Week in Review: Crypto Rally Runs into Resistance as Bitcoin Cash Hard Fork Nears

Bitcoin fork

Cryptocurrency markets engineered an impressive rally through the midweek, with bitcoin cash and XRP posting massive gains on positive speculation concerning hard forks and business adoption, respectively. Over the past 48 hours, markets have lost a combined $8 billion in value, as profit-taking and overbought resistance tempered growth.

In traditional markets, Wall Street’s bulls re-emerged after a disastrous October selloff, with the S&P 500 gaining 3.5% so far this month. A divided Congress has fueled speculation that the Republicans won’t be able to implement sweeping reforms that could impact big business.

Crypto Rally Softens

The crypto markets were a sea of red Friday, extending a 48-hour retreat that knocked the majors from overbought territory. After gaining as much as 53% week-on-week, bitcoin cash had pared its seven-day advance to 27%, according to CoinMarketCap. BCH was last seen trading at $566, down sharply from a peak near $640 earlier in the week.

XRP also witnessed broad declines in the latter half of the week, paring its seven-day gain all the way down to 9%. The so-called banker’s cryptocurrency is back below $0.5000 at the time of writing.

Bitcoin was late to the BCH-inspired rally but still managed 18-day highs on Wednesday. The largest cryptocurrency by market cap has given back most of those gains and currently resides below $6,400.

The cryptocurrency market cap is currently valued at $212.2 billion, down from highs near $221 billion on Wednesday but well above week-ago levels. Daily trade volumes are back below $14 billion after hitting highs of $17 billion on Wednesday.

Stock-Market Bulls Make Their Return

U.S. stocks made big gains this week, adding to an already impressive November start that has contrasted sharply with the previous month. As of Friday, the large-cap S&P 500 Index was on track for a weekly gain of 3%.

Most of the gains occurred on Wednesday following the U.S. midterm elections, which saw the Republicans widen their majority in the Senate but give up control of the House. A divided Congress, it is believed, could force the Trump administration to compromise on a number of issues ranging from trade to immigration.

Stocks are coming off their worst month in at least seven years as mixed corporate earnings, elevated trade risks and slowing global growth undermined the bull market. The dramatic selloff pushed the major indexes to the brink of overt correction, with the CBOE VIX Volatility Index reaching its highest level in eight months.

Oil Enters Bear Market

Crude prices hastened their decline this week, with the U.S. futures benchmark Friday tracking its tenth consecutive down session on fears that global supplies will offset demand even with Iran sanctions in place.

U.S. West Texas Intermediate (WTI) broke below $60 a barrel Friday for the first time since February and is down 22% from last month’s multi-year high. With the loss, WTI has officially entered bear-market territory, which is defined as a loss of 20% or more from the most recent high.

Members of the Organization of the Petroleum Exporting Countries (OPEC) are meeting in Abu Dhabi this weekend to review current production strategies and decide whether a shift in output levels is warranted. Saudi Arabia and Russia, which is not part of the cartel, have already expressed plans to raise output to account for the loss of Iranian barrels.

The Week Ahead

The hard fork of bitcoin cash is scheduled to take place Nov. 15, with several exchanges already announcing support for the split. BCH holders on Coinbase, Binance and others can expect a one-for-one distribution of the new BCH token relative to their holdings 1-2 hours before the hard fork takes place.

Economic data are also in the spotlight next week, with the U.S. Department of Labor scheduled to report on the latest inflation numbers. The annual consumer price index (CPI) is forecast to reach 2.4% in October, up from 2.3% the month before. Higher inflation all but guarantees that the Federal Reserve will continue raising interest rates in December. The Fed implied as much Thursday when it voted to keep interest rates on hold but acknowledged broad improvements in the labor market.

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.

Chief Editor to Hacked.com and Contributor to CCN.com, Sam Bourgi has spent the past nine years focused on economics, markets and cryptocurrencies. His work has been featured in and cited by some of the world's leading newscasts, including Barron's, CBOE and Forbes. Avid crypto watchers and those with a libertarian persuasion can follow him on twitter at @hsbourgi