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Analysis

Friday Inferno market update

TL;DR it’s a slow time for the markets, but that means…

 

We’ve seen it before, recently and more than once. It seems to be bitcoin’s signature right now. Days of boredom, with prices doing little of interest. Then BOOM! A big move, up or down, immediately followed by a frenzy of speculation that the bear market is finally over or else due another leg down.

 

Right now, bitcoin is tracking slowly and quietly downwards in what looks a lot like a bull flag. The pattern has continued for several days now after the monster spike higher, with price gently falling, staying below the 50 moving average on the one-day chart. Should this break up – and that’s quite possible – then we’d want to see at least $4,000 before we regain some optimism.

 

What we need to remember here is that we have not yet seen a higher high in this cycle. Right now, the trend is unclear: after 14 months of the bear, most indicators are still pointing downwards. We’re about to see a 50/100 cross on the weekly moving average, we’re trading below all of the major daily MAs and bumping along the 200 weekly MA. One positive-looking pattern doesn’t change all that – and bull flags don’t have to break upwards. In short, we’re waiting to see how this situation develops before we get our hopes up.

 

Meanwhile, the fundamentals continue to improve. Jack Dorsey has been making waves after his public endorsement of the Lightning Network by playing the torch game on Twitter. He’s now going all in, suggesting that LN could be used within the Square app.

 

Lastly, on a more pessimistic note, QuadrigaCX – the exchange that collapsed when its CEO (apparently) died, taking with him the keys to its cold storage – has lost more funds. Someone sent 103 BTC (almost $400,000) to the CEO’s cold wallet. Because he’s still (apparently) dead, they’re gone too.

 

Oops.

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Tuesday Inferno market report

Was it a flash in the pan, or the start of a roaring bull trend?

 

Friday’s green candle was impressive in both size and volumes, with BTC soaring $350 – 10% – in a matter of hours. Crypto Twitter was quick to claim the bottom was in and the new uptrend had started. While that’s possible – this is bitcoin, after all – we’re going to advise caution for now. Here’s why.

 

The rally faltered right where you’d expect it to end. The daily candle closed below the 50 MA, and even the wick upwards didn’t come close to the top of the triangle BTC is currently painting. The top also coincided with the 50% fib, measured from the December low ($3,122, Stamp) to its subsequent high ($4,237).

 

In short, resistance came into play exactly where it should, and BTC is still following the pattern of lower highs. We have not broken out of that pattern, and until we do, we have to remain bearish. As things stand, price is tracking just below the 50-day MA, and trending downwards. It does look somewhat like a (bullish) pennant is forming on the 4h, but we’re just not buying it yet – it’s too unclear for now and downward momentum/volume may be picking up.

 

We currently expect a return to BTC’s former levels of $3,450, and potentially below. Whatever happens in the medium-term – and under these conditions it’s not impossible that BTC would take another leg higher – we still think that 200-week MA will come under fire again.

 

Infrastructure, infrastructure, infrastructure

For all that we don’t like the current chart setup, we love what’s going on in the background. Infrastructure is being built, meaning that when the market does finally bottom, bitcoin is going to be in a strong position to move higher, hard. In that respect the current circumstances feel a lot like late 2014 – but with way better tech. We have a functional and growing Lightning Network; big news recently from Abra wallet, which integrates crypto with mainstream financial assets; Binance enabling crypto purchases via credit card; and, of course, those big institutional platforms like Bakkt and Fidelity, the delays notwithstanding.

 

We’ll get there. Not today, not tomorrow, but soon. And for the rest of your life.

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Inferno Friday market report

TL;DR waiting, endlessly waiting…

 

There is an inevitability to market cycles. While markets are inherently unpredictable in the short term, in the long term we have macro trends that have a clear direction. We don’t know when that trend is going to end, or at what price things will turn around, we just know the direction of travel. And we know we’re not at the destination yet.

 

So although we’re expecting resolution that will involve:

  • A re-test of the 200 WMA (currently around $3,300)
  • A high-volume capitulation of one form or another

 

That will happen in its own good time and there’s nothing we can do but wait it out. Bitcoin’s current drift sideways on very low volume is highly reminiscent of the same pattern in October, before the sudden crash through $6k and down to $3,100. Given that the price is now practically sitting on the 200 WMA, the next move could be sooner rather than later, but there are never any guarantees. Another factor that might play into an impending resolution is the fact that the 50 and 100 WMAs are about to cross, which could well trigger a round of selling from bots with those conditions programmed in.

 

At the time of writing, bitcoin is staging a small rally, but we’d advise caution. Every similar green candle to date has resulted in a lower high. That has been the pattern and until we see higher highs we see no reasons for undue confidence.

 

Longer term, of course, we’re as bullish as it gets. The underlying picture is great. Transactions per day are rising, and have been now for over six months. Many of these are down to Proof-of-Proof – the practice of recording the state of smaller blockchains on Bitcoin, to protect against 51% attacks. Still, adoption is adoption and this is just another use case for Bitcoin.

 

We also have a report that suggests Bitcoin’s core infrastructure is becoming more decentralised, thanks to competition in the mining sector. And a final piece of news in global adoption is that Argentina has started accepting bitcoin for public transport. Thriving economies are more circumspect, but failing states have figured that bitcoin offers a way to pay for goods in something other than the imploding local currency.

 

That’s all for now! Stay tuned.

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Tuesday Inferno market roundup

TL;DR the slow grind continues.

 

And so it goes on, with the rhythm of dump, consolidate, dump, consolidate evident on the daily chart. Traders await resolution to the bear trend as a whole and the magnetic appeal of the 200 weekly MA in the immediate term, which seems to be offering gently rising support for now. Bitcoin closed last week almost sat on the 200 WMA line, which is currently at $3,300.

 

The big news this week is the QuadrigaCX debacle, which is either colossally bad luck or a blatant exit scam, depending on who you ask. The exchange – one of Canada’s largest – has suspended trading after the supposed death of its CEO, who took with him the private keys to its cold storage. In total some 26,500 BTC, 11,000 BCHABC, 11,000 BCHSV, 35,000 BTG, 200,000 LTC and 430,000 ETH are on ice, and the exchange allegedly owes its customers almost $200 million.

 

There is lots that is suspicious about this episode, and the ‘lost’ QuadrigaCX coins may not be lost at all. They therefore still overshadow the market, and we may not know much more about how they will impact trading until it is too late. As yet, the event has not proven a catalyst for lower lows – but there’s still time.

 

QuadrigaCX aside, wider opinion from major industry figures is mixed. Mike Novogratz recently tweeted: ‘Realizing having tweeted about crypto in a while. It’s a grind.  Don’t think we head north for at least a few more months. Always take longer for institutions to move. Very confident they will. Tons of activity under the hood. Stay the course.’

 

Meanwhile Charlie ‘Satoshi Lite’ Lee, creator of Litecoin, thinks a new all-time high will be reached within the next three years. Based on the pattern of the last bear market, that sounds quite plausible at this point.

 

Brave New Coin has a different perspective, noting:

A bottom may be close, however.  Exchange order book data indicates a large buy wall emerging on major exchange Coinbase Pro around the low- $3000 level that will likely prevent, at least in the short run, a push down towards a $2000 level (Coinbase data is used because it is more difficult to set up faked or spoofed bids because bids are fiat backed and faking bids has much higher costs involved).  

 

We’ll see.

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Friday Inferno market update

TL;DR all eyes are on $3,200.

 

We’ve said it before, and we’ll say it again: the 200 weekly moving average is where traders have drawn their line in the sand. Right now we’re just a couple of hundred dollars above it, if that. We expect strong support in the $3,000–$3,200 zone, which has a cluster of factors in its favour. What happens after we hit that – and while there are few certainties here, this is one of them: we will revisit it – we won’t know until we get there and see the market’s reaction.

 

Right now the charts are very bearish, and sentiment is absolutely horrible. That points to a downward move, but remember: when it’s as bearish as it can possibly get, that’s when the trend changes. Be prepared for that moment when it happens, as it must. We just don’t see it happening quite yet.

 

As the bear market grinds on, we have a few hopeful predictions and a slew of pessimistic ones. Entrepreneur Alex Melen suggested that ‘Last time the 50 and 200 average crossed on the 4 day chart was at the bottom of last bear market.’ The same has just happened. In fact, the crossover slightly lagged the bottom in 2015, and so this fits quite well with the picture this time, with the crossover lagging the fall to $3,100. However, it’s not all that convincing given the broader picture of low volumes and wider bearish indicators.

 

Another prominent trader and bitcoin analyst, Murad Mahmudov, believes steady support will ultimately be found at the 300 WMA, around $2,300, with a wick to the 400 WMA around $1,800. His Twitter thread contains a wealth of insight about the evolving market and progression in the MAs that have acted as support over time. It’s worth reading, but realistically, there’s too little data to be sure of anything. Then we have Vinny Lingham, Civic CEO, who has recently tweeted: ‘If we break below $3,000 for bitcoin, crypto winter will become crypto nuclear winter.’

 

In more positive news, Fidelity have announced the potential launch of their custody services in March. A lack of suitable solutions for storing crypto securely has been one of the factors preventing institutional investors getting into the bitcoin space. Fidelity works with over 13,000 financial institutions and has over $2 trillion under management. A lot can happen in two months, so there’s no telling what the state of the crypto markets will be, but we will see whether institutions have the confidence in digital assets to start scaling in. The CBOE has also just re-submitted the SolidX-VanEck bitcoin ETF proposal that was so recently pulled due to the government shutdown. But it doesn’t simply pick up where the old one left off. A new 240 day period will now start, meaning it could be almost the end of the year before a decision is finally made.

 

At the other end of the spectrum, bear markets are the time when the next generation of projects build the foundations for the next cycle. We have featured a number of small projects on Crypto Inferno that we think have strong fundamentals. One of these, Soniq, has been busy building on the demand for decentralised music applications. Soniq’s app will run music competitions, and anyone can participate as either musician or judge. Judges vote with small amounts of Soniq tokens, and the more votes a musician receives, the more likely they are to win. Judges are also rewarded for their activity and picking the winner.

 

Soniq’s app is in development but they are currently testing the idea with a contest on Instagram. The team reached out to 1,000 musicians last year. 300 responded and wanted to participate to win Soniq tokens. With no promotion the project now gets hundreds of thousands of views and impressions. A new contest has now been launched on Instagram with higher rewards, with the aim of introducing cryptocurrency investors to the concept and to promote participation. Check out Soniq’s website for more details. We firmly believe that the projects that bootstrap with little or no funding in the fire of the bear market will be very strongly positioned for the turnaround, when it happens.

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Tuesday Inferno market update

We have hit a yearly low, but have not yet revisited the low for this market cycle. Yet.

 

Bitcoin has been trending down all year, but it seems like we might finally be approaching the endgame for this cycle. We’re not at capitulation yet, but after a period of consolidation, it’s grinding closer.

 

For the last week or so BTC has traded sideways around the $3,500 level. What we have seen repeatedly is rapid jumps up or down and then back to the mean. These are not normal market movements. They start and finish within just minutes, leaving long candle wicks of 2-3%.

 

This is consolidation within a range, with market-makers taking potshots here and there at traders who are over-leveraged without proper risk control. Big players (most likely using bots) are simply margin-hunting in an environment of low liquidity. The expectation was always that this would end like the other consolidation ranges did: with a big move.

 

Yesterday saw a sharp fall, but a clean bounce off the fib line. We have just now seen a further drop below that, with a low (at the time of writing) of $3,322 (Bitstamp). But we do not expect that to hold for long.

 

The pattern continues: lower high, lower low, trending down towards that 200 weekly moving average and the $3k zone. That is where we expect the fireworks to happen in earnest as traders panic that the last line of defence – as they imagine it – becomes threatened. And since that is such an important area, we do not expect capitulation to happen and for the next cycle to start until that area is attacked with greater volumes than before.

 

Let’s be clear here. We are expecting a crash of epic proportions below $3k. It may well last only hours, but when a market like bitcoin panics, it can be spectacular. If you trade, set a skunk order down low, because anything can happen – including flash crashes right down to zero if a big trader panics or fat-fingers. What happens after $3k is breached will depend on the market’s reaction. A strong bounce would be positive; a weak bounce would imply the bear market will continue for some time longer.

 

In other news…

 

Steve ‘Woz’ Wozniak, Apple co-founder and bitcoin fan, has said that he sold all his bitcoins at the top. ‘When it shot up high, I said I don’t want to be one of those people who watches and watches it and cares about the number. Part of my happiness is not to have worries, so I sold it all and just got rid of it.’

 

Minor exchange Liqui has shut down, after its users did not agree in sufficient numbers to the changes to its terms.

And according to Jan Van Eck of VanEck bitcoin ETF fame, former BTC investors are turning to gold in the bear market.

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Friday Inferno market update

TL;DR It’s always bearish – until it’s not.

 

We had some big news this week: on Wednesday CBoE withdrew its proposed rule change to the SEC, which would have allowed it to list shares in the SolidX-VanEck bitcoin ETF.

 

The long-anticipated ETF has been one of the big hopes for the bitcoin bulls, the belief being that such a retail-friendly on-ramp for money would open the floodgates and power BTC back into an uptrend, and likely to new highs.

 

A final decision on the ETF was due by 27 February, and there have been suggestions that the ongoing government shutdown meant the understaffed SEC was set to refuse it rather than take the risk of letting it through by default when the deadline passed. A statement from VanEck claims that this is a temporary issue, and that the application will be re-submitted when the government and SEC start up again. Either way, this is a significant development and means, at the very least, another long delay.

 

What is interesting about this is the market’s response: essentially nothing. Bitcoin made no move around that news that could be considered anything more than background noise.

 

On Tuesday morning, the day before, BTC did abruptly plummet, dropping from around $3,530 down to $3,401 (Bitstamp): a dramatic fall that looked set to put in a lower low and send bitcoin back down towards the 200 WMA, which we have been saying it is likely to retest. But it was a flash-crash: a single five-minute candle down, which was erased with the next five-minute candle back up. It may have been completely unrelated to the SEC announcement, or it could have been insiders dumping their coins before the news was released (if you like conspiracy theories). Overall, though, the markets shrugged off news that the ETF is on ice.

 

Does this suggest a bottom is in? Unfortunately not: the big picture is still overwhelmingly bearish. Bitcoin keeps putting in lower highs, is trading below the 50 and 200-day moving averages, is experiencing lacklustre volume and has multiple resistance levels to clear before we can say the downtrend is over.

 

But is it interesting? Absolutely. Think back to 2017 and the market’s crazy reaction when the first ETF was denied – a massive crash, followed by rapid recovery and then an onward march to the all-time high. That was at a time of huge optimism. In this instance, the news didn’t make so much as a dent in the market. One way or another, the failure of that ETF was already priced in. That must surely be an indication that we’re reaching the despair phase of the market cycle. And when the last weak hands have sold in despair, there’s only one way for the market to go.

 

So while things look bearish, we know that it won’t last forever. And unless you’re really good at catching knives, you won’t know it’s over until the moment has passed.

 

Tomorrow we’ll look a little further at what a market reversal looks like.

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Tuesday Inferno market update

TL;DR is it crunch time – again?!

 

Well folks, the hour is once again upon us. Much as we hate to resort to memes and cliches (ok, so we don’t hate them that much…), the next 24 hours are critical.

 

Sometime over the coming day or so we’re expecting a big move for bitcoin. Take a look at the chart, four-hourly scale, and you’ll see why.

 

That nice, high-volume green candle on Saturday faltered right at resistance, with the top wick perfectly touching the 200 moving average (4h) and the daily candle closing just under the 50-day moving average. With such a confluence of factors, the writing was really on the wall, and sure enough it wasn’t long before we saw a rapid fall to $3,470 (Stamp). That was a lower low in this recent leg of the market, wrecking any hope that we might be painting higher lows and on the way up.

 

And so here we are, sitting in the low $3,500s, waiting for the other shoe to drop. And while we might well see more short squeezes and sudden moves up, the most likely medium-term scenario is a retest of that 200 weekly moving average and the support we know is layered around $3,200 and the psychologically important $3,000.

 

There are three scenarios.

 

  1. We crash hard into the 200 WMA, perhaps deep below it, but huge buying pressure sends BTC soaring back up as traders pick up bargains. It’s a high-volume move and it effectively puts the bottom in: capitulation. The market consolidates a while and then gradually starts moving up again.
  2. We bounce off the 200 WMA, but not with enough force to demonstrate a convincing bottom. Instead, we fall into another descending wedge pattern or trade in a range, until it’s time to make a decision – the most likely one of which is back down below $3,200.
  3. BTC drops cleanly through the 200 WMA and enters a range with very little support between around $2,200 and $3,000, where it stays and consolidates much as happened when it dropped below $6k.

 

We can’t call what will happen at this point, but the reaction to retesting the 200 WMA will give us useful information as to the condition of the market and traders’ overall confidence. For what it’s worth – and this is not trading advice – we expect a short-term bounce at least at ~$3,200. Long-term, we think that’s going to be a good price. But over the next few weeks, we might well find that the real bargains are to be had in the $2,xxx range.

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Friday Inferno market report

TL;DR waiting patiently for breakout…

 

We have been stuck in a very narrow range for a week now. There has been some movement outside of it, briefly, but price keeps coming back to a band between $3,650 and $3,570. Volumes are unimpressive and significantly down from their recent peaks.

 

These are conditions that are perfect for big moves. Price consolidates, Bollinger Bands squeeze, like a spring coiling; traders are waiting for their cues and when they come, the move could be violent. And it could be either way; the low volumes means the market can be moved hard and whales are in the habit of clearing out shorts or longs from time to time, only to send the price in the other direction when they’re done.

 

The overall picture is still somewhat bearish, with BTC trading below the 50-day moving average, RSI on the higher timeframes below 50 and bitcoin constantly making lower highs. Until that changes, it’s easier for price to move downwards than up. That does not preclude short squeezes, of course. It just means that, all things being equal, traders will ultimately favour selling. And we haven’t yet seen the retest of the 200 weekly MA we’ve been calling for.

 

In other news, the markets have taken the hack of Cryptopia in their stride; there is no panic like there was when Bitstamp was hacked at the beginning of 2019 – this was not a capitulation trigger. It is a far smaller exchange, of course, with losses stretching to only a few million dollars – much of which has been frozen when it hit other exchanges. In the wake of the Cryptopia hack, Binance CEO ‘CZ’ has apparently suggested that the solution is… using trustworthy exchanges.

 

Store coins yourself. You fight hackers yourself, and guard from losing wallet yourself. Computer breaks, USBs gets lost.

Store on an exchange.  Only use the most reputable, proven secure, exchanges.

Or move to DEX, disrupt ourselves.

 

He gained much criticism for this, as can be expected. Meanwhile, Binance is launching a GBP and EUR crypto platform in Jersey, which is proving highly popular – potentially as traders hedge money against the effects of Brexit.

 

That’s all for now! Tomorrow we’ll be giving an update on what’s going on with Bakkt.

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Tuesday Inferno market update

It turned bloody over the weekend. Rothschild said to buy when there’s blood on the streets, but we think it needs to be more than ankle deep…

 

After the heavy falls we saw on Thursday, bitcoin stabilised, consolidating at that $3,600 support level. Then on Sunday afternoon we saw the start of the move we’ve been expecting: a sharp drop lower, below $3,500. For a while, it looked like BTC would be posting even greater losses, but the price again stabilised in the low $3,500s – before a dramatic bounce higher.

 

We’re used to short squeezes in this market, and the ‘Bart’ back up failed at the 50-day moving average line. It does not fundamentally change the picture; it’s part of the same ‘two steps back, one step forward’ narrative of the bitcoin bear market. Until we see something out of the ordinary, our view is the same. We are still expecting to test that 200 weekly MA once again, and hopefully experience some kind of decisive move one way or another.

 

Volumes are still down, which does not inspire great confidence in these moves. Looking back at the previous capitulation in 2015, the weekly volume was around 350,000 BTC (Stamp), or 820,000 BTC on Bitfinex, roughly equal to the highest volume since the bubble popped. We’d want to see that again – in this case, 200k BTC on Stamp and 600k BTC on Finex.

 

Overall, the fundamentals for Bitcoin overall are good. Average tx fees are less than $0.25, putting them back at 2015 levels. Hashrate is climbing again after its dip at the end of last year. Meanwhile OTC volumes are rising, according to one outlet: ‘Buying pressure has reportedly increased at many notable OTC crypto trading desks. One of the largest OTC traders, Cumberland, tweeted that the imbalance between buyers and sellers spiked by 60% over the last week. Galaxy Digital saw robust buy back from asset managers, who previously sold assets for tax purposes. The nature of most of Paxos’ trading activity this year was buy tickets from emerging markets traders. Circle’s OTC desk saw a “come back” in January after elevated sell pressure in December. Genesis OTC volume is up by 50% year-on-year. According to a director of the fintech research firm Tabb Group, Monica Summerville, the OTC market is about two to three times larger than trading activity across the whole of the retail exchanges.’

In breaking news, Cryptopia has experienced a security breach, which resulted in ‘significant losses’. We await further details of what that means in practice. Slightly better news is hackers have returned around $100,000 of funds stolen in the recent 51% hack on ETC, for reasons as yet unknown.

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