardest crypto for me to explain simply because I don’t see it as useful. It’s not a great store of value and is not meant to be a medium of exchange. So I’m scratching my head trying to figure out why crypto traders latched onto this one.

Of course, if we zoom out a bit we can see the incredible gains of ETC’s younger sister ETH. A platform that has hundreds of projects being built on top of it and currently processes more transactions than any other blockchain.

The present rise in ETC might just indicate that alternative investors are looking for a bit more risk at the moment, and if that’s the case we may see some of the altcoins or even the exotic cryptos gaining a bit. In the chart above we can spot a nice rising trendline (yellow) but if that fails to hold we should have a nice support level just below $900 a token.

Remember: Several of the traditional markets will be closed tonight for the holiday in the USA. Crypto trades 24/7. 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.

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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Market Overview

Asian Market Update – Monday: Asian stocks hits all-time high; cryptocurrencies decline

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punching

Slow morning for cryptocurrencies

The top cryptocurrencies, including bitcoin, ethereum, bitcoin cash, and ripple, all traded slightly lower on the first day of the week, with no significant news coming out to guide the markets.

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Bitcoin was nearly flat at midday in Asian trading; remaining below the $14,000 line that it has been hovering around in recent days.

On the positive side for bitcoin, US-based Kraken Exchange is back up after a system upgrade that was supposed to take only two hours instead lasted for two days.

Ethereum was also down as of midday in Asian trading on Monday, though much of the losses from yesterday were quickly recovered. In terms of technicals, the strong surge in ethereum that started on New Year’s Eve is still intact, as the price continues to form higher lows and higher highs, which is the typical wave-pattern we are looking for in good trends.

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As of midday in Asia, the price of ethereum is still below the $1,400 level. A break above the previous high of $1,420 would indicate a signal a new immediate surge in price.

Ripple XRP, the number three cryptocurrency in terms of market cap, continued to consolidate Monday morning, remaining below the $2 line for the second day. Since reaching its all-time high on January 4, ripple has now corrected by more than 40 percent to its current level.

Main Market Movers – Midday Asian Trading Session

Indexes Value at Midday Daily Change
Japan- Nikkei 225 23,715 0.26%
China-Shanghai Composite Index 3,419 -0.28%
Hong Kong – Hang Seng 31,582 0.54%
South Korea-KOSPI 2,505 0.33%
Australia-ASX 200 6,077 0.12%
S&P 500 E-Mini Futures 2,794 0.17%

Asian stocks reached for new all-time highs on Monday, as the US dollar continued to weaken, boosting both commodity prices and US export-driven industries. The MSCI index tracking shares in the Asia-Pacific region (excluding Japan) finally reached a new all-time high on Monday, as it caught up with its previous high from 2007.

The US stock market has also continued to make fresh gains with the S&P E-mini future rising once again. The uptrend in the S&P 500 has accelerated in a strong way since the beginning of the New Year, proving many bears wrong.

Currencies

The Japanese yen gained 0.14 percent against the US dollar as Tokyo trading ended on Thursday, changing hands at 110.88 per dollar.

The Chinese yuan gained 0.39 percent against the US dollar, trading at 6.438 per dollar.

The Australian dollar added 0.4 percent on the US dollar, changing hands at 1.2585 per US dollar as the Australian trading day was ending.

Commodities

WTI Oil consolidated slightly Monday morning despite the weakening dollar, trading down by 0.08 percent to $64.32.

Brent Crude Oil was flat for the day, trading at $69.80

Gold continued to rise as the dollar declined, adding 0.26 percent to $1,342.

Featured image from Pixabay.

Disclaimer: The author owns bitcoin, ethereum and litecoin. He holds investment positions in the coins, but does not engage in short-term trading.

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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