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Inferno weekend analysis

It has been a week of characteristically Bart-like pumps, forming staircase upwards from the lows of $5,800 at the end of June. At one point, bitcoin had gained $1,000 on its local low, and sits a little below $6,600 at the time of writing.

On 4 July the Americans celebrated Independence Day. The holidays are generally down days for the bitcoin market, and this broadly proved to be the case: a weak push higher towards $6,800 failed to sustain momentum, and was followed by a fall below $6,500.

As things stand, resistance lies in the $6,800 zone. Pushing above $7,000 would be a positive development, but we’re still far from behaviour that could be described as bullish. But in fact, for where we are in the market cycle, this is just fine. There is a pattern to the way these things play out, and the need at the moment is for consolidation and a period of lower volatility. This will provide the foundation for the next major move up, and a sustainable rally cannot occur unless this first takes place. The long-term moving averages need time to catch up with price, which they are slowly doing. The 50-day MA is currently around $7,000 (reinforcing the existing resistance there) and the 200 MA around $9,300. In due course the price will inevitably rise above the key 50 MA level, and we will ultimately experience the ‘golden cross’ that is the counterpart to the bearish ‘death cross’ that mainstream analysts talked about so much earlier this year. In other news, the looming trade war between US and China could push money back into crypto as investors seek a safer haven and alternative play.

Whilst recent predictions have been all over the place, it is worth bearing in mind the analysis that Willy Woo put forward in May: https://www.newsbtc.com/2018/05/26/analyst-says-bitcoin-may-drop-5500-new-upside-q3-q4-2018/. In a bear market, analysts start to panic and predict overly-pessimistic outcomes — some calling for $3,000 or even $1,000, lining up with previous all-time highs or areas of activity. Woo called it pretty much perfectly, predicting that the market would bottom out in the $5,700s at the end of June before consolidating and rising again from July. Not too bullish, not too bearish. Of course it’s too early to say that this will occur, but it’s a reasonable analysis given the data.

TL;DR things are turning around, slowly — and that’s how it needs to happen.

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Saturday Inferno market report

 

Bitcoin’s daily candle closed at below $6,000 for the first time this year. Analysts are calling the bottom around $4,500-$5,000, though of course, we can never know except in hindsight.

We’ve spent most of the last week bumping along the $6,000 line, with a judder on Sunday that saw the price of bitcoin fall deeply below that level before a surprise recovery to close the day above $6k once more – possibly helped by knowledge that newly-created Tethers were about to be deployed into the market.

But that wasn’t enough to instil confidence into a very fragile situation, and on Thursday night the almost inevitable happened with a fall below that all-important support level. Sunday’s low was $5,780 (Bitstamp) and the price has already dropped a few dollars below that, so there’s little consolation here for bulls.

It also bears repeating here that volumes are not high, the implication being that these moves lack conviction. It’s more of a drift than a crash, which is what we need to resolve this bear trend: the classic sharp ‘capitulation’ fall driven by panic selling, followed by a hard bounce as smarter traders pick up coins they firmly believe are under-priced.

The fact that volumes are still low indicates we’re not at that point yet, and many so-called experts are nailing their colours to the mast with predictions in the $5,000 zone or a little below.

And here, we need extra caution. Because the market exists to make fools of as many people as possible, and bitcoin in particular has a habit of confounding expectations.

When ‘everyone’ thinks the price is going to fall, there is no one left to sell and so the opposite happens. Alternatively, those traders may find themselves caught out because they have telegraphed their move to the wider market (including whales with the firepower to manipulate the market), and found themselves on the end of further falls beyond their target buy-in price.

Crypto isn’t dead, it’s just in pain right now. Good luck, trade smart, and position carefully for the future.

Update: this report was written yesterday, before the $500 spike in bitcoin prices that occurred late last night. This is exactly the reason for caution: when ‘everyone’ think prices are heading lower, that’s the time when the market is ready to liquidate short sellers by surprising them with a move up.

Right now we don’t know whether this is part of a longer-term move or just a flash in the pan. Volumes still aren’t high enough for any degree of confidence. Watch and wait!

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Back to Basics: Crypto Fundamentals

If you bought bitcoin one year ago, you’re probably looking at a 200-300% gain. Any time before that, well – just try to find another asset class that can meet that kind of ROI.

But if you bought at any point in the last eight months, you’re sitting on a loss – maybe a heavy one. Bear markets are always miserable, and its a part of the whole psychological picture of a downtrend that it’s hard to retain perspective. That’s what leads so many traders to dump their holdings at a loss.

So at times like this, it’s always worth taking a step back and reminding yourself of the big picture. Cycles are a normal part of every market, and bitcoin’s history is one of successive bubbles. Sentiment and price do not match the reality of where the technology and adoption are at – in other words, spot price and long-term value are almost always out of sync. That’s why the contrarians who can distinguish sentiment from value do so well.

If you need to be reminded about some of the fundamentals driving the crypto economy, here are just a few:

MtGox has moved from bankruptcy proceedings to civil rehabilitation, meaning that customers can claim their share of the coins recovered from the defunct exchange. Gox’s trustee selling BTC has been blamed for the price declines since the beginning of the year. This development takes a billion dollars of supply off the market and will see many old holders credited with coins they thought they’d never see again.

The SEC has stated that it doesn’t view BTC and ETH as securities – meaning they will be regulated more lightly, and traders don’t have to worry about the bureaucracy and compliance hoops they would have had to jump through.

SegWit is live. Fees are lower than they have been in years, and delays are minimal. Exchanges have implemented transaction batching. All of this gives the bitcoin network higher capacity than ever before.

Lightning Network is being used – offering fast, super-low-cost bitcoin transactions and massive scaling potential.

There has been a surge of institutional interest in bitcoin, as well as other cryptocurrencies and blockchain technology more broadly.

Facebook has started to allow crypto ads once more, and there is a persistent rumour they want to acquire Coinbase.

All of which points to a bright future, even if the present is a dark place.

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Friday market report

Low volumes and weak support lead to a very unclear picture.

This week, we’ll take a look at two opposing views of the market, each of which make good sense and that have each gained some traction on the web and among traders. Note that although they paint very different scenarios — basically one bullish and one bearish — that doesn’t mean one of them is wrong. The market is a bit like Schrodinger’s Cat: all different scenarios exist at once, with varying degrees of probability, and the endpoint only becoming clear when it actually happens. Uncertainty is inherent in the nature of the market, and even the act of observing it can change its state.

But enough of the philosophy. Let’s get down to business.

This article by CryptoMedication pretty convincingly makes the case that bitcoin is worth at least $6,000: https://medium.com/thedailydose/crypto-market-analysis-of-the-massive-sell-off-on-june-9th-and-10th-pt-1-chart-analysis-8bbd537447b. The article analyses the heavy fall back to $6,100 that occurred two weeks ago, dropping through multiple well-established support levels. We’re currently sat in the ‘last line of defence’ zone: an area of very strong support that has been tested many times. If price falls below that, it marks a change in the psychological paradigm of bitcoin hodlers, and of market buyers. But right now, the fact that price has failed to breach this level says that the market as a whole views $6,000 as a good price for a bitcoin.

The same author has also hinted at scenarios where falls back to $4,500–5,000 could occur, which is an idea that is also gaining traction from other analysts: https://bitcoinmagazine.com/articles/bitcoin-price-analysis-shaky-support-gives-way-massive-bear-flag-set-/#1529615520. The ‘TL;DR’ of this one is that the recent fall and stabilisation paints a big ‘bear flag’: a brief respite that will be followed by another leg down. In this instance, the writer is looking at a final resting place in the mid-$4,000s. Right now, bitcoin has found support, but it’s shaky.

A few bits of news that have some relevance this week:

Korean exchange Bithumb experienced a $30 million hack, stating: ‘We checked that some of cryptocurrencies valued about $30,000,000 was stolen. Those stolen cryptocurrencies will be covered from Bithumb and all of assets are being transferring to cold wallet.’ (Guys, will you never learn?) See https://www.coindesk.com/bithumb-exchanges-31-million-hack-know-dont-know/.

The Bank of International Settlements (BIS), which is basically the central bank for the world’s central banks, has warned about cryptocurrencies — again. With the air of a man coming back to an old argument with the phrase, ‘And another thing!’, BIS has warned that crypto could break the internet, amongst other things. See https://www.smh.com.au/business/markets/bitcoin-could-break-the-internet-warns-the-bis-20180618-p4zm2l.html.

And Tether has released a report on its reserves, which has met with widespread dismissal — not because people believe the reserves aren’t there, but because it wasn’t a full audit and it wasn’t carried out by a proper auditor. In short, the continuing lack of transparency raises more questions than it answers. See https://www.reddit.com/r/BitcoinMarkets/comments/8sid45/tether_transparency_report/.

 

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Friday Inferno round-up

This week… Bitcoin headed back to levels not seen since February, touching a $6,120 low. The price has since risen to around $6,600.

There are various reasons for the crash and recovery, though the idea of ‘news’ driving the markets always has to be taken with a pinch of salt. (Bad news has a habit of being ignored in a bull market and good news in a downtrend.)

Firstly, there was the study that shows evidence that the price of BTC was manipulated by Tether creation in the run-up of 2017. This will come as no surprise to anyone in the crypto world, but was heavily featured in the mainstream news. See Inferno’s post, https://telegra.ph/The-University-of-Texass-Tether-study-is-a-lot-like-watching-The-Force-Awakens-06-14.

The immediate catalyst for the move upwards appears to have been the news that the SEC has finally decided bitcoin and Ether are not securities: https://www.wired.com/story/sec-ether-bitcoin-not-securities/. Most ICOs do qualify as securities, however. This situation is, again, much as the majority of the crypto world expected.

In ‘offbeat’ news, Star Trek’s William Shatner has joined forces with the Solar Alliance to promote sun-powered bitcoin mining: https://news.bitcoin.com/william-shatner-joins-bitcoin-mining-project-admits-he-doesnt-quite-get-it/.

Steve Bannon, Breitbart co-founder and former chief strategist to Donald J. Trump, has also gone on the record as being in favour of bitcoin: https://www.nytimes.com/2018/06/14/technology/steve-bannon-bitcoin.html. Bannon owns a significant amount of bitcoin, and is considering creating his own cryptocurrency, liking the disruption the concept poses to the banking system.

Finally, someone has been trolling Craig ‘Satoshi’ Wright: https://twitter.com/kanzure/status/1007441372209655808?s=21. The Bitcoin Alert Key is a key used to notify all clients about critical network problems, though it was retired some time ago and is no longer used. In his tweet, Brian Bishop is making the point that although numerous people share the Alert key, it is not publicly known. If Craig Wright was Satoshi, or closely involved at the early stages of bitcoin, he would have it. He does not.

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Friday Inferno market report and round-up

The $7,800 ceiling that we noted on Tuesday (https://telegra.ph/Tuesdays-Inferno-market-report-06-05) remains intact, with bitcoin bumping up against it once again yesterday, before dropping back. If the same pattern continues to play out this will paint a higher low, before bitcoin once again takes a run at that resistance level – and, this time, hopefully breaks through it. As we also noted on Tuesday, the deadline for a significant move is approaching, since the long-term rising support line will place more and more pressure on the price as it pushes towards $7,800. One way or another, the days of sideways movement will soon be over.

On Twitter, Armin van Bitcoin paints this bullish picture for bitcoin, noting the months-long consolidation: https://twitter.com/ArminVanBitcoin/status/1004011244238594048. It’s also interesting that Google searches for ‘bitcoin’ (which have historically correlated well with price) are down 75% from January: https://www.investopedia.com/news/google-searches-bitcoin-down-75/. That’s worth watching as an indication of what might happen next.

Meanwhile, the fundamentals are pretty good. Venezuelans are buying more bitcoin, though that shouldn’t be a surprise for a country with 25,000% inflation: https://cointelegraph.com/news/bitcoin-buying-on-the-rise-again-in-venezuela

And the prospect of ‘Italeave’ (Italy exiting the Eurozone) has prompted renewed awareness of bitcoin as a safe haven asset: https://bravenewcoin.com/news/italexit-prompts-speculation-that-bitcoin-is-a-new-safe-haven-asset/

That’s all for now! Stay tuned for the next Inferno post.

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Friday crypto round-up

What’s been going on in the wonderful world of crypto this week? Well, starting with the markets…

The total market cap of crypto has started rising again after bitcoin bottomed out around $7,000. Last time that happened, market cap almost doubled from less than $250 billion on 1 April to $470 billion five weeks later. It’s too early to know whether this is a sustainable rise, but it looks like money is starting to come into the overall cryptosphere again: https://coinmarketcap.com/charts/.

One of the factors that will help that process is better on-ramps and off-ramps for fiat, and Bittrex has just announced it’s managed to get a USD banking partner: https://www.bloomberg.com/news/articles/2018-05-31/bittrex-gets-bank-agreement-to-help-you-buy-bitcoin-with-dollarsCustomers will now be able to deposit dollars and trade them against bitcoin, Tether and TrueUSD, another stablecoin like USDT (though not as controversial). Meanwhile on the other side of the world, no fewer than six Japanese public companies plan to launch crypto exchanges.

We’ve been seeing the ‘Bart Simpson’ patterns in the markets again. These are most obvious on the 1-hour chart and take the form of a fast spike up, a jagged top and then an equally swift crash. They have been a feature of the bear market for the last few months, and may signal manipulation by large players: https://themerkle.com/what-is-the-bart-pattern/The most recent Barts have lacked the downstroke, signalling that perhaps something else is going on now. The other ‘pattern’ to watch is the 6 pattern: the theory that a medium-term reversal happens on the 6th of every month: https://telegra.ph/Sixth-Sense-05-30

There’s been some interest in bitcoin as an early warning system for problems in the wider financial markets: apparently, there’s a strong correlation between bitcoin 30 days ago and the VIX or ‘Fear Index’, a measure of volatility: https://www.cnbc.com/2018/05/29/bitcoin-is-the-markets-new-fear-gauge-investor-says.html

And lastly, the SEC has gone after Michael Stollaire, a self-professed ‘blockchain evangelist’ who conducted an ICO under the influence of thinking it was still 2015. Stollaire fraudulently claimed he had dozens of major partners including Disney and Boeing for his Titanium token sale (see

https://www.sec.gov/news/press-release/2018-94).

11.05.2018 Inferno market roundup

Bitcoin has taken a bit of a hit after pushing that $10,000 high. After touching that critical resistance level, BTC dropped back to the $9,000 mark before returning to a more stable level just under $9,400.

The apparent recovery suddenly changed with a surprise crash back down towards $9,000. This is no big deal in its own right, though it does mean bitcoin posted a lower high before dropping again. That’s against the backdrop of higher highs we’ve seen recently.

The move takes place at a time when significant rises in price might be expected. The Consensus conference will take place in New York next week: https://www.coindesk.com/events/consensus-2018/

Consensus is a huge blockchain summit. The awareness it brings to bitcoin typically prompts a bump in price – and this year attendance is expected to be higher than ever. So the price action at this point is interesting. It might be a ‘sell the news’ fall. That is, if everyone is expecting the price to rise, it is actually more likely to fall because buyers have already made their move. Under those circumstances, smart traders will unload early because they know so many other people will be playing the same game – the one who sells first wins. Alternatively, it might be good old manipulation: whales pushing down the price to take advantage of temporarily depressed prices and stocking up before a rise in price next week.

Expectations are certainly high, with some prominent voices like Fundstrat’s Tom Lee predicting a major post-conference rally. ‘In 2017, attendance at the conference doubled from the previous year. The value of Bitcoin increased by 69 percent during the meeting. In the two months after Consensus, Bitcoin was up by 138 percent. Lee is expecting this pattern to hold, believing that the results this year might even be more significant. For one thing, the 2018 Consensus conference is expected to gather twice as many participants as last year’s event. More than 2,750 people attended the summit in Manhattan in 2017.’  (https://bitcoinist.com/analyst-predicts-consensus-conference-will-trigger-bitcoin-price-increase/) Lee is predicting an incoming all-time high and $25k by the end of the year.

04.05.2018 Friday market analysis and round-up

Pushing $10k once again, it’s a key point for crypto – and possibly the start of something truly special.

Interest is returning to the crypto markets. Bitcoin has risen significantly over the last two weeks and there are signs that the long-awaited alts season has begun.

We always knew it would take more than one attempt to push through the $10,000 mark – a psychological barrier as well as the current level of the 200 MA. Yesterday traders bought the price up towards the critical zone for the second time – the first being on Tuesday, when BTC topped out at $9,755 (Bitstamp). This time it hit $9,800, a higher high. There’s certainly resistance here, but it won’t hold forever.

Money is pouring back into the alts markets too, with many coins posting very significant gains. Looking at the overall crypto market cap charts (https://coinmarketcap.com/charts/), it’s clear that since mid-April, fresh fiat has been coming into the crypto world: this isn’t the same money being recycled between BTC and alts as traders seek to make profits in a bear market. Both are seeing gains.

That’s very encouraging, and if it continues we are likely to see some significant appreciation across the board. There is no immediate reason to think that won’t be the case, which would make this the beginning of the next rally. The summer is set to be hot.

Meanwhile, Venezuela has certified 16 crypto exchanges as part of its efforts to secure liquidity for the Petro which, President Nicolas Maduro claims, has raised $3 billion at pre-ICO. The Petro will either become a major international crypto resource, or blockchain’s largest scam of all time. You can read more about the Petro at https://news.bitcoin.com/venezuela-certifies-cryptocurrency-exchanges/

27.04.2018 Friday Inferno market analysis

It’s been another volatile week for bitcoin, but closing above $9,000 is good news. 

Earlier this week we noted that bitcoin had tentatively flipped back to bullish mode. In fact, it looked set to push above the closely-watched $10,000 mark, rising as high as $9,755 (Bitstamp).

However, these moves rarely happen as decisively and cleanly as that. You’ll remember that earlier this year, the bitcoin charts described a ‘Death Cross’ formation: when daily 50 moving average crosses the 200 MA. The 200 MA is currently just below $10k, and bitcoin bounced back off it from its high on Wednesday. That’s only to be expected, since traders will naturally be wary of such a big milestone and are likely to take profits and de-risk as the price approaches this zone. The chances are it will need a couple more runs at least to push through the 200 MA and over $10k.

That retrace saw a $1,100 drop down to $8,654. BTC has since climbed back over $9,000 and is currently sitting around $9,300 – where it was at the beginning of this week. It’s still out of that downward channel and still over $9,000, so there’s been no fundamental change in the last few days.

In other news, the 17 millionth bitcoin has now been mined, meaning there are just 4 million more to go. Binance has surpassed Deutsche Bank in profitability, which isn’t at all embarrassing for Germany’s largest bank (https://www.ccn.com/binance-surpassed-germanys-biggest-bank-deutsche-in-profitability/). Binance’s second-quarter profits were $200 million. Meanwhile another potential smart contract bug was discovered, prompting major exchanges to halt trading of ERC20 tokens. The concern was that the batchOverflow bug would enable an attacker to create millions of new tokens, which could then be dumped on the market.

Lastly, Bill Harris, former PayPal CEO, has told CNBC that bitcoin is the ‘greatest scam in history’ (https://twitter.com/CNBC/status/989622582352711681). Doubtless no one will be surprised that this particular turkey has declined to vote for Christmas.

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