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Analysis

Tuesday Inferno market report

More turbulence on the markets – and it’s not over yet.

 

We’ll start with a brief sketch of the last week in the bitcoin markets, and then move on to some of the wider factors in play as we eye the next month or so.

 

Bitcoin hit a local low 10 days ago after the crash from $7,400, bottoming at $6,120 (Bitfinex). Since then it has made two successive higher lows, although yesterday’s was only just higher: $6,170 on 11th, before a mini-rally to just under $6,600, and then another fall to $6,203 a few hours ago, after another surprise $200 drop.

 

Moving out to the one-day chart – our preferred timeframe for the bigger picture – we see BTC is drifting in a neutral-to-bearish way. Volatility is decreasing, as is clear from the size of the swings in price over the past seven or eight months. Zoomed out, the bitcoin chart looks like the path of a bouncing ball, losing energy and momentum every time it touches the $6k floor.

 

For all that, we can’t call whether this bear market will end with a bang or a whimper: a final capitulation and hard rally, or a slow attenuation before price gradually picks up. Almost from day to day sentiment changes, oscillating between gloom and excited expectation. Both, clearly, have been misplaced each time – so far.

 

The month ahead

Looking at some of the external factors in play, another decision by the SEC on the VanEck-SolidX bitcoin ETF is due on 30 September. At this point, most traders have probably priced in another delay. The final decision may well be postponed until the spring, though there are no guarantees. That will, as we and many others have commented before, fundamentally change the game in terms of investor confidence and inflow of money.

 

Before that, we have the expiration of CBOE futures tomorrow – something analysts have previously noted as a catalyst for significant downward price movements. Then there is the meeting of MtGox creditors on 26 September with the exchange’s trustee, at which he will update them on the assets held. Creditors will have another month to register their claims. This could potentially see BTC sold by creditors receiving funds back; however, it does mean the full 160,000 BTC held by the trustee won’t be dumped at market price.

 

Thus there are numerous factors that hint at considerable volatility over the coming weeks, likely compounded by the lower than usual trading volumes.

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EdenChain: blockchain protocol focused on practical enterprise use and security

Token: EDN
Price: 1 EDN = 0.06 USD
Bounty: Available
Platform: Ethereum
Accepting: ETH
Minimum investment: 100,000 USD

About

EdenChain is a Korean project that is aiming to build a platform for the enterprises of tomorrow. The ICO hard cap is USD $24 million. Through hardware integration, EdenChain targets a balancing act between leveraging the strengths of public blockchains and a high level of scalability, and meeting the security demands of enterprise companies.

The EdenChain platform allows any user to create a marketplace, attach their assets and trade them using cryptocurrency, all without the need for a third party. They have already introduced their first platform, HelloEden, which includes dedicated support in terms of technology development, as well as in business areas such as legal and marketing/PR.

Protocol – Hyperledger Sawtooth

Hyperledger Sawtooth is considered one of the most promising code bases. Among early companies already using Hyperledger Sawtooth are telecommunications giants Huawei, which is building a decompiler for the software, as well as T-Mobile and Amazon.

Sawtooth includes an advanced parallel scheduler that splits transactions into parallel flows. Based on the locations in state which are accessed by a transaction, Sawtooth isolates the execution of transactions from one another while maintaining contextual changes. This means that when possible, transactions are executed in parallel, while preventing double-spending even with multiple modifications to the same state – providing a substantial potential increase in performance over serial execution.

Main features of EdenChain

  • Parallel transactions via namespace technology allow transactions per second to grow in a linear manner.
  • Secured on-chain and off-chain interoperability enables smart contracts to interact securely with external data sources and modules.
  • EdenChain also aims to provide a comprehensive blockchain and token platform for applications across the board, including IoT, Energy, AdTech, P2P finance, Healthcare and many other sectors.
  • Supports Solidity, currently the most popular smart contract language.
  • Easy integration into existing business via RESTful API.
  • EdenChain has signed a strategic partnership with Tomochain that will allow them to deepen their footprints in Southeast Asia and Vietnam.

Tokens

An exchange listing date for EDN tokens is expected in Q3 2018. The total supply is 1 billion EDN (no more tokens will ever be created) while circulating supply is 400 million EDN.
EdenChain offers a bounty/income – node participants are compensated through rewards for staking their token or running their Eden nodes. Enterprise users can secure their own nodes or use the rewards to offset part of their running costs. The team will also be giving 400 EDN each to the top 5 posts that have been upvoted and shared through social media.

Roadmap

Q4 2018
EdenChain ICO; 3rd Developers meet-up; CleanDeal Service Launch; EdenChain Real Service PoC; Partnership with major blockchain network; Testnet for OpenEdenChain Platform; Custom Coin Issuance Service; EdenChain API Service; Mobile Wallet.

2019 Q1
ICO continues; Blockchain Conference; 4th Developers meet-up; Partnership with major blockchain network; Platform migration to Cloud; E-Oracle Network Launch; EdenChain Optimization; Mainnet Launch.

Conclusion

EdenChain aims to create the best possible solution for solving global and technical business issues – starting with performance and security. Their approach to solving efficiency issues without sacrificing user security could turn their platform into one of the most appealing up-and-coming projects out there. But at the same time, it is extremely ambitious and their attempt to tackle multiple issues and markets all at once could end up being overwhelming.

Resource links

Website
Twitter 
Facebook
Telegram
Reddit

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Friday Inferno market report

Just as two weeks ago the market’s confidence turned to dismay, this week its pessimism was steamrollered with a $400 leap in price. What can we expect from the week ahead?

The main purpose of the market, said American investor Bernard Baruch, is to make fools of as many people as possible. That happened last week with traders’ near-universal confidence that the rally to $7,400 would continue, and it apparently happened again as sentiment turned bearish across the board with the drop to $6,100.

It’s a tough time to be a bitcoiner, especially a new one, given the mixture of hope, dashed expectation and market manipulation we’ve seen in the last couple of weeks. Whether you were long or short, there were surprises, and there can’t be many traders who called both the top and the bottom profitably.

At this point, we’ll zoom out to the daily, where the larger pattern becomes clear.

Since mid-January, when a large proportion of the froth had come off the bitcoin market, BTC has been trading in a tightening wedge. The bottom of that wedge has been the $6,000 zone and just below. Bitcoin has descended to and come off that area no fewer than five times now.

The upper bound of the wedge has fallen from $12,000 down to around $7,000. Bitcoin has risen to this level and then fallen four times.

 

Tightening range

With each oscillation, the swings in price get smaller. If the pattern continues, it will run out of time in the last week of October, when the top and bottom lines cross at around the $6,500 mark. At that point, the price has to cross one or other line. Thus we have just five weeks before this stage in the market cycle finally resolves, one way or the other.

 

 

But of course, it won’t take five weeks. These things rarely go all the way to the end. Traders see the writing on the wall and collectively make a decision before that. What we’re looking for is a convincing movement above or below the bounds of that triangle (currently $7,300 and $6,300, respectively), with volume. Price may rise or dip outside of it briefly — if so, be cautious, because that doesn’t mean it won’t reverse and end up going the other direction. These ‘fake-outs’ are common. We’ll only know for sure with hindsight, but look for the volume as well as the magnitude of the movement: together they indicate how committed traders are to the move.

At the time of writing, RSI on the 4h reads almost 70, heading into overbought territory, but appears to be taking a pause and is possibly levelling off. On the daily, momentum is gaining upward pace but is not yet over the 50 mark, so there’s plenty of room to go.

 

ETH capitulation by ICOs?

The same returning optimism is not true of ETH, which has seen very heavy selling in recent days. Almost 300,000 ETH has been sold in the last month by ICOs dumping their holdings. Trustnodes reports that 160,000 ETH were sold in just 10 days. This has always been a risk for the Ethereum ecosystem, as critics have warned: it’s one thing to collect tens of millions of dollars worth of ETH in your ICO, but at some point, you’re going to have to cash out to pay bills. And if the market is crashing, you need to sell fast to make sure you have enough fiat to continue work. Then it just becomes a huge competition between ICOs to see who can cash out fastest and get the least-worst prices for their ETH. Right now it looks pretty bleak for ETH, though it saw a strong bounce from its recent low just yesterday.

So the picture — at least for bitcoin — is looking up. Mike Novogratz, CEO of Galaxy Digital, just tweeted his opinion that the bottom is in. The next decision by the SEC on the SolidX-VanEck ETF is due at the end of September, which will prove significant one way or the other.

But one last warning. That big Silk Road wallet that just sent a big chunk of coins to Bitfinex and likely sparked the last crash? There’s plenty more where that came from.

Breathe.

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Monday Inferno market analysis

After the carnage of the end of last week, it’s been a fairly quiet weekend for bitcoin – but that never lasts for long, especially not at the moment.

 

To recap, last week saw a brutal fall in the value of bitcoin from $7,400 down to a low of just over $6,100. While that was a ‘higher low’ that didn’t break the previous low of $5,877 (Bitfinex), itself higher than June’s low of $5,755, it was still an dramatic move that caught many traders unaware.

 

While mainstream media reported the immediate trigger was Goldman Sachs’ decision to shelve their plans for a crypto trading desk, when Goldman denied this as ‘fake news’ the price failed to recover. As we reported, a far more likely explanation are the $10 million in BTC that were sent from an old wallet, somehow connected to the Silk Road, to Binance and Bitfinex at the very end of last month.

 

While that’s not much in the context of overall volumes, it is a lot when dumped at market rates on a single exchange. The crash was most likely a catalyst for further selling by traders and the lower prices that followed. However, it’s worth saying that even this volume of coins wouldn’t have been a problem if the market hadn’t already been at a fragile point in its recovery. Traders didn’t have the confidence to absorb the sells, instead bailing out before matters got any worse. In short, the recovery up to $7,400 had been too fast. It was looking promising, and perhaps it would have continued and gained momentum, but the Silk Road coins had the effect of a bucket of cold water.

 

Since the initial falls, the market stabilised somewhat around $6,400. We then saw a ‘Double Bart’ formation, with a crash-consolidation-spike followed by the reverse spike-consolidation-crash. Right now bitcoin sits at $6,270, but that figure is likely to be out of date in minutes.

 

Zooming out to the daily chart, we can see that the 200 MA is really coming down fast now, since the price on a large number of the last 200 days has been beneath it. The 50 MA, which reacts more quickly, of course, is heading south even faster – but conversely it picks up more quickly too with a recovery. Price is well below both, indicating downward momentum. However, resistance around the $6,000 zone has once again held, demonstrating the strength of demand here. RSI has come off its lows, indicating deceleration of downward movement. That’s hardly surprising after such massive selling, though: on the 4h chart, RSI signalled BTC was more oversold than at any point since June.

 

In short, a day of reckoning is on the way. The downward-sloping resistance line that has held since February will soon meet the demand zone at $6,000. One will give. That must happen in the next month – and it’s highly unlikely the pattern will play to the end without a breakout.

 

Traders will rightly be cautious here. If it does go south in a meaningful way, lots of analysts are talking about $5,000, but this is a point where both big risk and big opportunity lie. $6k has proved a demand level many times before. On the other hand, markets are inherently unpredictable and Mr Silk has plenty more BTC to dump. If you buy, be prepared to HODL or set a tight stop loss.

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Friday Inferno market analysis

Staring up from – what is hopefully – the bottom of the abyss, we can’t help but suppress a wry smile that bitcoin’s murky past continues to set the agenda from time to time.

 

Every now and again the crypto markets throw traders a curveball. This was one such week.

 

Analysts were broadly in agreement that the picture for bitcoin was looking rosier by the day. The major indicators were all flipping positive with the steady rally from the recent low of around $5,900 to over $7,400 – an impressive 25% uptick in just three weeks. MAs were converging and crossing, resistance levels turning to support, RSI climbing with the momentum – and then carnage. An initial crash briefly stabilised around the $7,000 mark, before a further $600 fall. In all, bitcoin’s price plummeted a thousand dollars in a matter of hours.

 

Mainstream news scrambled to find a reason, with many outlets citing Goldman Sachs’ decision to cancel their plans for a crypto trading desk. Perhaps that helped, but in reality it probably occasioned little more than a shrug from most genuine traders. In any case, earlier today Goldman’s CFO denied the bank had scrapped its plans, calling reports ‘Fake News’.

 

A far more plausible reason is the huge stash of bitcoins, somehow connected to the Silk Road, that was recently moved to Binance and Bitfinex.

 

Manipulation on a grand scale

Given that the blockchain is transparent but the identity of traders on exchanges is hidden from public view, it’s impossible to know for sure what’s going on here. It could have been lots of small traders panicking or our whale dumping lots of coins at once. There’s some circumstantial evidence that this was more than an early holder cashing out quickly and clumsily, so we’re going to take a shot at drawing some conclusions.

 

One thing to bear in mind is that a smart trader doesn’t dump a lot of coins onto the market at once. They trickle in sell orders, or set a sell wall, assuming they can’t get access to an OTC trade. That way, you don’t crash the price and get less USD than you otherwise would.

 

Another factor – possibly coincidental, but we’ve been in crypto long enough to keep the tinfoil hat on – is that DOGE saw a massive rise in volumes and value a few days before BTC crashed. That may be consistent with other insiders pumping it to offset losses just before BTC went south. DOGE always has been a favourite coin for pumpers to fleece the market. As we say, though, this may have been an unconnected manipulation. Binance doesn’t list DOGE, so the Silk Road whale himself probably didn’t do it.

 

Lastly, the holder sent 210 BTC to BitMEX. That’s a derivative exchange that offers very high leverage: up to 100x.

 

A whale with deep pockets could make an absolute killing by dumping BTC on one exchange, while going leveraged short on another.

 

In short, this episode looks like a deliberate manipulation that likely netted the perpetrator or perpetrators many tens of millions of dollars, if not more.

 

The big question, of course, is what happens next. Is there another BTC crash to come? Or will the whale reverse the pattern, go long and reset the market back to where it was a few days ago – pocketing enormous gains while maintaining or even increasing his BTC position?

 

We don’t know – and as ever in these circumstances, we would advise extreme caution if you’re trading. This kind of thing has become less frequent over the last couple of years, as the crypto markets become larger and more liquid, but bitcoin’s early legacy refuses to die.

 

Someone out there with access to a stash of over 100,000 BTC still wants to party like it’s 2014.

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Tuesday Inferno Analysis

The picture for BTC and the alts is looking good. As traders come back from their summer holidays, it looks like the bull is also back in town and growing stronger with each passing day.

 

On a technical level, it’s been a great couple of weeks for BTC, as traders have pushed up through multiple layers of resistance. Regular pull-backs have ensured the market doesn’t get ahead of itself too fast, making this a strong and sustainable rally. The most immediate support levels at $6,800 and $7,000 held on tests. At the time of writing, BTC is bumping against the ceiling of downward-sloping support, with the next target to break around the $7,500 zone.

 

On the daily chart, we’re sat between the 50 and 200 moving averages, and RSI is heading north – though not yet into overbought territory. A look at the daily RSI over the last several months shows that it has been an excellent indicator for buying and (particularly) selling. We would advise caution, though: in the last bull market, there were periods when the daily RSI spent significant periods of time over 70, and selling there would have meant missing out. When BTC goes into bull mode it’s a raging bull, and the rules change.

 

The technical picture is broadly positive for now, then, though breaking $7,500 and then $8,000 would consolidate that impression. Pushing above the 200 MA would give traders a confidence boost, and likely when $10k is breached there will be another wave of media interest and speculation (of both kinds).

 

Right now, volumes are still lower than they were earlier in the year or at the end of 2017. Nevertheless, the mood has changed over the last month. More longs are opening on the futures markets, with CME reporting both a reduction in shorts and an increase in longs. On top of that, another 100 million USDT have recently been printed, suggesting incoming demand. Big money (which usually equals smart money) is signposting its expectations.

 

On the other side of the coin, one other factor that has attracted interest in recent days is the movement of large quantities of bitcoins from a wallet that has been dormant since 2014. Around $100 million has apparently been moved to Bitfinex and Binance, presumably to sell for USD and altcoins, respectively. We’ll take a closer look at this tomorrow, but that could indicate considerable sell pressure in the short term. Right now, though, the market doesn’t seem to care.

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Bitcoin dominance is a metric of crypto failure, not success

Bitcoin dominance – the proportion of total crypto market cap occupied by bitcoin – has hit 50% again.

It’s the first time bitcoin dominance has been above 50% in 2018. The last time it was above 50% was December 2017. However, back at the beginning of 2017, BTC dominance was around 85%. It had rarely dipped below 80% in the whole history of crypto.

Bitcoin maximalists love to talk about BTC dominance. The thinking goes that bitcoin is best, and every use case for alts can and should move to bitcoin in one way or another. Thus ‘dominance’ is the best metric for the success of bitcoin: for bitcoin to succeed, everything else must fail.

 

This is a ridiculous viewpoint, for more than one reason.

  1. It’s classic zero-sum thinking. Crypto isn’t competing against crypto, it’s competing against fiat.
  2. Bitcoin can still be incredibly useful and important – and 100 times its current market cap – and still have less than 50% overall market share, or even 10%.
  3. As the number of altcoins increases, and the number of crypto tokens used by businesses for many and various purposes, the market cap of non-bitcoin crypto will inevitably increase. A million tiny but genuinely useful projects with $1 million valuation is a trillion dollars. None of these threaten bitcoin. Collectively, they don’t indicate bitcoin is less valuable either.
  4. These ‘alts’ include tokens like Tether, TrueUSD and other fiat-backed cryptos that add to market cap but don’t compete with bitcoin. As the ecosystem grows, so will the proportion of market cap occupied by stablecoins. That actually reflects demand for bitcoin, while reducing dominance.
  5. Blockchain applications and tokens do a lot of different things. A LOT. They’re not all money, or a store of value – digital gold – like bitcoin. They don’t compete for bitcoin’s #1 use case.

A higher rate of bitcoin dominance isn’t a sign of health in the overall crypto world, or a sign of the success of crypto. Higher dominance indicates less confidence in crypto as a whole, with traders exiting initiatives that might drive forward blockchain adoption. It’s akin to the market deciding that mobile communication doesn’t have much of a future, that innovation isn’t necessary or desirable, and piling into Apple shares because they have one major product that does happen to generate revenues.

 

In the future, the best case scenario would be for bitcoin to be the largest crypto – by some significant multiple, whether that’s 10x or 100x – but to occupy far less than 50% of overall market cap.

 

TL;DR Dominance is a terrible metric of success. Ratio of #1:#2 crypto is a better one.

 

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Tuesday market overview

For the last couple of weeks, bitcoin has been trading in a channel between $6,000 and $6,500, a brief spike above and below those levels notwithstanding. Price has found it hard to break out of this zone, despite strong fundamentals and positive news from the likes of Intercontinental Exchange and Bakkt. Against that, there is widespread skepticism among regular traders about the future of bitcoin given its 70% decline this year.

However, this is akin to looking out of the window and inferring long-term climate conditions from a change in the weather. Having tested the $6,000 support several times and held, we are of the opinion that the current price (around $6,400 at the time of writing) represents an excellent entry point. Short-term traders will want to manage risk carefully, since it is conceivable that we will revisit lower levels and, of course, it is not impossible that price will break downwards — this is a market, after all, and uncertainty is built in. It’s also quite possible that we will see another dip down towards support at $6,000 or even $5,800, even if bitcoin doesn’t break those levels.

In fact, this is what the market is betting. Shorts are at their highest in a year, indicating the large number of traders who think further falls in price are coming. The ratio of shorts to longs is also close to a high. In short, the market as a whole believes that bitcoin is heading downwards.

What you think the significance of that is depends on what you think of the ‘wisdom of crowds’. The quote goes that the market exists to make fools of as many people as possible. The crowd is usually wrong. Given the volume of shorts, a rise in price will cause a significant short squeeze, as those traders are liquidated and forced to buy back bitcoin, driving the price higher still. Short-term targets are $6,600, $6,800 and $7,000.

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Bitcoin in 2009 and 2018

A look at the evolving face of the world’s #1 digital currency.

What is bitcoin? A borderless currency? Cash for the darkweb? An uncorrelated asset class? All of these and more, in different proportions and at different points in its history. That’s the conclusion of an intriguing study entitled ‘Visions of Bitcoin’ that takes a look at the different narratives about bitcoin that have existed within the community in the years since its launch.

Because bitcoin doesn’t arise from a company and doesn’t have a formal brand or marketing department, what it is and how it is perceived largely depend on the community. What they use it for, what they want it to be — that’s what it is. And that has changed over time.

Back in 2014, bitcoin was a fantastic tool for e-commerce. With transaction fees of just a few cents, it was the ideal way to purchase goods online from anywhere in the world, without the charges, restrictions and chargebacks associated with credit cards. That vision ran aground when transaction fees spiked as high as $20 last year, at which point ‘digital gold’ — the idea of bitcoin as an investment-grade commodity — came to the fore.

Overall, the authors of the study pinpoint seven different narratives, which have varied in their impact over the years:
1. E-cash proof of concept
2. Cheap p2p payments network
3. Censorship resistant digital gold
4. Private and anonymous darknet currency
5. Reserve currency for the cryptocurrency industry
6. Programmable shared database
7. Uncorrelated financial asset

You can see the part that these elements have played in the overall bitcoin narrative over time in the chart. What’s perhaps most interesting is the evolution of different narratives that lie in tension (like cheap payments vs digital gold), and if and how they are resolved. The next tension, it seems, is the transparent financialisation of bitcoin vs its use as an anonymous currency — though with so many looking forward to an ETF, and so many privacy coins now in existence, that battle is all but over.

Read more here.

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Inferno analysis: Friday

Taking our regular bi-weekly look at the charts and markets, bitcoin has provided some surprises over the last few days. Tuesday saw bearish sentiment out in force, with a sharp dip below $6k. BTC dropped as low as $5,880 (Bitstamp) and it seemed that far lower was on the cards. But the rule held: when it’s looking most bearish, it’s bullish. All of those calling for lower prices had already done their selling, and there was little supply left. Since then bitcoin has recovered $600 to trade at $6,480 (at the time of writing).

Right now we’re trading sideways within a range or, if you are feeling charitable, in a very gentle upward channel. Looking at some of the classic indicators, that sideways picture is borne out. On the 4h, RSI is nudging upwards, currently around 60 — not overbought but with a slight bias towards higher prices right now. Zooming out to the daily, RSI is around 40 — not low enough to indicate it’s too oversold — and heading upwards. Daily RSI has provided good sell signals at 70 in recent weeks, and reasonable buy signals at 30. We would like to see momentum carried above 50.

At $6,480 bitcoin is still well under the 50 and 200 MAs, which now sit at $6,900 and $8,000 respectively. After the bearish Death Cross that occurred at the end of March, they are narrowing. However, the fact that bitcoin now stands at a similar price to its point at the last cross should caution against reading too much into it: bitcoin moves fast and a lagging indicator is no good on that timeframe. Nonetheless, conventional traders will doubtless make much of a Golden Cross, as and when it must occur.

Otherwise, we have seen confirmation again of demand around the $6,000 level, despite the brief intra-day dip below. Bitcoin has tested this level no fewer than four times now. Clearly accumulation is happening around $6,000, and the smart money will be looking to get in there if it hasn’t already. It’s a little early to say but volumes seem to be picking up slightly too — even though it’s the holidays. Overall, it’s time for cautious optimism again in what we think is a nascent and fragile recovery, but the beginnings of a new trend all the same.

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