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Analysis

The Crypto Correction: What You Need To Know

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In the short span of about 24 hours prices of cryptocurrencies have fallen like a stone. Investors have either given back or taken losses of sizable amounts. Measuring the one-day drop: bitcoin -21%, Ether -29%, Litecoin -29%.

From its December all time high near $20,000, bitcoin has given back more than $200 billion in value. This amounts to more than 80% of the companies on the New York Stock Exchange or Nasdaq. Even for those who have experience-trading crypto, the events of the last few days can challenge nerves.

What is the right plan of action? Possibly no plan at all, by that I mean sitting tight and doing nothing, could be the best plan. What ever you choose, the first thing to do is to shut down your computer and turn off CNBC. These are all entirely emotion driven groups and right now they are making loud negative headlines reminding us of quotes from JP Morgan CEO Jamie Dimon and Warren Buffett.

The same sources are painting a dark case today. These are the very same folks that were gaga over crypto last year while prices were rising. Now these sources are quoting Warren Buffett who predicted with a high degree of confidence that cryptocurrencies will have a bad ending.

If you listen to Christopher Harvey, Head of Equity Strategy at Wells Fargo, you get an even more dire prediction. He recently appeared on CNBC stating that the cryptocurrency price correction could spill over into the overall stock market.

There is a rule of thumb on Wall Street. If you are right 51% of the time, you are considered an investment genius. This means most opinions are wrong at least half of the time. This could be the case with today’s crypto naysayers.

Prices And Business Fundamentals Don’t Always Match

The number of true experts in cryptocurrencies is small relative to the number of investors. That means there is more emotion than usual driving prices in both directions. It is this volatility that keeps certain investors on the sidelines.

But if you have done your research and have a view of the world in 2028 short-term volatility is not your enemy. Warren Buffett, the biggest crypto naysayer is a master of long term investing. During the 2008 financial crisis, when the world was close to the brink of financial disaster, Buffett was standing by with billions to loan Goldman Sachs charging an outrageous 10% rate of interest. There is a lesson for us here.

Don’t Get Distracted By Short Term Issues

Korea is a big market for crypto demand and, along with China has produced headlines threatening to close down cryptocurrency exchanges. I have not dealt directly with any of these so the analysis of others is necessary.

These folks point out the excessive price premiums as evidence of the behavior of bad actors in the game. So any action by governments to clean up the exchanges could produce a better experience for investors. And let us not forget cryptocurrencies are global. There are plenty of exchanges in the world that make markets.

Korea does not have a monopoly on bad actors. The exchange and lending platform Bitconnect, in recent days, announced that it is closing. The company was recently served with a cease and desist order. Ethereum founders had criticized the exchange for their practices that many believe were bordering on a Bernie Madoff style Ponzi scheme.

The Tipping Point Has Been Reached

The jury is no longer debating the verdict. Cryptocurrencies have become embedded in the global economy. According to Google’s Annual Report on Search Facts, bitcoin and cryptocurrencies were the second most important topic in the world during 2017.

Bitcoin is all about fast, anonymous, low cost movement of money anywhere on the planet. Those lofty goals have not yet been achieved but with tens of thousands of businesses now accepting bitcoin including some hefty Fortune 500 companies and with the Bitcoin Lightning Network coming on, bitcoin’s shortcomings are being addressed.

Bitcoin Futures: Acceptance Is Spreading

When I learned that bitcoin futures would be traded in the US by the CME and CBOE, the only question was how long it would be before other countries recognized the legitimacy of bitcoin futures. Well, it didn’t take long. The Hong Kong securities regulators, SFC issued a report on December 11th giving investors a green light.

Within less than a year futures contracts will be available on Ethereum and possibly others.

Ethereum: The Future Is Here

Ethereum has always had a more obtuse purpose. It was never intended as a medium of exchange like bitcoin. For what it is worth, Ethereum is less likely to be singled out by governments and central banks that fear loss of economic control.

Descriptions like decentralized blockchain platform offering smart contracts and driven by Ether require some time to appreciate. Ethereum is open sourced and applications oriented. You don’t need to understand the technology you only need to envision what it can be applied to.

Ethereum co-founder Steven Nerayoff tells us the number of Ethereum projects today is already ten times the number of last year. Here are just two examples.

Unilever

Unilever, the $52+billion food and packaged goods giant, is working on a blockchain based project to better manage its massive global supply chain. So far it is only being tested but consider the size: 10,000 Malawian tea farmers. And this is just the start of their massive corporate wide supply chain. Imagine what this will look like if Unilever starts to take things seriously: stay tuned.

On The Vanguard

Now the $5 trillion Vanguard group is getting the blockchain bug.  They are the investment industry’s low cost provider. Now they are embarking on test to apply blockchain technology for data sharing.

Caveat Emptor

The reality is the cryptocurrencies are embedded in the global economy and likely to grow dynamically for a long while. This doesn’t protect us from short-term events. That is why huge price corrections are so interesting. The Warren Buffett habit of always having deep cash reserves to pounce on opportunity when frightened investors run is a strategy that has worked well over multiple decades.

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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4.4 stars on average, based on 115 rated postsJames Waggoner is a veteran Wall Street analyst and hedge fund manager who has spent the past few years researching the fintech possibilities of cryptocurrencies. He has a special passion for writing about the future of crypto.




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3 Comments

3 Comments

  1. mrmajestic

    January 18, 2018 at 9:53 am

    I like the sentiment of the article. Slightly dodgy spelling and grammar, it jars me a bit when i see elementary spelling errors like “what ever”. I expect the grammar to be on the same level as the rest of the article, higher quality.

  2. incog13

    January 18, 2018 at 11:36 am

    Consider this, though: What happens if the G20 countries all agree to heavily regulate cryptos or outright ban the conversion of cryptocoins to fiat (leaving company blockchains unregulated, though)? I don’t see how the cryptos could recover if they are relegated to the poorer part of the world, with the rogue states, etc.

    Any thoughts?

  3. Chris G

    January 18, 2018 at 6:53 pm

    Bingo

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Analysis

Crypto Update: Coins Settle Down After Weekend Pump & Dump

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While crypto bulls had something to cheer about early on during the weekend following a rally attempt in the majors, the move once again failed to improve the technical setup in the segment, and the top coins quickly gave back their gains. Now, most of the coins are trading near the bottom of their short-term ranges and technicals continue to point to the continuation of the bear market.

Correlations are still very high, there is no sign of a developing bullish leadership, and with none of the key coins showing bullish momentum, bulls are facing strong headwinds. While trading volumes and volatility remain relatively low thanks to the range-trading environment a move below primary support could trigger larger moves in the majors soon.

The negative long-term trends are still in no danger, and although there is still a slight chance of a failed break-down pattern to develop in the market, odds favor a bearish short-term outcome as well. With that in mind, traders and investors still shouldn’t enter positions here, with our trend model being on sell signals on both time-frames in the case of the majority of the coins.

BTC/USD, 4-Hour Chart Analysis

Although Bitcoin is still relatively stable compared to its most important peers, it gave back all of its weekend gains and fell back below the key $3600 support/resistance level yesterday. Now, BTC is threatening with a break-down below the prior sing low, and given the recent weakness, our trned model is now on a short-term sell signal.

While bulls could still be saved by a move above $3850, the failed rally attempts warn of selling pressure, and a bearish continuation is more likely here. Further strong resistance is ahead between $4000 and $4050, with support zones still found near $3250 and $3000, and traders should still not enter positions.

ETH/USD, 4-Hour Chart Analysis

Ethereum shoed relative weakness during the rally attempt this weekend, and it is now very close to a break below the key swing low, which would likely lead to a move towards the key support zone between $95 and $100. The coin remains on sell single son both time-frames, and with a test of the bear market low near the $80 price level seems likely in the coming weeks.

Strong resistance is ahead just above the current price level and near $130, with further zones at $145, $160, and near $180 while a weak short-term support is found near $112, and the coin’s weakness is a negative sign for the whole segment.

Altcoins Still Weak Despite Rally Attempt

STR/USD, 4-Hour Chart Analysis

While none of the major altcoins broke the key short-term support levels, the overall picture remains bearish and we haven’t seen signs of resilience that would indicate a short-term bottom and the resumption of the counter-trend move.

Stellar, which has been among the bearish leaders towards the end of 2018, is once again showing relative weakness while following the trends in the broader market, should the coin violate the $0.10 level, a quick to new bear market lows would be likely, with the $0.09 level being the only lone of defense for bulls.

XRP/USDT, 4-Hour Chart Analysis

Ripple still seems very fragile from a technical standpoint, and a move below $0.30 looks inevitable in the coming weeks, with a likely test of the bear market low near $0.28. The $32 support/resistance level remains in focus, but given the weak rally attempts and the bearish long-term setup, we don’t expect the coin to get back to the $0.3550 level in the coming period.

Our trend model is still on sell signals on both time-frames, with further strong support found near the $0.26 level, with resistance ahead near $0.3750, and in the key long-term zone between $0.42 and $0.46.

LTC/USD, 4-Hour Chart Analysis

Litecoin is back near the key $30-$30.50 support zone after the volatile weekend, and it also looks ready to dip below that zone, even as the short-term trading range is still intact. The steep long-term downtrend is intact despite the recent counter-trend move, and traders and investors shouldn’t enter positions here, with the short-term setup also being bearish. Strong resistance is ahead near $34.50, $38, and $44 with further support found near $26 and $23.

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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4.7 stars on average, based on 445 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

GBP/USD Price Prediction: Bulls Reclaim 1.2900, Eyes Locked on Another Retest of 1.3000

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  • GBP/USD bulls pick up momentum to the upside, following generally positive tone to Theresa May’s Plan B statement.
  • Next upside targets for the bulls should they firmly breakdown 1.2900 again, will be the psychological 1.3000 mark.

GBP/USD throughout the session on Monday remained very much elevated. This came as market participants were somewhat maintaining an optimistic view. All of which heading into the British Prime Minister Theresa May’s speech to the House of Commons, on her Brexit plan b. Of course, this had to be drafted again, given her humiliating defeat at the vote last week, on the initial EU withdrawal plan.

Theresa May Plan B

In terms of her details this time round, she will be going back to Brussels, to seek some amendments to her initial agreement. This needs to be done in order to get a plan through another vote in the commons. Looking at some of the GBP bullish takeaways from this statement; she guaranteed rights for EU citizens at several angles, scraping the application fee EU nationals registering in Britain, discussing the backstop with the DUP this week.

To conclude, PM May appears keen in her language to ensure of a soft-Brexit, rather than one that is hard. All of which supported GBP in its push to session highs, at the time, briefly moving back above 1.2900. The price had given up this area on 18th January, when the bears were reversing the run observed on 17th, where GBP/USD touched to big psychological 1.3000 mark again.

Technical Review – GBP/USD

GBP/USD 60-minute chart. Near-term resistance eyed at 1.2900, with bulls locked in on a retest of 1.3000.

GBP/USD at the time of writing continues to trade around the 1.2900 territory. This price did see a brief period cooling, on touted profit-taking post the statement. Near-term resistance can be seen within this price region, but if convincingly broken down again, then there is decent upside potential. Aside from the supply observed here, there isn’t much in the way of the 1.3000 price region.

Given the renewed optimism around Brexit now, this has assisted in maintaining momentum to the upside for GBP. In terms of support to the downside, a strong area of demand should be noted at 1.2850-25 price region. As can be seen via the 60-minute chart view, this has supported the price since 15th January.

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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4.6 stars on average, based on 112 rated postsKen has over 8 years exposure to the financial markets. During a large part of his career, he worked as an analyst, covering a variety of asset classes; forex, fixed income, commodities, equities and cryptocurrencies. Ken has gone on to become a regular contributor across several large news and analysis outlets.




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Analysis

3 Things You Need to Know About the Market Today

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1, Chinese GDP Growth Slows to Multi-Decade Low

Shanghai Composite, 4-Hour Chart Analysis

When even the strongly PR-optimized Chinese economic releases are showing severe weakness, it’s not at all surprising that the local stock market is in a deep bear market, and even the explosive oversold rally on Wall Street combined with the trade optimism of last week is not enough to meaningfully change the technical setup.

While economic growth slowed to an almost 30-year low on a yearly basis, retail sales and industrial production beat the consensus estimates by a hair, but that wasn’t enough to cause a material rally in equities, with the global sentiment leaning slightly bearish. This week’s most important question will be how risk assets will hold on to their recent gains, with a special attention on China and Europe, which continue to lag behind the US from a technical perspective.

The Shanghai Composite is more than 30% below its bull market highs, while the main European benchmarks are also around 20% below their respective highs, and that’s following one of the strongest short squeezes in history on Wall Street, mind you. The next few days could be crucial for markets, and we now advise caution even for short-term bulls.

2, Stocks Retreat after Friday Ramp with Wall Street Closed

German DAX 30 Index, 4-Hour Chart Analysis

Looking at Europe, the major indices failed to extend their gains from Friday, while US stock futures are also modestly lower after the European close. With the US markets being closed in observance of the Martin Luther King Jr. Day, trading volumes and activity has been predictably low, and things will likely get heated tomorrow, as the earnings season will also continue.

Johnson & Johnson (JNJ) and IBM (IBM0 will report earnings tomorrow, and all eyes will be on their overseas numbers and guidance amid the global economic slowdown. We had some negative reports regarding the US-Chinese trade talks, concerning the sensitive issue of Intellectual Property, and we still think that even though an agreement is likely in the coming months, implementation and enforcement will be borderline impossible.

3, Oil Tests December High

WTI Crude Oil, 4-Hour Chart Analysis

While risk assets, in general, had a slightly bearish half-session crude oil kept on pushing higher following Friday’s move to new correction highs, with the WTI contract entering the resistance zone that capped the December consolidation. The crucial commodity, which has been slightly lagging US stocks from a technical perspective is still squeezing late shorts, but we expect a short-term top very soon, possibly after a stop hunting rally above the $55 per barrel level.

What’s sure, is that we wouldn’t be buyers at these levels, even in light of the OPEC production cut, since over-supply remains a major issue, and the increase in US output continues. That said, the short-term uptrend is intact and the topping process could take a while, but we will keep a close eye on the day-to-day price action following the 25% rally off the December lows.

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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4.7 stars on average, based on 445 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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