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Analysis

Friday Inferno market update

  Analysis

It’s been quite a fortnight, but we’re now staring at a moment of choice for bitcoin.

 

After last week’s incredible spike upwards, we might have expected bitcoin to correct immediately. In fact, after some initial volatility, it actually pushed higher – topping $5,466 (Bitstamp) on Wednesday afternoon.

 

Given that all the indicators on the longer-term timeframes were already screaming overbought, this was remarkable. Predictably, it was only a short-term move to the upside, and yesterday saw the sell-off we expected from that, bringing the price back down to its current level of just over $5,000.

 

This a key line for bitcoin, since that original move higher took BTC above $5k. The question now is whether it will hold onto gains, or whether it will retrace further – potentially a lot further. There’s a case for suggesting we will retest the $4,200 line that proved strong resistance, and that may be support now. If that fails, then there is a serious question mark over whether the bear market is, indeed, over. If BTC falls back into its previous range, then this looks like a manipulation spike (powered by that mystery 20,000 buy) or the end of a fourth wave in an Elliott wave cycle – with a final fifth wave to play out lower.

 

Leading analysts are divided on this. Tone Vays is bearish, still expecting sub-$3k prices and a bottom sometime in the autumn. Alessio Rastani is similarly bearish, having called for a relief rally to $5,000 before this happened. Others like Willy Woo and Murad Mahmudov believe the bottom is in for bitcoin.

 

Right now, at the time of writing, BTC is holding $5,000 – just – having dipped below it recently. Despite the fall from almost $5,500, RSI for the daily has only just dropped out of overbought territory, indicating just how significant that move higher was. 50 and 200 moving averages for the daily are converging, and a ‘Golden Cross’ (the opposite of the Death Cross we saw last April) will occur in the near future unless there is another significant move to the downside. Price is currently well above the 200 MA.

 

It has been a tough week for alts, with heavy losses, powered by BTC’s falls. Alts traders are clearly looking to BTC for cues about the direction the market will take, and hedging for what they believe may happen next.

 

And whatever happens next will be significant – whichever way the market decides to go.

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China bans bitcoin – again?

  News

China is considering cracking down on Bitcoin mining, in the country’s latest attempt to separate its citizens from their beloved virtual currency.

 

Back in 2013, when bitcoin was hitting its peak of around $1,200, China stepped in and ‘banned’ it. The impact was an immediate plunge in price, which briefly recovered in November’s double top, before the long bear market of 2014 (helped by the fall of MtGox).

 

China has always had a habit of banning bitcoin, before backtracking – prompting the crypto world to suggest that officials just want to load up on cheap coins. There have been numerous points over the last five years when the People’s Bank of China (PBoC) has taken action to curtail bitcoin trading, generally by attacking exchanges themselves rather than their customers – stopping them offering high leverage, preventing financial institutions from working with them, and so on.

 

Now, it’s mining. The authorities are considering cracking down on Bitcoin and other proof-of-work crypto miners. The given reason is the amount of power these operations consume. China is a popular venue for crypto mining, with over 70% of Bitcoin’s network hashrate, thanks to its cheap power and the country’s willingness to burn its vast reserves of coal for energy. However, it is likely that there is an ulterior motive. Bitcoin offers a form of financial freedom, enabling citizens to shelter money and move it out of the country – something the government has tried to prevent in the past, through capital controls, as it tries to stimulate the economy by devaluing the currency. Mining bitcoin is effectively a way of converting Yuan into BTC, and thereby USD, should the miners wish.

 

And, with over 70% of network hashrate, that means $7 million a day or around $2.5 billion per year could be leaving the country – a small amount by Chinese standards, but enough to set a threatening precedent for PBoC.

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The four types of trader

  News

When it comes to making money from the markets, are you a butterfly, cat, dog or tortoise?

 

Anyone who trades stocks or currency markets will take a particular approach – assuming they have any clue what they’re doing, of course. We identify four main types of trader.

 

  1. Day Trader: the Butterfly

You flit in and out of trades, never spending long anywhere. You’re constantly in motion. You’re also delicate and vulnerable to being wiped out. Your close cousin, the moth, has a habit of being drawn to the light and getting burned. Either way, your lifespan tends to be short. There’s a reason they’re called day traders – many don’t last much longer than that. (Ok, so it’s really because they don’t hold positions overnight, but still – around 90% of day traders lose money.)

 

  1. Swing Trader: The Cat

You’re agile, fast, and you show little loyalty to anyone or anything so long as you can get a meal out of it. Your life consists of periods of inactivity followed by sudden movement. You might play dangerously from time to time, but you’ve got nine lives – assuming your risk control is any good.

 

  1. Position Trader: The Dog

You’re a faithful companion who takes long-term positions. Once you’ve made your decision, you stay with it – maybe for years. You’ll put up with a lot along the way, and you don’t have a lot of time for the cats of the world (in all fairness, they can treat you with disdain too). Basically, you know a good thing when you see one and you’ll stick with it.

 

  1. Buy and Hold: the Tortoise

You make a life out of doing as little as possible for decades at a time – maybe more. You take a position, then… that’s it. Your whole existence is built on the idea of inertia, letting the world come to you and making absolutely minimal effort. You’ll weather the ups and downs life throws at you, hiding away from it all if you need to for long periods of time. Your life is pretty uneventful, it has to be said, but it can also be remarkably successful – you’re one of the longest-lived animals out there and you can grow big. Incidentally, that’s why Warren Buffett looks like a tortoise.

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Tuesday Inferno market report

  Analysis

TL;DR The picture looks positive, but we’re not counting on anything – this is bitcoin, after all.

 

Bitcoin has held the $5k level after the huge move we saw a week ago, indicating this wasn’t a simple pump-and-dump. This move has some legs. All the same, we’re not complacent about this market.

 

In positive news, BTC is trading above its 200-day moving average, which currently stands around $4,650. Meanwhile the 50-day MA stands at $4,200. That’s not a large difference, and assuming price stays in its current range we can expect a ‘Golden Cross’ in the relatively near future. This is the reverse of the ‘Death Cross’ we saw back in April last year, which traders took as a very bearish signal. The 4h RSI is no longer overbought, so a move to the upside is becoming increasingly possible.

 

However, the RSI is still massively overbought on the daily. We have seen something like a double top on the 4h. Meanwhile Longs are climbing and Shorts have dropped. That potentially sets things up for a long squeeze – when lots of traders are long, a whale can push the market downwards, liquidating those longs and sending the market even lower.

 

In short, we can’t say definitively whether this is a fakeout/bulltrap, or the real deal: a new bull market. Breaking $5,400 would help, and breaking $6,000 (and consolidating above) would be outstandingly bullish. $4,200 remains the last significant resistance, broken last week, and may need to be revisited and retested as support.

 

One issue we are concerned about is that huge, 20k BTC order last week. Someone spent around $100 million across three exchanges (Coinbase, Kraken, Bitstamp) within the space of an hour, in a co-ordinated buy. Oliver von Landsberg-Sadie, CEO of cryptocurrency firm BCB Group, commented:

There has been a single order that has been algorithmically-managed across these three venues, of around 20,000 BTC. If you look at the volumes on each of those three exchanges – there were in-concert, synchronized, units of volume of around 7,000 BTC in an hour.

 

That is interesting at the very least, and potentially suspicious. Buying on exchanges with that amount of money is inefficient. Slippage can be – and was, in this instance – significant. It pushed the price up almost $1,000. So why would you do that? Clearly, because you wanted to tell the market something, as well as simply buy the coins.

 

The question is, was there an ulterior motive? Was this the first stage of a well-funded pump-and-dump, or the true bull market?

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Permabull: Bitcoin is now bullish

  News

Fundstrat’s Tom Lee, who has been relentlessly bullish for several years now, told Bloomberg that the market is now in a bull trend.

 

Bitcoin permabull and Fundstrat analyst Tom Lee has told Bloomberg that bitcoin is back in a bull trend.

 

Over the last week, we have seen the mainstream media once again dip their toes in the warm waters of bitcoin as Crypto Winter has apparently thawed. The surprise move above $5,000 – a jump of over $1,000 – has dampened criticism from those who proclaimed bitcoin’s death.

 

Lee is a noted bull, who has been calling for a bull trend ever since bitcoin came off its peak of $20,000 at the end of 2017. Lee famously predicted prices of around $50,000 back in 2017, and even recently claimed bitcoin’s ‘fair value’ was $14,000, when the market values it at a fraction of that price.

 

‘Bitcoin made a move that looks like it was based on true buying and closed above its 200-day moving average,’ he explained to Bloomberg about the recent price development. Lee’s definition of a bull market is straight forward: price remains above the 200-day moving average. So long as bitcoin goes above that 200-day value and holds it, we’re back in a bull trend, he says – so ‘Sentiment ‘has to change’.

 

Lee also cites ‘tailwinds’ for bitcoin – the dollar weakening, economic slowdown in China, and Bitcoin’s ‘OG’ or whales starting to accumulate coins again.

 

Now, he may be right. Maybe. But the problem with Tom Lee is that he is a permabull, and a permabull is like a stopped watch – it’s right twice a day. Bitcoin might be in a bear market still, and it might be in a bull market. The next few weeks should tell us for sure. But let’s not pretend that Tom Lee’s outlook on this is going to change based on the technicals or fundamentals. He’s going to be bullish at $1,000 and he’s going to be bullish at $100,000.

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Sunday digest: April 7.

  Digest

Welcome to the weekend, crypto lovers! Here are the top stories on Inferno from this week.

 

  1. Craig Wright increases the supply of Bitcoin fork BSV to 23 million
  2. Bitcoin goes crazy with s $1,000 spike
  3. We explain major cryptos with cows, cats and… well, take a look
  4. Craig is back in the headlines, and back in court – don’t laugh too hard
  5. We give our roundup of weekly crypto market action
  6. Want to buy your first coins? Check our our How-To article

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How to choose an exchange

  News

There are lots of crypto exchanges out there. What do you look for when choosing one?

 

So you want to buy (and ultimately sell) crypto. Good for you: you’re ahead of most of the rest of the population. In the coming years, that could prove a great decision. The problem is, there are a lot of crypto exchanges out there. A LOT. So, what do you look for?

 

Well, the answer is, of course, ‘It depends’. There are many exchanges and they specialise in different things. If you’re looking to trade bitcoin for profit, you might want one kind. If you’re looking to buy and sell altcoins, your needs are different again.

 

But assuming you’re just starting out and simply want to buy some bitcoin, here are some of the factors you need to consider in choosing an exchange or broker. (Exchanges let you buy and sell bitcoin from other customers; brokers sell you the coins themselves.)

 

  • Jurisdiction. Depending on where you live, different exchanges and brokers will be available to you. They have different banking arrangements, and it may be hard (or impossible) to deposit funds from certain areas, and if not perhaps expensive and time-consuming. It’s generally best to pick an exchange that has banking arrangements in the same country as your bank. Many large exchanges offer several options.
  • Liquidity. Smaller exchanges don’t tend to have great liquidity, meaning that a large buy or sell can cause ‘slippage’ – the price you get is worse than you expect. If you’re looking to buy large amounts of BTC, go for a bigger exchange (they tend to be safer too).
  • Fees. Different services have different fee structures. If you’re just looking to buy some BTC and hold for the medium-term, this won’t be too much of a problem. If you want o trade, then it’s a bigger factor because every buy or sell will incur a small cost. Brokers tend to have higher fees than exchanges, but they’re designed for lower turnover.
  • Storage. It is extremely important that you store your coins securely. If you don’t know how to do this yourself, it’s vital you learn how to create and use a Bitcoin address. You can store coins on exchanges, but it is not recommended. However, certain services are designed with secure storage in mind, and these can be a reasonable second-best option. Check out the reputation of the exchange/broker, their security measures, how often they are audited, whether they are insured, etc.

 

If you’re looking to buy and sell bitcoins for fiat (dollars, euros etc), then you realistically have a limited number of options. There are many, many smaller services, but you will get the best prices with one of the big players – and they’re more secure and reliable.

  • Coinbase. Good for US-based buyers but also serves other markets well. Brokerage and secure coin storage.
  • Bitstamp. Euro-area exchange with USD markets. Good for most of Europe but you will need to organise your own storage.
  • Uphold. Excellent brokerage service, working with many currencies. Good for storage. Worth investigating for building a long-term portfolio, wherever your location.

You can also use smaller peer-to-peer services like LocalBitcoins, but you’ll need to be happy with setting up your own bitcoin wallet.

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Friday Inferno market update

  Analysis

It’s been quite the week, but the big question is, of course – what next?

 

Bitcoin made incredible gains this week, surging over $1,000 to hit a high of $5,345. Not only was this a huge rise in its own right, but it was a landmark moment in the bear market: this was the first convinving higher high bitcoin has posted in over 15 months. It was the first indication that the bear market might be over. But it is a ‘might’, because the end of this story has not yet been written.

 

Bitcoin was hugely overbought, with the RSI well over the 70 mark on almost every timeframe – and over 90 on some. A correction was highly predictable and likely: after such a frenzy of buying, profit-taking is to be expected. Consequently the price fell by $500 to put in a local low around $4,800. The 1-day chart displays a rather bearish doji candle, and bitcoin struggled to hold $5,000. At the time of writing, the price sits at $4,940.

 

Many metrics unsurprisingly point to overbought conditions. These include on-chain metrics like NVT as well as technical indicators like RSI. (NVT Signal hit 155, which can be considered into overbought territory.) But there’s no underplaying the significance of that move.

 

So, what next? Is this a bull trap, before another leg downwards? Is this the top – or near the top – of an Elliott Wave 4, with a final 5th wave to come?

 

At the very least, technical analysis would suggest we need to retest $4,200, the zone of the breakout; old resistance should become new support if this move is to continue. That may not happen for a while but it would be characteristic of the market if it did. Despite the fact that $4,200 still lies over $600 to the downside, consolidating above that would actually be bullish.

 

Meanwhlie we now have resistance at $5,000. Should bitcoin’s price break above that again, we have a zone of interest around $5,500. Then, of course, there is the ultimate barrier to overcome: $6k, which proves such strong support on the way down.

 

If $6,000 is broken and price consolidates above that, the bull market is definitely on.

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Craig goes to court

  News

Have his lies caught up with him? We have to hope so.

 

You can’t make this stuff up. Well, actually, Craig did and now it’s looking like it’s – slowly – coming back to bite him.

 

Craig ‘Faketoshi’ Wright, who has famously and repeatedly claimed to be Bitcoin’s creator but never once supplied anything like convincing proof, is due in court today. The reason? Well…

 

He went public with his story that he and Dave Kleiman, a computer security expert who died in 2013, created Bitcoin together. As part of that process, a whole load of documents were ‘leaked’. It looks a lot like at least some of them are fake; for example, there are emails there that have domain names that weren’t registered until after the date they were apparently sent. So pretty suspicious.

 

However, Dave Kleiman’s family are taking him at his word. Ira Kleiman, David’s brother and his beneficiary, maintains that Wright defrauded him of 1.1 million BTC (currently worth over $5 billion). And central to the case is the relationship between the two men, and the work they did – together or separately – on Bitcoin.

 

Some of the documentation that has come to light suggests that Wright has been faking evidence of his early involvement in Bitcoin. There is a question about why he is doing this, that takes on an additional dimension here:

  • He wants the fame that comes with being known as Satoshi, and the business opportunities, including selling intellectual property that Satoshi (maybe Dave) and not he developed.
  • Alternatively, perhaps he really did defraud Kleiman. Perhaps this fake paper trail is designed to establish his ownership of the BTC so he doesn’t have to give billions of dollars worth of crypto to Dave’s brother.

 

It’s a mess of lies that seems like it’s finally started to catch up with him. And we love it. Hopefully the court proceedings will establish Wright’s involvement with Bitcoin once and for all.

By the way, Craig has apparently been taking legal action against people who claim he’s not Satoshi. Just so you know.

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Bitcoin cows, Eth cats, and BSV turds

  News

A while back we explained cryptos using cows, in the time-honoured tradition used for business and economics. Here’s another one along the same lines. But different.

 

Bitcoin: You have two cows. Cows are awesome, solid, reliable creatures so you keep them forever.

 

Ethereum: You have two cats. One of them is a cute, docile, friendly, loving animal who curls up on your lap every evening and snuggles you warmly. The other is a spitting, scratching hellcat who will rip your face off as soon as look at you. Both cats look exactly the same. You have no idea which one is walking up to you right now.

 

Ripple. You thought you had two cows but found on closer examination, one of them turns out to be a cardboard cut-out of a cow. When you look behind it, there isn’t even a blockchain. What you do find is some dude with a stack of sheets of card making 60 billion more fake cows. You’re kind of worried about your other cow now, so you sell it, fast, and never look back.

 

EOS. You have two banks. They cost $4 billion. The clever design of your banks means that administrators can reverse and block transactions, just like a regular bank. But these ones cost $4 billion. So that’s nice.

 

Bitcoin Cash. You have two turds. They both stink.

 

Bitcoin Cash Satoshi Vision. Roger has two turds. Craig steals one of them and adds further turd. Then Craig and Roger hurl turds backwards and forwards at each other until the whole crypto world is covered in turd. No one wants to buy any of it. Even cows are worth half as much as they were before.

 

Dogecoin. You have two dogs, of course. They are such dog, and very woof. You don’t see as much as your dogs as you used to back in 2014, but they’re probably still around here somewhere. ‘Fido? Heel boy!’

 

Binance Coin. You have two bags of money. Every time you come home they look bigger. You know it can’t last forever so you sell some. But the bags keep getting bigger anyway.

 

Tether. You have two dollar bills. Actually, they could be copies of dollar bills, it’s hard to say. The guy who gave you the bills says they’re worth $1 each, but he wouldn’t look you in the eye. You can hear the whirring of a photocopier in the background. You go next door and buy part of a cow with your dollar bills instead.

Beam: You have two of something. You just have no idea what. You don’t know where they are or how big they are, only that you have two of them. You think they might be green, but really, that’s a bit of a shot in the dark. All you know for sure is they’re not Monero because your CPU isn’t burning up.

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