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Analysis

Friday Inferno market update

TL;DR two steps forward, two steps back, brings you closer to the edge of the precipice.

 

Bitcoin has now drifted sideways for three weeks, on low volume – for what it’s worth, we don’t believe some of the inflated exchange figures we see on CoinMarketCap. Looking at the Bitstamp daily chart, we see volumes are gently dropping. RSI is neutral and has been all month.

 

That’s not to say things are entirely quiet, though. In these conditions, as we know, the liquidation hunters are busy. They wait for shorts or longs to stack up, and then bump the market in the other direction to liquidate them, pushing the price further in that direction as the orders are margin called and forced to cover. Yesterday, we saw one of these clear the order books for $50-60 in both directions, first up and then down, before the price returned to where it started.

 

Overall, though, the market is flat and quiet, with just these signs that whales are moving under the surface. But it won’t stay that way for long. Sentiment appears to be turning. After Crypto Twitter declared the bottom was in, more and more analysts are starting to think they spoke too soon. @MoonOverlord, a popular commentator, has drawn attention to the parallel between the calm before the November crash from $6,000 and the current quiet on the markets. If he’s right, bitcoin will break down by the end of the month, heading towards the targets set by the likes of Murad Mahmudov ($1,800).

 

Feeding into the wider picture, once again Tether (USDT) is cause for concern. After everything went quiet for a few months, Tether is now back in the news thanks to a recent update to their site. This makes it look like USDT is no longer backed by dollars alone (assuming it ever was):

Every tether is always 100% backed by our reserves, which include traditional currency and cash equivalents and, from time to time, may include other assets and receivables from loans made by Tether to third parties, which may include affiliated entities (collectively, “reserves”).

 

But it’s not all bad, not by any means. The US Securities and Exchanges Commission (SEC) has confirmed its earlier opinion that Ethereum (ETH) and cryptocurrencies like it do not count as securities under U.S. law.

 

Lastly, Mark Karpeles is facing his verdict on embezzlement and data tampering charges tomorrow. Depending on which way it goes (and it doesn’t look great for Karpeles), it could help draw a line under the MtGox scandal.

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Tuesday Inferno market update

TL;DR Two legs down, one leg up, reverse, rinse, repeat. The market is on a knife-edge.

 

The picture today is not so very different from the way things have looked over the last few weeks. In summary, we’re seeing periods of stagnation and price drifting along, slightly upwards, slightly downwards, but punctuated with sudden large moves both up and down. These are likely due to liquidation hunting bots or whales, which wait for longs or shorts to pile up, and then push the market in the other direction to liquidate them.

 

Bitcoin is trading above the 50 and 100-day moving averages, but still well below the 200-day MA ($4,900). There’s a resistance zone around $3,900, and the RSI is pretty neutral. We haven’t seen that push we need towards $4,200 to restore the (temporary) uptrend. Volumes are a lot higher than they have been, according to CoinMarketCap, but a lot of that is looking suspicious, with several ‘large’ exchanges likely faking volumes.

 

So bitcoin is stuck in a range, and there is still little indication of whether the next major move will be up or down. Given the state of things, we suspect that the move, when it comes, will be impressive either way. Zooming right out to the 3-day or weekly, things don’t look great; price is drifting sideways or slightly upwards, on broadly decreasing volume. It’s hard to call it a bear wedge, but it’s hardly bullish. But bitcoin constantly surprises its traders.

 

In other news, today is the 30th birthday of the World Wide Web! Congratulations Tim Berners-Lee – who is less than impressed with the state of his creation, which he says is in a ‘downward plunge to a dysfunctional future’.

 

In better news, the largest blockchain ETF starts trading on London Stock Exchange. It’s not a bitcoin ETF, and won’t directly invest in crypto – it is composed of 48 companies active in the blockchain sector.

And lastly, security website cryptosec.info has published information that proves Craig Wright is the real Satoshi Nakamoto.

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Saturday Inferno market update

TL;DR still within the channel, still awaiting instructions…

 

Despite some significant moves over the last few weeks, not least the push from $3,700 to $3,850 that took place on Tuesday and the red candle we saw yesterday, bitcoin is still stuck in its range. Consequently the trend remains unclear and expectations of what the next move might be with it.

 

To recap: bitcoin has still not made a higher high, which could indicate that the downtrend was over. To date, every major peak has been below the level of the last one. The brief push to $4,190 (Bitstamp) almost qualified, but was ultimately only a ‘fakeout’.

 

At the same time, we have not yet revisited the lows of the end of last year, when bitcoin dropped to $3,100. BTC made a higher low of $3,322 at the end of January. This level also broadly coincides with the current position of the 200-week moving average, which was the point at which bitcoin bounced from its low in December.

 

Right now, we are in a sideways holding pattern, with the range tightening. The effect is like a spring coiling. If BTC moves above $4,200, we can expect further moves higher – though this would only be the first sign that the bear market was over. Bitcoin needs to move well above this level and consolidate above $4,200 for this scenario to be valid. Conversely, we’d need a decisive move below around $3,500 to indicate to the market that support was not going to hold and that another leg lower was incoming – at which point we’d take interest in the $3,300 and $3,100 levels.

 

For now, volumes are relatively low. Traders are cautious, and under such conditions it’s easy for bots and large traders to push the market one way or another. We have seen that multiple times, shown on the chart by candles with long wicks up or down, and by the characteristic ‘Bart’ pattern.

 

By our reckoning, this impasse should resolve by the end of the month, or by the end of April at the very latest (when sloping support and resistance lines meet), though a move outside these bounds could occur at any time.

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Tuesday Inferno market update

TL;DR back to indecision – and fear.

 

At the time of writing, bitcoin is trading around the $3,720 mark, following a fall of around $100 yesterday.

 

The fakeout above $4k last weekend and subsequent plunge has rattled the markets, and pessimism has once again descended on bitcoin. The mood is turning sour, and crypto as a whole is suffering. Many alts have been posting double-digit red figures, as they give up gains in BTC terms and BTC gives up its dollar gains.

 

On the bitcoin chart, the 50 and 100 daily moving averages are now close, having flattened out in the last few weeks, and could cross soon. Price is currently above both MAs. This is all theoretically bullish, but it doesn’t feel like it at this point. The 200 DMA is still way up around $5k. Meanwhile, RSI on the one day is pretty neutral, around 50, and trending down. The recent fall has reminded us just how fragile the current situation is, and how fast things can change – for the better, and for the worse.

 

What is really telling is the flip in sentiment over the last couple of weeks. On the recent move above $4,000, Crypto Twitter was in full cry, declaring the bottom was in. That level couldn’t hold, and the abrupt crash back down below $4,000 and now to $3,700 has shown it was a lower high. We have yet to make a lower low, so at the moment BTC is still being squeezed between those two converging lines: the downward-sloping line of lower highs, and the upward-sloping line of higher lows. Resolution of that triangle is on the way, and for now, the direction of least resistance is down.

 

At the moment, there’s support at $3,600, and of course at the 200 weekly MA, which currently stands at $3,400. Then there’s the local low of $3,100, which represents the bottom for this cycle.

 

In terms of the fundamentals, there’s plenty of good stuff going on, but most of the big projects that could catalyse the next rally – Bakkt, the ETF, and so on – have gone quiet for now. No doubt their return will coincide with a confirmed uptrend for BTC.

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Friday Inferno market update

TL;DR Waiting, still waiting, for the epic move…

 

This week we have once again been in a holding pattern, awaiting the large move that is surely on the cards. A couple of times we have seen significant tremors in the market, which may be test moves for what is about to happen. On Wednesday, the price of bitcoin dropped $150 but recovered entirely within the 4h candle, leaving a long ‘shooting star’ doji; yesterday we saw a sharp move both up and down within the 4h, covering a span of around $150 but ending much where it started. These moves are most likely bots going liquidation hunting in low-volume conditions, taking out traders who put their stops in the wrong place. This is the best they can do at this point – before something more meaningful happens.

 

In terms of the bigger picture, bitcoin broke a five-month losing streak, with our first green monthly candle following five red ones. Volume is starting to rise, too. However, this does not (yet) translate to rising prices. We see that shorts may be picking up again, having potentially hit a bottom – indicating that the reaction rally may be over and traders are looking to take profits and go short.

 

Sentiment is flipping from bullish to bearish and back again, with Crypto Twitter alternating between shouting that the bottom is in and that further falls are on the cards. Looking at the daily, we can see that we still need to convincingly break $4,200 before we can reasonably call it a higher high; at the same time, we have not yet seen a lower low – so, we’re waiting for one or other of those factors to resolve, as they surely must.

 

In wider news, we’ve learned that the Bitcoin network supports 3x the yearly tx volumes that PayPal does, though of course, they can’t realistically be compared directly due to the way in which each are used and the dynamics of transfers on each (for example, a transfer to an exchange is typically forwarded to cold storage, doubling the transfer volume for that move alone).

 

Lastly, we’re still awaiting the launch of the big platforms like Bakkt and Fidelity. Bakkt have always kept their cards close to their chest and haven’t offered any updates since the US government reopened; when they do, we can expect everything to be in place already. Fidelity, meanwhile, is planning to launch towards the end of this month.

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Tuesday Inferno market update

TL;DR squeezed between a ceiling at $4,200 and an upward-sloping support line, bitcoin’s days in this range are limited.

 

Sunday saw some exciting action. Bitcoin had already taken two significant legs higher, pushing up from its local low around $3,330 earlier in the month to the $3,600s, consolidating a little before another move last Sunday into the $3,700s. Then we saw that final big move up two days ago, smashing through $4k before hitting that resistance zone at $4,100–$4,200. For a moment it looked as if bitcoin was going to make its first higher high in 14 months, but it was not to be.

 

Instead, it proved to be a fakeout, and a huge fall saw BTC take out the last support level and drop to $3,700, stopped only by the 100-day moving average it had so recently crossed. We are now at a crossroads. Bitcoin is clearly struggling to break that resistance at $4,200, where it needs to consolidate after a move up. At the same time, BTC has been making higher lows this year, and the upward-sloping support line they describe broadly coincides with that all-important 200 WMA at around $3,300.

 

Very soon, we must hit decision time. Either we will burst through $4,200 – in which case, another leg up is to be expected, to $4,400, $4,600 or potentially even as high as $5,000. Or that level will be rejected, and the ensuing fall will see the support line at $3,300 retested. If it is breached, we could see some very volatile conditions – starting with that epic move to the downside, below $3k and quite possibly down into the mid–$2,000s.

 

Whatever the technicals, the long-term fundamentals are good for bitcoin. In the last week we have seen Elon Musk come out in favour of bitcoin, adding his voice to the likes of other tech industry giants such as Jack Dorsey and Tim Draper. Also interestingly, Cambridge Associates – a global investment firm that works with institutions and wealthy private investors – have recommended that institutional investors start actively exploring crypto and allocating a percentage of their portfolios to this new asset class.

Lastly, Coinbase has added XRP – finally, to the joy of the Ripple community, who are some of the most committed fanboys in the crypto space. It may come as a shocking surprise that XRP showed significant movement higher in the hours before the announcement. Coinbase has been accused of insider trading before but found not guilty. We’ll see if the same applies this time.

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Friday Inferno market update

TL;DR the next few days are critical…

 

After the fantastic run-up we saw on Sunday and Monday, bitcoin stabilised – briefly spiking to touch exactly $4,000 (Bitstamp) but then dropping back to consolidate around $3,900, where we find ourselves now.

 

As far as the next move goes, it’s a mixed picture. On the daily, we’re above both the 50 and 100 MAs. However, volumes are dropping off and are far down from their levels in that recent rise. RSI is coming back down from overbought, as you’d expect after such a dramatic move; the market needs to take a breather. BTC is still in the resistance zone described by the downward-sloping line of lower highs since the end of last year, which also broadly coincides with the 100 DMA.

 

So let’s briefly review the conditions that would, if met, suggest a reversal could be underway:

  • Increased volumes
  • A higher high
  • Move upwards and then re-test of old support

 

In this case, that would mean a sustained move above $4,200, a higher peak and then a bounce off that $4,200 zone again. We have not yet seen the higher high, volume is still unimpressive and there has been no ‘capitulation event’. For now, then, all we can say is that the bottom cannot be confirmed on the technicals.

That hasn’t stopped Crypto Twitter from calling it anyway. Sentiment has shifted, and lots of crypto media outlets are speculating that the bottom is in. This is, frankly, not great news. While they could be right, if they are it’s only by coincidence. The level of irrational optimism sets the market up for the opposite move, and it’s quite possible we’ll see a crash back down as hopeful longs are liquidated. Many respectable analysts are still pointing to a retest of the 200 WMA, and likely a fall below $3,000 before we finally see trend reversal.

In other news, Sparkpool has temporarily frozen the 2,100 ETH fee included with one of the transactions it mined. It seems most likely that the string of insanely high fees was the result of a badly-programmed bot being deployed on mainnet, rather than money laundering or (repeated) human error.

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Tuesday Inferno market report

TL;DR Boom! A sustainable ‘Boom’? Well, that’s the 64,000 BTC question.

 

As is so often the case, bitcoin has just confounded many traders by doing the opposite of what they thought was about to happen. With almost all indicators bearish, another move downwards looked likely. In fact, what we’ve seen over the last day and a half is a dramatic move to the upside, almost touching that crucial $4,000 level. The rally has stalled – so far – at $3,955 (Bitstamp).

BTC is now trading above that very significant 50-day moving average, and indeed above the 100-day. It’s still some way off the 200 MA we discussed yesterday. And, after such a stellar uptick, it’s not surprising that the RSI is way into the overbought zone on the 4h, and touching overbought on the one day.

 

But what about the bigger picture? Has anything really changed from a chart perspective?

 

The answer to that is a very definite ‘Maybe’. There are causes for hope. That move does appear to have broken the downward-sloping resistance line (just) that has been in play since December, seeing multiple lower lows. Yesterday, the price closed more or less on that line, so it’s not conclusive – plus it coincides with the 100-day MA, so there’s strong resistance here. What we would really want to see is a daily close today above it, at the very least, and ideally a sustained move and close above the $4,200 resistance zone. At this point, it’s likely that the market will need to take a breather and consolidate, if it is to move higher.

 

We also need to bear in mind the relatively low volumes. This doesn’t look like a bottom – at least, not the kind of bottom bitcoin is used to carving out. We also need to remember the number of shakeouts and stop hunts we have seen, with whales waiting for the shorts to build up before liquidating them in the low-volume conditions; this might be a variation on that, with the opposite move coming once enough optimism has returned. But for now, we’ll take it and await developments with interest!

 

In the wider crypto world, one piece of news that’s been gaining some attention is the export deal that Argentina and Paraguay have settled in bitcoin. It was only a small amount, a barely-more-than-symbolic $7,100 worth of agricultural supplies. But that sets a massive precedence for the use of bitcoin as an international reserve currency of settlement, especially in countries that do not have a viable local currency.

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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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