2 Reasons a Deeper Correction in Stocks May End Bitcoin’s Rally to $8K

Bitcoin price could see a rally to $8,000 following the breakout to $7,000, but a potential selloff in stocks could put BTC at risk of revisiting new lows.

The Bitcoin price (BTC) rallied to around $7,300 on April 3, and BTC is still holding onto the $6,700 support level, meaning the price could push the dominant cryptocurrency to the $8,000 area. But, a highly accurate hedge fund manager’s stock market warning could rattle the cryptocurrency market in the short-term.

Dan Niles, the founding partner of Alpha One Capital Partners, said in a note to clients that the dire economic consequence of the coronavirus pandemic could lead to a steeper correction in the U.S. stock market.

With Q2 earnings set to be released in the coming weeks, jobless claims exceeding 10 million, and major European economics in free fall, the appetite for high-risk assets that include single stocks and crypto assets could fade once again.

Fakeout rallies have occurred frequently in 2020

As Cointelegraph previously reported, prominent trader PentarhUdi predicted the Bitcoin price to recover from $5,200 to the 200-week simple moving average (SMA) at $8,500 before it eventually grinds back down to the $3,000 region.

The pattern of a strong rally leading straight to an intense selloff has already been seen multiple times in the past 12 months. This is the result of Bitcoin’s price abruptly surging in a short period of time and shaking out late shorters in the market. This gives whales time to adjust their positions, often leading to a severe correction afterward.

Since late March, the Bitcoin price has broken out of its correlation with the U.S. stock market. Previously, BTC closely followed the movement in the U.S. stock market, going as far as reacting to pre-market trading of the Dow Jones Industrial Average.

As such, even if the price of Bitcoin sees a large upside movement to the $7,700 to $8,500 range in the short term, the price remains vulnerable to a pullback to the $3,000 to $5,000 area.

BTC USDT daily chart. Source: TradingView

BTC USDT daily chart. Source: TradingView

Bitcoin’s V-shape recovery makes it vulnerable

The March 12 drop to $3,750 could have technically caused the Bitcoin price to flash crash to zero as discussed by a few industry executives. Fortunately for investors, the price impressively rebounded from $3,600 to $6,700 with barely any pullback apart from a brief wick down to $4,400.

The stock market also demonstrated a similar V-shape recovery as Bitcoin, prompting renowned strategists to predict a deeper correction in the upcoming weeks.

Niles said about the stock market:

“I sort of laugh when I hear people talking about a V-shaped recovery because we are going to have at least 10% unemployment, my guess is closer to 20% before all of this is said and done.”

Liquidated longs remain a threat

The same argument for the lack of strength of a V-shaped recovery in the equities market can be applied with Bitcoin. Given that the cryptocurrency has not established strong support levels during its recovery to the $6,700 to $7,300 range, it faces a risk of a March 12-esque fall where a significant amount of long contracts are liquidated in a short period of time.

A long accumulation phase, in contrast to a V-shape recovery, allows spot volume to grow and actual retail investors to buy into the market, rather than highly-leveraged futures orders affecting the short-term price trend of BTC.

Like gold with previous crises, Bitcoin will thrive after coronavirus, research shows

Bitcoin showed a tight correlation with the U.S. stock market for about two weeks from March 12, raising concerns among investors that cryptocurrencies are just as vulnerable to a financial crisis as stocks and other high-risk assets.

A study from Seba, a Swiss banking startup that raised $103 million in 2018, showed that gold performed similarly to Bitcoin in previous crises. Over time, however, gold broke out from its correlation with the stock market, and Bitcoin could do the same.

Still a chance for Bitcoin to work as a safe haven asset

During the Dot-com bubble in 2000, for example, the price of gold moved in tandem with the stock market for about three months before the correlation broke down.

After the initial panic period where the overwhelming majority of investors and institutions frantically sold off assets, markets stabilized and gold began to see an upward trend.

Seba’s research read:

“Gold performed differently in the three crises. Gold’s correlation with S&P saw sharp spikes during crisis periods, however, over the longer term, there are no doubts regarding gold’s position as a diversifier. Over the past 30 years, the correlation between gold and S&P500 averages -0.05.”

gold bitcoin
Gold Vs. S&P 500 correlation in Dot-com bubble is similar to Bitcoin (source: Seba)

Gold behaved similarly to how the Bitcoin price moved as the U.S. stock market crashed following an abrupt spike in the number of coronavirus cases in the U.S.

Bitcoin fell when the Dow Jones slipped, even during pre-market trading, and it recovered as the Dow Jones rebounded. But, eventually, within less than two weeks, the correlation has worn off and the Bitcoin price started to rally despite the downtrend in the equities market.

Observing the low level of correlation between Bitcoin and the stock market as of late, researchers at Seba said:

“After the recent sell-off, the correlation has shrunk. This behaviour is similar to what we have observed with gold and S&P 500 during the dot-com bubble burst. Therefore, dismissing that bitcoin offers diversification based on short bursts of high correlation is not a good strategy in our view.”

Currently, the market cap of Bitcoin is hovering at around $125 billion. That is a market cap lower than most major corporations in the U.S.

As the market cap of Bitcoin grows with stronger infrastructure and a larger base of investors, it is likely to see lower volatility and correlation with the broader financial market.

bitcoin
Correlation between Bitcoin and S&P 500 (source: Seba)

Long-term future of BTC still bright

Seba’s paper emphasized that the correlation between Bitcoin and the stock market in the latter half of March does not indicate a gloomy long-term outlook for BTC.

The paper further read:

“The outside money characteristics of bitcoin coupled with bitcoin’s ability to continue to operate in phases where the price remains low, and unaffected demand for stablecoins even after the recent crash suggest that the long-term future of the field is intact.”

Following the crash of Bitcoin to $3,600, many investors moved their funds to stablecoins rather than moving their capital out of exchanges completely to fiat, which indicates that investors are readying to enter the market in the near-term.

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Past Halvings in Review: Case for an Immediate Bitcoin Upsurge Is Flawed

The case for an immediate Bitcoin price spike after the halving in May is flawed, past data shows.

The block reward halving of Bitcoin (BTC) has long been touted as an optimistic factor to drive the short-term price trend of BTC in the first half of 2020. Historical data, however, shows that the halving does not necessarily coincide with an immediate upsurge in the price of Bitcoin.

On the Bitcoin network, miners create blocks that record Bitcoin transactions to essentially verify and confirm payment data using computing power. Through large-scale mining centers filled with ASIC mining chips and sophisticated equipment, miners use a large amount of electricity and have high maintenance costs in order to mine BTC. Individual or small producers can mine BTC through pools — i.e., a group of miners that work together by contributing their computing power to mine Bitcoin blocks.

Every four years, the reward of mining Bitcoin halves, dropping the revenues of miners by 50%. Often, miners prepare for halvings by saving six to 12 months of cash as a buffer to ensure that even if Bitcoin’s price drops after the halving, their businesses can be sustained.

What does the historical data say?

The first halving of the Bitcoin network occurred on Nov. 28, 2012. At the time, there were only a handful of major cryptocurrency exchanges that facilitated Bitcoin trading, and it was still relatively difficult to purchase Bitcoin. For that reason, many analysts made the argument that market data prior to 2016 — when there were a limited number of exchanges — may not be reliable.

BTC USDT 1-month chart. Source: TradingView

BTC USDT 1-month chart. Source: TradingView

After the first halving in 2012, the price of Bitcoin took about 11 months to enter a parabolic rally, securing extended upward momentum. In November 2012, the price was hovering at around $12 on Bitstamp. In November 2013, Bitcoin had climbed to as high as $1,100, recording a 7,562% increase in price.

The second halving of the Bitcoin network occurred in July 2016. Coming off of a sharp price decline from $1,100, the price of BTC stabilized at around $600. The price then started to see a strong rally in May 2017, exactly 11 months after the halving occurred — just like in 2012. So, the past two halvings show that Bitcoin’s price tends to see a vertical rally 10 to 11 months after the halvings took place, but not immediately after.

Why does the Bitcoin price rally many months after halvings?

Large miners tend to save a cash-buffer for up to 12 months prior to a block reward halving, as the risk of the BTC price going down subsequent to a mining revenue cut is always present. But, small miners do not have the financial means or resources to prepare for the halving in advance.

Various data points, including Digital Assets Data’s 21-Day Miner's Rolling Inventory, show that miners have been selling more BTC than they mine in recent weeks. As hinted by major investors such as Joe007, arguably the biggest whale on Bitfinex, the potential sell-off of BTC by miners has not been priced into the market.

When small miners continue to sell their Bitcoin, it applies increasing selling pressure on the cryptocurrency exchange market. Some miners tend to sell crypto assets through the over-the-counter market; over time, however, OTC data also gets reflected by the cryptocurrency exchange market.

In mid-March, Joe007 warned that “overleveraged miners” will be unbelievably hurt by the time the halving comes, which could translate to the capitulation of some miners and, ultimately, the sell-off of Bitcoin through both exchanges and OTC platforms.

Why do investors expect the Bitcoin price to increase after the halving?

The main reason behind the widespread expectation of a short-term increase in the price of Bitcoin following the block reward halving in May is that the breakeven price of Bitcoin mining increases to anywhere between $12,000 to $15,000, as TradeBlock’s head of research, John Todaro, stated earlier in 2020. Many investors theorized that since it costs $12,000 to mine Bitcoin, it would be logical to have the BTC price above $12,000 after the halving.

While BTC could eventually enter the $12,000 to $15,000 range in the future, major miners prepare large cash-buffers precisely as a countermeasure against a possible dip in the price of Bitcoin subsequent to the halving.

Todaro’s research also found that newer mining equipment is consistently being developed by major companies like Bitmain and Canaan, which also makes it a variable in calculating the breakeven price of mining. Efficient mining equipment, together with cheaper electricity and resources, can substantially decrease the breakeven price of mining, even after a halving occurs, according to research by TradeBlock.

For large miners that have the cash-buffer and resources to speedily obtain new mining equipment, the eventual drop in mining difficulty through automatic adjustments make it possible to sustain their businesses through the early months following a halving.

What’s next for BTC?

If the Bitcoin price trend follows historical performance, as seen in 2012 and 2016, then Bitcoin should increase significantly in mid-2021, 10 to 11 months out from the halving scheduled to be activated in May. As such, there is a strong possibility that price will remain well below the breakeven price of mining over the next few months.

However, the popular theory that the hash rate of the Bitcoin network could reflect the decline in mining revenues — and thus lead to a “death spiral” to severely downgrade the Bitcoin network security — has not been proven to be accurate, based on historical data and on-chain research.

Despite the halving being one month out, the hash rate of the Bitcoin network has dropped only to December 2019 levels. Because the network’s hash rate has consistently achieved new record highs throughout the past two years, there is a low probability that the halving would have a noticeably large negative impact on the hash rate.

Source: Blockchain.com

Source: Blockchain.com

A study by BitMEX found a variety of scenarios that could play out, such as: “The halvening has a much larger impact on the network hashrate, causing a 47% decline” or one in which “the halvening only caused a 12% drop in the network hashrate.”

That means that even if Bitcoin’s price remains below the cost to mine BTC and stays that way for the next three to four months, and given that large miners tend to prepare in advance and that hash rate rarely drops by a large margin, the hash rate of the Bitcoin network is likely to remain stable until the BTC price begins to reflect the cost of mining.

The halving may shake out overleveraged and small miners in the near-term, the same way a drop in the price of Bitcoin can shake out overleveraged traders, as it is not likely to trigger an immediate price spike of BTC. But over the medium to long term, the fundamentals of the Bitcoin network and mining ecosystem are expected to remain strong.

Both minor and major acquisitions in the mining sector are ongoing despite the market dip and the stagnation in the cryptocurrency market, as seen in a $2.8 million acquisition of a Bitcoin mining center in Quebec, Canada on March 30, 2020. This suggests that miners expect a short-term drop-off in the global cryptocurrency mining sector, but a recovery over the long run.

$8.5K Then $3K — This Trader’s Bitcoin Price Call Is Playing Out to a T

Bitcoin price has shown a strong recovery over the past two weeks but there is still a chance that a rally to $8,500 could be a bull trap.

The Bitcoin price (BTC) has recovered strongly from $5,200 to $7,200 in the past two weeks, despite the declining appetite for high-risk assets including single-stocks and cryptocurrencies. 

One prominent trader predicted the entire price movement of Bitcoin since its initial drop from $10,500 to sub-$6,000, and in the medium-term, the digital asset’s trend remains gloomy.

Crypto market daily price chart. Source: Coin360

The rationale behind a short-term rally to $8,500

PentarhUdi, a well known technical analyst and trader who has deftly predicted multiple Bitcoin market cycles in the past, initially estimated that Bitcoin price would plunge from $10,500 to $5,800 in the first week of February.

On February 10, 2020, the trader explained that based on candlestick wicks, $10,500 was technically a lower low at a macro level and given that this level was a historically heavy resistance, a drop to $5,800 was highly probable.

Citing PentarUdi’s $10,500 to $5,800 prediction, crypto whale and Bitfinex trader Joe007 said

“There is one, and only one, TA analyst in the world that I really respect, and just today, a few hours ago, he came up with this piece of analysis.”

Due to a significant selloff in the U.S. stock market and the worsening Coronavirus pandemic that has since swept across the U.S. and Europe, the price of Bitcoin over extended its downtrend and fell to $3,600 on crypto futures exchanges.

The fact that buyers quickly stepped in to buy the dip and pushed the price from $3,600 to $5,200 led PentarUdi to suggest that Bitcoin price is likely to rally to $8,500 over the short term.

PentarUdi stated:

“This should bounce up from weekly sma 200 ($5,200) up to daily sma 200 ($8,500). Break up of the upper trend line invalidates this bearish count. I remind this is a hypothetical bearish outcome of previously published ideas.”

As a note of caution, PentarhUdi warned that as a result of the current global financial panic, Bitcoin is still likely to fall below $3,000 after rebounding past $8,000.

According to the trader:

“I got a bearish target between $1,800 and $2,500. In this case weekly 200 SMA will be broken and become resistance. Many times and affords will require to break it up and make it support.”

BTC-USDT daily chart. Source: TradingView

In short, Bitcoin price is currently seeing a relief rally to the 200-day SMA, a point which has acted as a strong resistance area throughout the past several years. Yet, there is a strong possibility that the entire rally becomes susceptible to a deep correction.

The next upside move could be a fake-out

With instability in the global equities market and dire warnings from governments that the novel Coronavirus pandemic could potentially lead to increased deaths over the next several months, a recovery to $8,500 could still be a bull trap.

On March 29, Anthony Fauci, the director of the U.S. National Institute of Allergy and Infectious Diseases said that the Coronavirus could potentially lead to 200,000 fatalities.

If efforts to contain the outbreak in the U.S. and Europe fail and the development of a vaccine takes 12 to 18 months, the sentiment in crypto and equities markets could take an even deeper bearish turn.

Here’s Why Bitcoin Price Just Spiked to $7.3K, Liquidating $90M

The Bitcoin price spiked from $6,900 to $7,300, liquidating $90 million on BitMEX and Bitfinex alone.

The Bitcoin (BTC) price spiked from $6,900 to $7,300 across major cryptocurrency exchanges, liquidating $90 million on BitMEX and Bitfinex alone.

While several traders anticipated the Bitcoin price to see a strong upsurge as it breaks out of the $6,900 resistance level, the abrupt upsurge to $7,300 caught many technical analysts off guard.

What happens next to Bitcoin?

The Bitcoin price is often susceptible to large downside movements as seen on March 12, when the price dropped to $3,600 from $8,000 on a single day.

Bitcoin tends to see overextended price movements because of the concentration of its volume in the futures market. According to the data from Bitwise Asset Management, the verifiable 24-hour spot volume of Bitcoin is estimated to be around $1.5 billion. 

In contrast, BitMEX alone has processed $2.9 billion in the last 24 hours, with Binance Futures, OKEx, Huobi, Bybit and Deribit also seeing high volumes across top cryptocurrencies including Bitcoin and Ethereum.

On futures exchanges, traders typically use leverage ranging from 1x to 125x, essentially trading with borrowed capital with debt. Leveraged trades leave the market vulnerable to extreme price swings, as they lead long contracts and short contracts to be liquidated in short periods of time.

Prior to the drop, the majority of traders in the crypto market were longing Bitcoin. Across BitMEX, Binance Futures, and Bitfinex, around 60 percent of futures contracts were longs.

The steady increase in buying demand started to squeeze Bitcoin shorts, forcing traders to market buy and adjust their positions. The squeeze continued on past $7,000, bringing the price of BTC to $7,300 in quick succession.

BTC-USDT daily chart

BTC-USDT daily chart. Source: TradingView

Highly regarded traders like Flood previously said that the strong recovery of Bitcoin from the $5,900 support level would likely result in a new test of higher resistance levels.

If shorts liquidation was the main reason, isn’t it a bearish retest?

Had the entire move been triggered by a cascade of short liquidations from low levels, it would make a solid case for a short-term bearish retest.

But, since late March, the gradual increase in the price of Bitcoin since low $6,000s has primarily been led by growing spot volume and demand.

In a report, major cryptocurrency exchange Coinbase said that retail investors increasingly bought Bitcoin following the crash to $3,600.

“Our customers typically buy 60% more than they sell but during the crash this jumped to 67%, taking advantage of market troughs and representing strong demand for crypto assets even during extreme volatility,” said Coinbase.

A spot market-driven rally that is supplemented with shorts liquidation presents a more optimistic short-term outlook than just a futures market-driven price spike.

The key to sustaining the newly found short-term momentum of Bitcoin would be a slow grind upwards following the initial rapid increase to $7,300.

Keep track of top crypto markets in real time here

Data shows 65% of the market is longing Bitcoin, but this key reason could spoil the rally

The overwhelming majority of traders in the crypto market are currently longing Bitcoin, data shows. While some technical indicators point toward a rally to the $8,200 resistance area, the large amount of longs leave the market vulnerable for a potential squeeze.

On both Binance Futures and BitMEX, the funding rate of the Bitcoin futures contract have stabilized at 0.01%. That means, holders of long contracts or buyers are compensating shorters or sellers to balance the market.

Traders are anticipating a rally to $8,000-$8,200 range for Bitcoin

The Bitcoin price has been in a relatively tight range between $5,800 to $6,900 since March 20, for well over 12 days.

When the market is majority long, historical data suggests that the Bitcoin price tends to correct to “punish” late buyers. The low liquidity in the futures market in the aftermath of the March 12 plunge to $3,600 could amplify the sell-off in the near-term.

Josh Rager, a prominent cryptocurrency trader, said that the $6,600 level would need to hold to make a bullish case for the Bitcoin price. He also noted that BTC surged by 7 percent within a four-hour span, which would make it the strongest price move in nine days.

Rager said:

“From support straight into resistance. I’m holding off making the next move until we can see follow up through this level, otherwise, it’s just going to break down here. Needs to hold $6600s”

bitcoin price
Bitcoin price spikes 7 percent in 4 hours (source: Josh Rager)

Raoul Pal, the CEO of Global Macro Investor, said that the price trend of Bitcoin still remains unclear in the short-term, with $7,000 acting as a heavy level of resistance for the dominant cryptocurrency.

In the long-term, however, Pal noted that Bitcoin is a “beauty.” He explained that the macro chart of BTC remains highly optimistic, as it presents a solid long-term risk-reward.

Pal stated:

“I’m a terrible short term trader. But, the Bitcoin chart looks like a nice wedge with a breakout to about $7,000. Maybe the low is in? I thought a re-test was likely but not so sure.

But the long-term chart, now that is a thing of beauty….I still think Bitcoin is the best long-term risk reward of any asset class I’ve ever seen. A good risk reward however is not a guarantee of reward.”

At a larger scale, the Bitcoin price looks to be consolidating in the $3,000 to $7,000 range, right above the lowest downtrend line. Based on the tendency of the Bitcoin price to undergo months of consolidation following a large drop, another leg down would strengthen BTC’s long-term price trend.

Bitcoin price
Macro trend of the Bitcoin price (source: Raoul Pal)

Volume is growing

After an initial plunge in mid-March, the daily volume of Bitcoin has started to pick up in the past week. Both futures and spot volumes are starting to pick up, as the Bitcoin price nears a key resistance zone.

The current price action of Bitcoin suggests that a failure to cleanly break out of $6,900 could cause a revisit of recent lows, with an imminent support level at $5,800.

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Ethereum’s .org website now uploaded on IPFS: What is IPFS and how does it differ from blockchain?

The popular Ethereum Foundation website Ethereum.org is now operating on the Interplanetary File System (IPFS), according to Ethereum co-founder Vitalik Buterin. Many users confuse the IPFS as a blockchain network. The closest system resembling IPFS is the HTTP; simply put, IPFS is a decentralized version of the web.

IPFS is not a blockchain, but it can interoperate with a blockchain

The IPFS itself is not a blockchain. It is a distributed protocol of nodes that allow users to store and transfer data in a peer-to-peer manner.

RTrade CEO talks Interplanetary File System (IPFS) – potential applications, challenges of good user experience for crypto/web3 devs, ETH 2.0 & ENS Domains
Related: RTrade CEO talks Interplanetary File System (IPFS) – potential applications, challenges of good user experience for crypto/web3 devs, ETH 2.0 & ENS Domains

For instance, if one user requests a piece of data on the IPFS network, the node of the data uploader then shares the information with the node that requests it.

As ProtoSchool describes it:

“As a peer-to-peer data storage system, IPFS allows each user (peer) to host whatever data they’d like locally. When you first add new content to IPFS, you’re really just setting it up on your own machine in a format suitable for sharing via the IPFS protocol.”

When a user uploads data to the Ethereum network, as an example, the data is then embedded into the blocks of the blockchain, stored on the blockchain.

However, on IPFS, the data is stored locally on the system of the uploader, and is shared to other users on the protocol.

Structurally, the IPFS is more similar to a torrent protocol than a blockchain network. The main advantage of the IPFS is that unlike the Bittorrent protocol, as an example, it works as a swarm of node operators, making data processing more efficient.

ethereum IPFS
Traditional internet compared to IPFS

Here’s why IPFS works well with blockchain

On an immutable blockchain network like Ethereum, IPFS users can upload links to the data stored on the IPFS protocol to Ethereum. Since they are merely links, they do not impose significant pressure on the blockchain network like raw data would.

IPFS was also designed in a way that allows it to seamlessly interoperate with blockchain networks, and make them readily accessible.

The IPFS website reads:

“IPFS lets you address large amounts of data and place the immutable, permanent links into blockchain transactions. This timestamps and secures content without having to put the data itself on the chain.”

Over the long run, as the trend shifts from centralized to decentralized systems starting with the shift from normal currencies to Bitcoin, IPFS and the decentralized web would provide an alternative to the existing web system.

Some countries, like Russia and China, have already developed a centralized version of HTTP called the Chinese New IP, which makes systems like IPFS more favorable.

The post Ethereum’s .org website now uploaded on IPFS: What is IPFS and how does it differ from blockchain? appeared first on CryptoSlate.

Q2 historically generated large gains for Bitcoin, but this time may be different

Historically, the Bitcoin price has tended to increase in the second quarter of every year. In the past six years, with the exception of 2018, BTC’s price has increased by 80 percent on average from April to June.

However, 2018 was an odd year out during which the Bitcoin price dropped by 8 percent in its second quarter. There is a possibility that 2020 replicates its performance two years ago given the gloomy macro outlook in the U.S. and the declining sentiment around high-risk assets.

bitcoin price
Every Q2 performance of Bitcoin in the past six years (source: Skew)

Sentiment is gloomy: a scenario in which Bitcoin ends Q2 with a positive

The short-term trend of the Bitcoin price remains dim as the decline in the volume of cryptocurrencies across futures and spot exchanges leaves the market vulnerable to a sudden sell-off.

When the Bitcoin price sees an abrupt capitulation-esque drop to some of the lowest support levels and recovers, it typically suggests that a long accumulation phase or consolidation phase is likely to follow.

The crypto market’s early-March meltdown revealed something super bullish for Bitcoin
Related: The crypto market’s early-March meltdown revealed something super bullish for Bitcoin

For instance, in Sept. 2019, the Bitcoin price plunged from around $10,900 to $7,330. The following month, the Bitcoin price suddenly spiked to over $10,000, only to fall to a lower area of support at $6,410. A similar trend was also seen in previous years, most notably in 2018.

Some prominent investors, like Placeholder’s Chris Burniske, have argued that technical indicators and structures point toward the bottom not being in for Bitcoin.

That means the $3,600 to $3,800 range the Bitcoin price plummeted to on March 12 may not be the bottom, based on certain data points.

For a strong extended rally to materialize heading towards the end of 2020, a firm support area has to be established. Often, such support can only be formed through months of consolidation at a low price range.

An abrupt spike up to high resistance levels can create an environment wherein traders and whales aggressively begin to take profits and market sell large amounts of Bitcoin.

But, even if the Bitcoin price falls to the $3,000 to $4,000 range in the short-term, it is highly probable for BTC to still end Q2 with a gain or a minimal loss like in 2018.

Much of the weakness in the trend of crypto assets in the past month has been attributed to the prolonged sell-off of the U.S. stock market.

A major progress in containing the coronavirus pandemic, especially in heavily affected countries including the U.S. and Europe could lead to a general recovery of all markets, providing newly found momentum to the cryptocurrency sector.

Historical data may make little sense in 2020

Bitcoin has never been tested during a global economic slowdown that is bordering a a worldwide recession like the Great Depression in 1929.

As such, 2020 is significantly different than the previous ten years for Bitcoin in that the price trend of BTC is being primarily affected by geopolitical risks.

As CryptoSlate previously reported, the plunging oil market also presents a unique threat to cryptocurrencies, increasing the level of caution of investors in the crypto market.

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Plunging oil price presents an unexpected risk to the crypto market in April

The oil price is plummeting rapidly, dropping to as low as $5 in Canada. The dumping of additional supply by Saudi Arabia and Russia is expected to rattle the oil market further in April, which may cause high-risk assets including stocks and crypto to drop off.

Over the next several weeks, JPMorgan expects oil-rich sovereign wealth funds to vamp up their cash-buffer as the dispute between Saudi Arabia and Russia intensifies.

A large sell-off of stocks at a time during which the U.S. stock market has just started to recover from recent lows could fuel the next leg down of equities.

If crypto-assets continue to demonstrate a high level of correlation with the U.S. stock market, cryptocurrencies could also feel the pressure imposed by the declining oil market.

High probability the Dow Jones recovery is short-lived, prompting more crypto investors to be cautious

Throughout March, the U.S. stock market has dropped off substantially as fear towards the coronavirus pandemic worsened.

According to worldometers.info, the U.S. has surpassed 160,000 in confirmed coronavirus cases, forcing major companies in the likes of Macy’s to lay off the majority of their workforce.

The Federal Reserve’s projection of 47 million jobless claims in 2020 and the negative economic impact of the coronavirus pandemic is expected to apply significant selling pressure on U.S. stocks.

In recent weeks, the crypto market has shown that cryptocurrencies are not immune to a global economic slowdown. When investors frantically start selling all types of assets including gold, crypto-assets remain highly vulnerable to a downturn.

JPMorgan strategist Nikolaos Panigirtzoglou said:

“It makes sense for sovereign funds to frontload their selling, as you don’t want to be selling your assets at a later stage when it is more likely to have distressed valuations.”

A sell-off of an additional $75 billion in stocks, as estimated by the Sovereign Wealth Fund Institute, may slow down the effect the $2 trillion Senate stimulus package has had on the U.S. stock market.

Holger Zschaepitz, market analyst at Welt, said:

“Global stocks mixed as volatile quarter comes to an end and Hedge Fund redemptions could spark another rout. Significant bounce in China’s PMIs helps sentiment. US & European Futures little change.”

oil crypto
Oil price continues to plummet, leaving stocks and crypto more vulnerable (source: bloomberg.com)

Low volumes, rejection of same resistance levels

Both CME and spot exchange volume indicate that there is generally lacking buying demand for crypto assets at this time.

The Bitcoin price has been unable to recover above $6,900, primarily due to the large number of sell orders stacked in the $6,900 to $7,100 range.

After $6,900 was initially rejected, Bitcoin tested $6,600 and $6,500 each with a lower daily volume, which demonstrates that at this time, there is limited appetite from investors to reenter the crypto market.

Many investors are sitting on the sidelines to wait for a better opportunity to enter into the crypto market, and at a period like this, the cryptocurrency market is often at risk of seeing another phase of consolidation.

The post Plunging oil price presents an unexpected risk to the crypto market in April appeared first on CryptoSlate.

Keep it vs. leave it: Why Binance delisting leveraged crypto assets has users divided

Binance, the world’s largest crypto exchange, has decided to delist leverage crypto tokens from its platform. The decision led to mixed reactions from users; some supportive and others wanting the leverage tokens to remain on Binance.

What are leveraged crypto tokens and why is Binance delisting them?

On futures exchanges like Binance Futures, FTX, Bybit, and BitMEX, users can trade cryptocurrencies such as Bitcoin and Ethereum with leverage of up to 125x.

That means, with $100, a user could trade up to $12,500 in capital, essentially using debt to trade in a more risky environment.

Spot exchanges, however, merely allow users to buy or sell crypto assets; users cannot borrow capital or use leverage to place additional risk for higher reward.

Leveraged crypto tokens supplement the benefit of a futures contract and high leverage trading. It allows users to buy a leveraged version of a crypto asset, and when the price goes up or down, the return is amplified by 3x leverage.

For example, the native cryptocurrency of Binance is called Binance Coin (BNB). If the price of Binance Coin rises from $12 to $13.2, it increased by 10 percent and the investor would net a 10 percent return.

A leveraged BNB token, which on Binance was called BNBBEAR and BNBBULL, multiplies the returns by three times. That means, if the price of BNB increased by 10 percent, the net loss or net gain from the trade would be multiplied by three times when trading the leveraged token.

On March 29, Binance CEO Changpeng Zhao said that Binance will be delisting leveraged crypto tokens because many users still do not fully understand the tokens.

Zhao emphasized that the leveraged crypto tokens brought significant volume to Binance and it would be “bad for business to delist them,” but the company made the decision to protect its users.

He said:

“Protecting users comes first. Seeing from comments in earlier posts, I expect some complaints still. If you dislike our decision for this delisting, check back on the prices of these tokens in a month time, and let us know if you still complain then.”

crypto binance
Leveraged BNBBEAR crypto token on Binance (source: tradingview.com)

Users respond with mixed reactions

On Twitter, where Zhao made the announcement, Zhao’s tweet was flooded with comments from users who called for the leveraged crypto tokens to relisted on Binance once again.

Given their high volume, leveraged crypto tokens had many active users trading them on a daily basis.

One trader wrote:

“Most of the people will continue to have problem with whatever is done. Leveraged tokens were pretty nice for those who like limited leverage, no liquidation and were true traders. I still believe people can be educated about it. It’s not for everyone though.. maybe a different tab?”

To it, Zhao said that the team will explore more innovative solutions but in the immediate future, the company finalized the decision to delist the tokens.

The delisting of leveraged tokens could directly translate to a higher daily volume on FTX, a cryptocurrency exchange invested by Binance that created the leveraged tokens.

The post Keep it vs. leave it: Why Binance delisting leveraged crypto assets has users divided appeared first on CryptoSlate.

Forget crypto: Kiyosaki says the stock market is “manipulated”

The crypto market has been relatively stable in the last four days. The Bitcoin price has generally been moving in between a five percent range, showing an unusually low level of volatility. In contrast, the U.S. stock market has demonstrated extremely large swings, moving by three to six percent on a daily basis in the last four days.

Given its trend in the last several days, Robert Kiyosaki, renowned businessman and the best-selling author of “Rich Dad Poor Dad,” said the “biggest fake” of all is the stock market.

The U.S. stock market is moving similarly to crypto

Throughout the past ten years, the crypto market, except for several accumulation phases, has recorded a relatively high level of volatility throughout extended periods of time.

The large price movements in the crypto market can be attributed to two main factors:

  1. The low market capitalization of major cryptocurrencies like Bitcoin and Ethereum
  2. The dominance of futures markets such as BitMEX, OKEx, CME, and Binance Futures

As of March 28, the total market capitalization of Bitcoin stands at around $121 billion. That is, smaller than most top conglomerates in the U.S. and about 1.5 percent of gold.

The small market cap of Bitcoin already leaves the dominant cryptocurrency vulnerable to high volatility, and when that is put together with highly leveraged trades through exchanges that offer up to 125x leverage, it increases the probability of massive short or long squeezes.

After dropping to as low as 18,371 points, the Dow Jones Industrial Average (DJIA) has been showing similar levels of volatility as the crypto market, possibly as an immense amount of put options get liquidated or take profits at low levels.

stock market crypto
The U.S. stock market has been more volatile than crypto (source: Yahoo Finance)

The stock market is seeing a short squeeze of a sort, as put option holders begin to capitalize on their bets as top indices fall to levels unseen in years.

Looking at the abnormally large movements in the U.S. stock market, Kiyosaki said:

“The biggest fake is the stock market. How can it go up 1500 points in 5 seconds and come down 1000 points in 5 seconds. If that’s not manipulation, wake up and smell the coffee.”

Fundamentals have not changed for the U.S. stock market in the past week; the number of coronavirus cases are still increasing rapidly and the unemployment rate remains at a record high.

As such, the recovery of the stock market is primarily triggered by squeezes of put options, like crypto in early March.

It goes onto show that the world’s largest markets with deep liquidity are still vulnerable to “manipulation” to a certain extent, as Kiyosaki explaned.

What’s next for the market?

The Bitcoin price has not shown any clear correlation with the U.S. stock market since March 23. It has been moving independent of most assets, including gold and other safe haven assets.

As scientists predict the peak of the coronavirus pandemic to be at least four weeks out, both the crypto and stock market remain at risk of seeing a deeper pullback in the near-term.

The post Forget crypto: Kiyosaki says the stock market is “manipulated” appeared first on CryptoSlate.

Bitcoin Was Heading for a Big Upsurge, Traders Explain What Changed

Top crypto traders have started to lean toward a resumption of a bearish trend for Bitcoin price.

With the firm recovery of the Dow Jones Industrial Average and Bitcoin defending the $6,400 support level with strength, crypto traders anticipated the Bitcoin price to rebound to at least the mid-$7,500 area in the short term. In the past 48 hours, however, they have started to lean toward a resumption of a bearish trend for Bitcoin, as the relief rally of the dominant cryptocurrency is seemingly coming to an end.

Much data from the imbalanced buy and sell orders on major exchanges like BitMEX and the decline in the total open interest of Bitcoin futures point toward lacking demand from buyers. Historically, when the Bitcoin price came close to a full-blown capitulation phase as seen in December 2018, it required months of accumulation in a low price range to recover over a lengthy period of time.

The last time Bitcoin dropped to the low-$3,000s region, it took around four months to begin a gradual recovery to the $7,000 to $8,000 area. There are concerns that Bitcoin’s price may have recovered a little too quickly after dropping to $3,700, and as the biggest whales in the crypto market like Joe007 explain, such a short-term, V-shape recovery after a massive correction never occurred in the crypto market in the past.

Top trader explains why Wall Street’s pain is translating to a painful Bitcoin correction

Speaking to Cointelegraph, cryptocurrency trader and technical analyst Eric Thies said that the struggle of Wall Street and institutional investors directly affected the price trend of Bitcoin. As the stock market in the United States took a hit, the open interest across major futures exchanges including CME dropped off substantially. In futures trading, the term “open interest” refers to the total amount of long and short contracts open at a certain time.

According to data from Skew, aggregated open interest for all Bitcoin futures contracts — which include CME, BitMEX, Binance, OKEx and Huobi — fell from more than $4.2 billion to just $2 billion since March 1.

Bitcoin futures aggregated open interest drop

Based on the data, Thies emphasized that the drop in the volume of the futures market led the price of Bitcoin to correct, causing mayhem in the entire cryptocurrency market:

“With last week's plummet, many were initially left scratching their heads. But it makes complete sense from a logical point of view. Looking at the facts of the situation: Bitcoin was looking bullish prior to the breakdown; this is Bitcoin's first 'recession.' [...] Point being, that since futures carry such a heavy weight of the volume in the market, guess what's going to happen when wall street is getting destroyed… Bitcoin also gets shredded. And last week was a very interesting point to be made.”

Some strategists in the U.S. seem to believe that the stock market has not reached its bottom yet. The coronavirus pandemic is still expanding, and the U.S. overtook China as the most infected country in the world. The negative impact the Bitcoin futures market is having on the price trend of BTC is unlikely to subside anytime soon, adding to the selling pressure on the market as a result.

Why Bitcoin was initially en route for a relief rally and is now at risk of another correction

Several renowned traders who have predicted multiple market cycles throughout the history of Bitcoin such as PentarhUdi foresaw the Bitcoin price drop to sub-$6,000 coming when the price of BTC was still hovering above $10,000 in February.

The 200-week moving average mentioned by PentarhUdi on Feb. 10 was $5,800. However, a cascade of liquidations on BitMEX and other exchanges led Bitcoin’s price to free fall to $3,600.

Following the correction, PentarhUdi noted that Bitcoin could recover to up to $8,500, which technically presents a 200-day simple moving average. Then, the trader said that BTC remains vulnerable to a second correction to sub-$3,000s, adding:

“Amid global financial panic, Bitcoin price aggressively attacks Weekly SMA200 and bottom triangle line of previous chart. I see this might not end as well as I thought. As the bearish potential of global markets is huge.” 

From $5,200, Bitcoin saw a decent recovery to around $6,900 but was rejected at a historically strong resistance level. It is now at a borderline negative year-over-year, and in the short term, Thies told Cointelegraph that he now leans toward a bearish outlook:

“One additional interesting point from the event is that it was on 3/13/20 and the low was $3,850. Looking at the charts, the closing price of 3/13/19 was the exact same number. From the pricing standpoint, it is interesting that BTC is now borderline negative for YOY gains since the implementation of futures went live in 2017. I'm watching carefully here since I'm actually leaning unfortunately bearish at the moment.”

The bottom of bitcoin could be lower

Bitcoin has shown less correlation with the U.S. stock market since March 25. While the Dow Jones surged by more than 6% on Thursday, the price of Bitcoin remained relatively stable. Venture capital investor and partner at Placeholder Chris Burniske said that, purely based on technicals, Bitcoin could retest the lows at $3,000.

That validates the historical cycles of Bitcoin, which show that Bitcoin has never recovered in a V-shape pattern from a near 60% correction within a three-week span. For Bitcoin to maintain a bullish trend at a macro level over the medium to long term, a retest of lows and a stable accumulation phase lasting several months is critical.

Echoing the logic of other experienced traders, Burniske said that the plunge of Bitcoin through the 200-week moving average, which typically served as a historical support level for BTC, leaves the dominant cryptocurrency vulnerable to another big pullback:

“Lots of people are asking where BTC bottoms. The short of it is I wouldn’t be surprised to see a retest of our 2018 lows near $3,000. Historically, I’ve relied on the 200 week moving average (yellow line below) as our bear market bottom, but we fell through that at ~$5,500 last Thursday.”

The unprecedented weakness in the altcoin market can be considered another signal of the lacking appetite for high-risk assets and cryptocurrencies in general, as trader DonAlt said: “BTC looks like it could go up, down or sideways. Alts look like they could go down, down or down.”

When Bitcoin is on track for an actual relief rally, altcoins tend to front-run Bitcoin, as seen in December 2019 when Bitcoin started to recover from $6,400 to over $7,500. Bitcoin is now essentially in the same price range; it has rebounded from $6,400 and rose to as high as $6,950, but major altcoins the likes of Ether (ETH) and Bitcoin Cash (BCH) have barely moved against both Bitcoin and the U.S. dollar.

Strategists predict the U.S. stock market continuing to be rattled by the economic consequences of the coronavirus pandemic. New reports show that the virus outbreak in the U.S. may just be starting — and like China in the early days, there is a high probability that the U.S. may take more than two months to recover.

Starbucks CEO Kevin Johnson explained that the recovery of the U.S. from the coronavirus could be delayed by a week or two compared to China, based on the contrast in containment efforts.

With record-high jobless claims and the rapidly expanding coronavirus outbreak, both the U.S. stock market and Bitcoin — primarily due to the declining futures market open interest and volume — remain highly vulnerable to another leg down in the foreseeable future.

Bitcoin difficulty dropping isn’t all that positive as many claim, as seen in Dec 2018

The difficulty of mining Bitcoin has dropped by more than 10 percent for the fifth time in the asset’s history. It previously marked the bottom of BTC, but not every time.

In the first week of December 2018, the difficulty of Bitcoin mining dropped by 15.13 percent. Yet, BTC did not recover until four months after the major difficulty adjustment was made.

It typically marks Bitcoin bottoms, but not all the time

A major drop in Bitcoin mining difficulty often marks the bottom of a bear cycle because it suggests that some investors and miners are beginning to capitulate.

When the hash rate of the Bitcoin blockchain network abruptly drops, the protocol adjusts to reduce the computing power required to mine BTC.

The hash rate of Bitcoin drops when the network sees a lower number of miners in the ecosystem mining BTC blocks and verifying transactions.

Miners, especially small miners or mining centers, often tend to pause their operations when the price of BTC falls substantially below the breakeven price of mining.

Large mining centers can afford to continue mining the cryptocurrency at a loss, as big miners have a tendency to save up a cash reserve to last for many months at a time.

Sizable mining operations are often ran with long-term contracts with electricity providers, and that makes it more difficult for large miners to abruptly close down their operations as a short-term play.

When investors and small capitulate with peak fear in the market, the Bitcoin price tends to rebound. But, that was not the case in 2018.

In late 2018, there were several difficulty adjustments before the price of BTC began to rebound, and it took more than four months after the initial 15.13 percent drop in mining difficulty for Bitcoin to demonstrate an extended rally.

bitcoin mining
Bitcoin mining difficutly adjustment cycles (source: Nunya Bizniz)

What will happen to BTC in the upcoming months?

The first half of 2020 is expected to be a challenging period for miners because of the heightened level of uncertainty in the cryptocurrency market amidst an expanding global pandemic.

The coronavirus outbreak and its negative effect on the global economy has coincided with the highly anticipated block reward halving of Bitcoin.

Previous bear market cycles of Bitcoin were solely dependent on the trend of the cryptocurrency market. However, the recent correction, as seen in the correlation between the Bitcoin price and the U.S. stock market, has been largely impacted by the declining sentiment of investors for high-risk assets in the broader financial market.

The 10% mining difficulty adjustment indicates that Bitcoin is moving closer to its bottom. Based on historical data, the bottoming out phase could last up to five months of accumulation at a low price range.

Cryptocurrency analyst Nunya Bizniz said:

“Bitcoin difficulty adjustments alter the difficulty of miners finding blocks. They occur every 2 weeks. There have been 4 instances where an adjustment has been -10% or lower. Thursday is the next adjustment. Its estimated to be -10.2%. Market bottom?”

Hence, while small miners have started to halt their operations, there is still a possibility that a worse scenario is left to come.

As a Bitcoin whale warned, BTC has rarely recovered from a capitulation-esque correction without months of accumulation with low volatility.

The post Bitcoin difficulty dropping isn’t all that positive as many claim, as seen in Dec 2018 appeared first on CryptoSlate.

Why the world’s biggest crypto exchanges are making a big bet on India

Four months after the high-profile acquisition of Indian crypto exchange WazirX by Binance, BitMEX invested in a $3 million funding round for another local cryptocurrency exchange in India called CoinDCX.

The world’s biggest crypto exchanges by daily volume have started to actively invest in India’s crypto market after the reversal of the Reserve Bank of India (RBI)’s prohibition on cryptocurrency trading.

Can India evolve into a big crypto market?

Prior to the RBI’s crypto trading ban in 2018, the crypto exchange market of India accounted for a fairly large portion of the global cryptocurrency trade volume.

Reports suggest that the crypto exchange market of India was valued at $12.9 billion, with top five exchanges at the time recording consistently high volume.

For instance, Koinex, one of the top exchanges in India before the RBI’s ban was implemented, was recording around $240 million in daily trade volume at the peak of December 2017.

The company said in June 2019, as it closed down:

“Within 4 months of operations, Koinex became India’s largest and favourite digital assets exchange — recording $265M in trading volume and on boarding 40K+ new users in 24 hours at peak in the month of December. Koinex also became India’s fastest growing startup to see such metrics and an ultra-quick profitability.”

India was once a juggernaut in the global cryptocurrency market, and a blanket ban imposed by the nation’s central bank teared down the industry. After nearly two years since the ban was imposed, key players in the crypto sector are seemingly anticipating the revival of India’s crypto sector for the first time since 2018.

crypto
Crypto exchages in India recorded large volume in 2017 (source: tradingview.com)

Binance CEO Changpeng Zhao, who acquired WazirX before the trading ban was overruled, has consistently expressed optimism towards India and its potential to become a major crypto market.

In November 2019, when the legality of cryptocurrencies and the trading of digital assets still remained uncertain, Zhao said:

“The acquisition of WazirX shows our commitment and dedication to the Indian people and strengthen the blockchain ecosystem in India as well as another step forward in achieving the freedom of money.”

Despite the support of the industry’s front-running companies, whether India will rapidly see a recovery in its local cryptocurrency exchange market still has to be seen.

For years, crypto investors in India dealt with instability of banking services and a lack of clarity in regulatory frameworks. The nation’s central bank is still to this date expressing its intent to combat the Supreme Court’s ruling to lift the ban on trading crypto assets.

Industry leaders unfazed

CoinDCX, WazirX, and Unocoin, three exchanges that stayed open throughout the past two years without any banking support to facilitate new users, remain unfazed and confident that the local market has a “huge potential” for the asset class.

Sumit Gupta, co-founder and chief executive officer of CoinDCX, specifically pointed at India’s massive remittance market and a large number of individuals in some regions that have no stable access to banking services.

Local companies and exchanges believe cryptocurrencies can fill the gap of the unbanked, as it looks to grow India to the pinnacle of crypto trading once again.

The post Why the world’s biggest crypto exchanges are making a big bet on India appeared first on CryptoSlate.

Why this cryptocurrency just surged 16% on news of a key Binance partnership

BAT, the native cryptocurrency of the Brave Browser, spiked by more than 16 percent following a Binance trading widget integration.

The Brave team said:

“Brave Software and Binance, the global blockchain company behind the world’s largest cryptocurrency exchange by trading volume and users, today announced a partnership that enables Brave browser users to seamlessly trade cryptocurrency assets through Binance.”

The partnership allows users of Brave Browser to trade cryptocurrencies on Binance on the new tab page of the browser.

Bringing cryptocurrency trading to the mainstream

The Brave Browser remains as one of the few products with a native cryptocurrency to have millions of active users on a monthly basis.

In January 2020, Brave Software co-founder and CEO Brendan Eich said that the number of active monthly users using the Brave Browser surpassed 11.2 million.

He said:

“Brave finished 2019 with 11.2M MAU & 3.5M DAU. Since then DAU has passed 3.7M DAU, and growth continues.”

That is more than a 10 percent increase in user growth within a two-month span, after seeing 8.7 million users in October 2019.

Changpeng Zhao, the CEO of Binance, said that the “long-term partnership” with Brave will increase the utility of cryptocurrencies.

Zhao said:

“The Binance widget on Brave’s privacy-oriented browser instills a safer way to buy and sell crypto and also reduces user friction to onboard, trade and interact with the Binance ecosystem. We are looking forward to our long-term partnership with Brave to make it even easier to interact with crypto and encourage more utility in the near future.”

The recovery in the price of BAT comes at a much needed time of the year; since January 1, the price of the BAT cryptocurrency fell by nearly 50 percent against the USD.

It fell substantially as the Bitcoin price dropped sharply from $8,000 to sub-$4,000 on March 12, in one of the steepest pullbacks in the market’s history.

Since bottoming out at $0.099 in mid-March, the price of BAT has increased by around 70 percent to $0.162.

cryptocurrency
The BAT cryptocurrency has seen a crucial recovery during an important period (source: tradingview.com)

Crypto industry still moving forward despite global economic uncertainty

The sharp correction of the U.S. stock market and the global financial sector led to a short-term decline in the valuation of the entire cryptocurrency market.

But, the industry has seen significant positive developments over the past three months. Most notably, the Supreme Court of India dismissed the circular issued by the Reserve Bank of India to prohibit cryptocurrency trading.

Investments in the cryptocurrency and blockchain industry have declined year-over-year, primarily due to the economic consequences of the coronavirus pandemic in key cryptocurrency markets such as China, South Korea, the U.S., and Europe.

Yet, industry leaders and major companies within the sector are working toward strengthening the infrastructure supporting cryptocurrencies, similar to every previous bear cycle in the last ten years.

Since 2009, Bitcoin has seen a repeated cycle of a bear market-build phase-accumulation phase-bull market many times over. Following every bear cycle, the industry had come out stronger in terms of fundamentals.

The post Why this cryptocurrency just surged 16% on news of a key Binance partnership appeared first on CryptoSlate.

The Fed just gave crypto a critical lifeline by doing this, and Bitcoin is strongly reacting

The Federal Reserve is taking a stronger approach than it did during the 2008 financial crisis to slow down the downtrend of the U.S. economy. The crypto market has been rallying in tandem with U.S. stock market futures, reducing fear in the market for the first time since early March.

The Dow Jones has hit “limit up” after surging by nearly 1,000 points in pre-market trading. The Bitcoin price increased by 15 percent, closely following the trend of the U.S. stock market.

Fed gives a crucial lifeline to crypto

Up until March 23, top traders in the crypto market were anticipating a steep pullback for Bitcoin in the short-term.

Bitcoin price flash spiked 13% in 1 hour, but top traders think it’s a “fake” rally
Related: Bitcoin price flash spiked 13% in 1 hour, but top traders think it’s a “fake” rally

Many described the sudden upsurge of Bitcoin to $6,600 as a fakeout, and it did correct to around $6,100 almost immediately after its price spike.

However, the crypto market has started to see a steady increase in momentum over the past 12 hours, leading the Bitcoin price to surpass $6,800.

The $6,800 level for Bitcoin has often been regarded as a “break it or make it” resistance area that determines another extended rally for the crypto market or the resumption of a downtrend.

The Fed has ironically given the crypto market a crucial lifeline in the short-term; its fiscal policies alleviated significant pressure off of equities, which eventually translated to a heightened appetite for high-risk assets.

Last week, all types of assets regardless of their risk-on, risk-off, or safe haven characteristics, plunged as the U.S. stock market recorded historic levels of sell-off.

Led by gold, single stocks and crypto assets have started to rally at the start of the week, sparking optimism for a relief rally after weeks of correction.

One positive factor for cryptocurrencies in the short-term

Much of the buying demand in the past three days have come from the spot market. The open interest of major futures, which reflect the total amount of longs and shorts open at a certain time, has nearly halved across major exchanges.

Prior to the sudden crash of Bitcoin to $3,600 on March 12, the open interest of BitMEX’s perpetual swaps futures contract for Bitcoin was hovering at $1 billion.

According to Skew.com, the open interest of XBTUSD on BitMEX is now at a mere $370 million.

Bitcoin crypto open interest
Bitcoin open interest on BitMEX drops from $1 billion to $360 million in less than a month (source: Skew.com)

The shift in volume from futures exchanges to spot trading platforms indicate that actual retail investors have been moving into the crypto market, possibly due to the low prices of major crypto assets including Bitcoin.

The price of Bitcoin has nearly doubled since reaching $3,600, and renowned technical analysts anticipate the Bitcoin price to rise to as high as $7,500 to $8,500 in the near-term.

The dominance of spot volume has allowed the crypto market to remain more resilient than before, recovering quicker to abrupt pullbacks with reduced volatility.

As CryptoSlate reported, BitMEX was criticized by investors and key industry players in recent weeks. Some have said that the bitcoin price could have theoretically plunged to $0 earlier this month, as a result of an unprecedented cascade of long contract liquidations.

The post The Fed just gave crypto a critical lifeline by doing this, and Bitcoin is strongly reacting appeared first on CryptoSlate.

A prominent trader makes the case for $8.5k Bitcoin before making new lows

A prominent trader known as PentarhUdi accurately called the drop from $10,000 to sub-$6,000 and has called many full Bitcoin market cycles in the past several years, believes BTC is headed to up to $8,500.

When the Bitcoin price initially hit $5,200, the trader said that the dominant cryptocurrency is likely to move towards the 200-day simple moving average (SMA), found above $8,000.

$8,500 Bitcoin target matches with Fed’s aggressive fiscal policy

In the past 24 hours, the Bitcoin price has surged by more than 15 percent against the USD following the Federal Reserve’s decision to essentially carry out unlimited quantitative easing (QE).

The Fed said that it will not hold back in acquiring U.S. government bonds and mortgage-backed securities. The Dow futures indicate an upsurge of over 800 points at open, as the stimuli from the Fed alleviates pressure from equities.

On March 19, when the Bitcoin price was still trading below $6,000, Pentarhudi predicted that the price of BTC should recover to up to $8,500 after touching the weekly 200 simple moving average at $5,200.

The Bitcoin price was expected to see a firm rebound after reclaiming the $5,200 support, and the macro trend of the broader financial market led to increased sentiment towards cryptocurrencies.

The trader said:

“This should bounce up from weekly sma 200 (~5200) up to daily sma 200 (~8500). Break up of upper trend line invalidates this bearish count. I remind this is hypothetical bearish outcome of previous published ideas.”

On February 10, when the Bitcoin price was just hovering above $10,000, Pentarhudi said that a pullback to $5,800 is the logical next target given the historical cycle of Bitcoin. The move to the downside was overextended as panic ensued in the global financial market.

He noted:

“If this idea is correct, price should fall from current levels down to weekly MA 200 in term of 1-3 months. Breaking upper bold red line (now or later) will open door to long bull run. Price is long-term bullish while it stays above weekly MA 200.”

Economic downturn erases trillions from stock market and shows just how tiny crypto truly is
Related: Economic downturn erases trillions from stock market and shows just how tiny crypto truly is

In the short-term, both equities and Bitcoin are anticipated to experience a strong recovery as a result of large stimulus packages coming out of the U.S. and Europe.

bitcoin price
A bearish Bitcoin price scenario (source: Pentarhudi)

So what’s next?

In a bearish scenario, Pentarhudi said that he expects the Bitcoin price to see a new bottom below $3,000 if it rejects $8,500.

The technical analysis of the trader matches the fundamental analysis of high-profile investors like Chris Burniske, who have suggested that Bitcoin is facing a rougher year in 2020 than in 2015.

Burniske explained:

“For many reasons, 2020 is rougher than 2015. And let’s face it, the world has bigger problems than #bitcoin’s bottom at the moment. But the next really strong support I see is our last bottom (low $3000s). Futures were offered around there in size last Thursday, and if there’s more bad news for the world ahead (there is), BTC is unlikely to be spared.”

Since the Bitcoin price dropped to $3,600, a large portion of the cryptocurrency market’s volume moved from futures exchanges to the spot market. After this shift, resilience in the price of Bitcoin increased.

The post A prominent trader makes the case for $8.5k Bitcoin before making new lows appeared first on CryptoSlate.

Bitcoin price spiked 13% in 1 hour, but top traders think it’s a fake rally

The Bitcoin price increased from $5,850 to $6,640 on major cryptocurrency exchanges in a 13 percent rally within an hour. But, top traders are convinced it is a fake out before a bearish continuation.

The abrupt spike in the Bitcoin price coincided with the Federal Reserve’s aggressive fiscal policy and its decision to acquire as many U.S. government bonds and mortgage-backed securities as needed to stabilize the market.

Why top traders are not convinced of the Bitcoin rally

The Bitcoin price was showing oversold conditions after dropping to as low as $5,600. Technical indicators showed a bullish divergence on lower time frames, suggesting that a minor relief rally is likely.

But, a prominent trader who goes by the alias “Trader XO” predicted the Bitcoin price to see a recovery to around $6,400 before continuing its downtrend to sub-$6,000 before the upsurge.

Prior to the drop, the trader said that the Bitcoin price has a tendency to revisit previous levels after demonstrating an initial pullback.

He said:

“Don’t be surprised if we see one more raid around $6,500s before a bigger drop – wiping out a large number of late shorts / tight stops.”

bitcoin price
The Bitcoin price was expected to revisit the $6,500 level before a bigger drop (source: Trader XO)

Another trader known as Jonny Moe noted that while he remains optimistic in the long-term trend of Bitcoin, in the near-term, it faces significant vulnerability and a potential revisit of the $3,000 to $4,000 range.

Moe explained:

“If you asked me where I think BTC is heading fundamentally in the next few months, I’d tell you I’m bullish as hell. But if you just look at the chart, all I can see is this large bear flag right into horizontal resistance.”

In recent weeks, the Bitcoin price has generally moved in tandem with the U.S. stock market.

Although strong fiscal policies from the Fed are slowing down the pullback of equities, high-profile strategists like Chantico Global founder Gina Sanchez have said that stocks will only rebound when the number of coronavirus cases starts to decline.

If analysts do not believe that the U.S. stock market has bottomed, and stocks are not reacting positively even to Fed’s large stimuli, the Bitcoin price is likely to remain vulnerable to a correction.

Financial analyst Koroush AK also emphasized that at a technical level, the Bitcoin price is yet to reclaim key resistance levels. Until that happens, the macro trend of BTC remains bearish.

The analyst stated:

“Still bearish on BTC. Unless we reclaim key levels and see some follow through. This pump was nothing but an opportunity to add to shorts.”

Almost immediately after the Bitcoin price surged to $6,600, it fell back to the $6,200 level, rejecting it as resistance.

Alternative cryptocurrencies showing a weaker trend

Major cryptocurrencies in the likes of Ethereum and XRP are continuing to underperform Bitcoin.

As the Bitcoin price rose to $6,600, the Ethereum price spiked to as high as $137, but fell to $128 in a sharp 6.5 percent pullback.

Alternative cryptocurrencies are experiencing intensified movements to the downside after every rejection of a heavy Bitcoin resistance level.

The post Bitcoin price spiked 13% in 1 hour, but top traders think it’s a fake rally appeared first on CryptoSlate.

Why Ethereum locked in DeFi plunged $600m after intense 57% ETH drop

The total amount of Ethereum (ETH) locked in decentralized finance (DeFi) platforms plunged by more than $600 million since February 16. It coincided with a 57 percent drop in the price of ETH from $280 to $120.

DeFi platforms like MakerDAO have gained significant popularity in recent months by allowing users to issue loans on the Ethereum blockchain network with relatively high yearly returns.

DeFi loans can be liquidated too when Ethereum price drops

On a DeFi platform, borrowers are required to put up Ethereum as collateral to obtain loans. The collateral is made in Ethereum terms, which means that when the price of ETH drops, the value of the collateral declines in tandem.

When the price of Ethereum abruptly drops by a large margin, it requires borrowers to put up more Ethereum as collateral to reduce the risk of having their loans liquidated.

Ethereum is down 27% in 4 days: here’s why it’s crashing harder than other cryptocurrencies
Related: Ethereum is down 27% in 4 days: here’s why it’s crashing harder than other cryptocurrencies

But, when Ethereum’s value plunges by 30 to 50 percent within a short time frame, it makes it difficult for borrowers to make up for the lost value of Ethereum with more collateral.

For that reason, when the unexpected drop in the price of bitcoin on March 12 to $3,600 occurred, CryptoSlate reported that millions of dollars worth of DeFi contract liquidations were recorded.

At the time, Tushar Jain, a managing partner at cryptocurrency investment firm Multicoin Capital, said that the entire DeFi ecosystem was at risk of liquidation within a 24-hour span. Jain emphasized that he is concerned if the DeFi ecosystem as a whole is sustainable.

He said:

“I am worried that DeFi cannot be sustainable if the whole ecosystem could get liquidated in less than 24 hours. That was a real risk today.”

Since around $10 million worth of loans were liquidated across major DeFi platforms, the total amount of collateral in Ethereum in the DeFi ecosystem dropped from $1.2 billion to $567 million.

The DeFi market essentially saw an outflow of 57 percent within less than a month. It brought the total value locked in the DeFi ecosystem back to mid-2019 levels.

ethereum defi
Ethereum locked in DeFi plunged to mid-2019 levels (source: defipulse.com)

So what can be done to sustain DeFi?

The single biggest merit of using a DeFi platform is that it is based on top of a decentralized protocol. All financial activities including the issuance of loans are done in a peer-to-peer manner, without the involvement of central entities.

However, the advantage of DeFi could also be a real risk that could shut down the entire market upon flash crashes of major cryptocurrencies if no precautionary measures are taken.

Some prominent investors, like Jain, proposed the implementation of an industry-wide circuit breaker for that reason in case of extreme events that crashes the cryptocurrency market.

Jain noted:

“Today’s price moves in crypto are a strong argument for industry wide circuit breakers. The crypto markets structurally broke today & leading exchanges need to work together to prevent a repeat.”

Whether a severe short-term market correction as seen on March 12 would happen again remains unclear. But, during a flash crash-like pullback, the DeFi ecosystem becomes vulnerable to a cascade of liquidations.

For more news on decentralized finance, check out our DeFi section.

The post Why Ethereum locked in DeFi plunged $600m after intense 57% ETH drop appeared first on CryptoSlate.

XRP is now nearing 3-year lows: what’s behind the massive correction?

The price of XRP is nearing a three-year low, hovering at around $0.15. Last week, XRP fell to as low as $0.114, which it has not hit since May 2017. The underperformance of the cryptocurrency against both Bitcoin and the USD comes as the appetite for high-risk assets is increasingly on the decline.

XRP should theoretically be outperforming most major cryptocurrencies

Since the 2017 bull market, XRP has struggled to maintain strong momentum despite high-profile partnerships with major financial institutions in the likes of SBI Holdings and Moneygram.

Major Ripple supporter sells all of her XRP holdings due to toxic community
Related: Major Ripple supporter sells all of her XRP holdings due to toxic community

Since surpassing the $1 resistance level in April 2018, XRP has never come close to retesting it again, recording five consecutive lower lows at a larger time frame over the past three years.

In April 2018, September 2018, June 2019, and February 2020, XRP rejected $1, $0.77, $0.5, and $0.35 respectively, leading to an extended bear market.

xrp
The price of XRP is nearing a 3-year low after five consecutive lower lows in the past three years (source: tradingview.com)

Theoretically, XRP should have outperformed major cryptocurrencies in 2020 following a decline in sales of the cryptocurrency by Ripple, a company that develops infrastructure for the ecosystem.

XRP is the key to Ripple’s profitability; here’s why that could be a big issue
Related: XRP is the key to Ripple’s profitability; here’s why that could be a big issue

In the fourth quarter of 2019, Ripple substantially dropped sales of XRP to institutions and the distribution of the cryptocurrency to exchanges.

On its blog, the company noted:

“Last quarter, total XRP sales were $13.08 million (USD) vs. $66.24 million the previous quarter. In addition, Ripple continued the pause of programmatic sales, focusing solely on our over-the-counter (OTC) sales with a few strategic partners, who are building XRP utility and liquidity in strategic regions including EMEA and Asia.”

The decline in XRP sales likely alleviated selling pressure on the cryptocurrency exchange market, which, in theory, should have served as a factor for recovery. In spite of lower XRP sales, the cryptocurrency found it difficult to break out of any meaningful resistance level in recent months.

As the coronavirus pandemic removed any appetite for high-risk assets including single stocks and cryptocurrencies, the steep correction of the cryptocurrency intensified.

When the Bitcoin price dropped to as low as $3,600 in a fastened price drop due to a cascade of liquidations across all exchanges, the XRP price dropped to as low as $0.114.

Is there any hope for recovery?

The current price trend of XRP is similar to that in early 2017, prior to the bull run of cryptocurrencies that saw the Bitcoin price spike to as high as $20,000 and $23,000 on exchanges in South Korea.

For XRP to see a strong recovery to previous highs in the medium-term, it would need to see a December 2017-esque upsurge to cleanly break out of resistance levels at $0.35, $0.5, $0.77, and $1.

At this macro landscape where the institutional sell-off of all types of assets is rapidly increasing on a daily basis, major cryptocurrencies including XRP are unlikely to recover until the U.S. stock market and global equities rebound.

With fiscal policies and large-scale stimulus packages unable to boost the confidence of investors towards the stock market, the cryptocurrency market is anticipated to stagnate over the next few months.

The post XRP is now nearing 3-year lows: what’s behind the massive correction? appeared first on CryptoSlate.

Ethereum deposits exceeds previous record high; are whales cashing out?

Ethereum deposits on exchanges have exceeded its previous high in December 2018, when the price of ETH fell to as low as $89.

Total exchange deposits of Ethereum increased to 14.5 million across all major cryptocurrency platforms, indicating that ETH is likely being sent to trading platforms to be sold.

Exchange deposits typically show that investors are moving to sell their assets, and exchange withdrawals or outflow indicate investors holding onto crypto assets over a long period of time.

A surge in exchange deposits demonstrates that amidst heightened levels of fear towards the coronavirus pandemic, investors are hedging their portfolio in the case of a further downtrend.

ethereum
Ethereum deposits hit a new high (source: ViewBase)

Uncertainty surrounds Ethereum and the crypto market

Since the second week of March, the price of Ethereum and other major crypto assets such as Bitcoin have been largely correlated with the U.S. stock market.

The drop-off in the equities market, primarily triggered by declining appetite towards high-risk assets, has led to a steep sell-off in the crypto market as well.

Analysts like Placeholder VC Chris Burniske have said that the Bitcoin price is unlikely to have seen its bottom just yet, due to various technical reasons. Until equities see a bottom, the demand for crypto assets, especially from institutions, is expected to dwindle.

Despite the exponential growth of the decentralized finance (DeFi) market and the rapid expansion of firms like BlockFi and Dharma, the Ethereum price has seen a significant correction in the past month.

As the price of Ethereum fell to sub-$200, it triggered a large number of liquidations across DeFi platforms, causing the total amount of ETH used as collateral on DeFi platforms to nearly halve.

Because DeFi platforms use ETH as collateral for loans, when the price of Ethereum drops substantially, borrowers are required to put up more ETH to maintain their loans.

At this time, for the crypto market, technical factors seem to take precedent over fundamentals; while Ethereum’s ecosystem has seen consistent growth since early 2019, the  ETH has not been able to outperform the crypto market.

With analysts anticipating the crypto market to establish a new bottom in the near-future, exchange data suggests that a large number of investors are selling Ethereum out of fear towards uncertainty in the market.

Why record high deposits often coincide with the bottom

The crypto market, similar to the traditional financial market, tends to bottom when the market sees a peak level of fear amongst investors.

In December 2018, Ethereum bottomed when the number of deposits to exchanges reached 14 million ETH. After large amounts of ETH were sold and the price declined to nearly $80, ETH started to recover.

Similarly, when the Bitcoin price dropped to as low as $3,150 two years ago, it saw a sudden spike in buying demand and volume across major spot exchanges, causing a massive reaction and recovery.

The post Ethereum deposits exceeds previous record high; are whales cashing out? appeared first on CryptoSlate.

Bitcoin price rises to $6,900: a point that kickstarted the last rally to $10,000

The Bitcoin price spiked to $6,900 on the day, rising to as high as $6,946 on BitMEX. The last BTC rally to over $10,000 started from a strong rebound from the $6,900 level.

Upon rising to $6,900, the Bitcoin price saw an immediate rejection to the mid-$6,000 region, and some technical analysts anticipate a minor correction to come given the importance of the $6,900 resistance level, despite an optimistic medium-term trend.

Scott Melker, a cryptocurrency trader, said that a pullback to $6,000 would confirm a Bitcoin uptrend, providing a stronger floor for BTC to recover from.

“I would still love to see a retest of the 6K level as support. It would confirm the uptrend without leaving it behind to be tested further down the road,” he said.

bitcoin price
The Bitcoin price rallies to $6,900 in a fast spot volume-led recovery (source: Scott Melker)

Sentiment divided on the current Bitcoin price trend

The sentiment among traders following the bitcoin price’s abrupt drop from around $8,000 to $3,600 and its rapid recovery to $6,900 remains divided.

Some traders, like Placeholder partner Chris Burniske said that technicals suggest the bottom of Bitcoin is yet to be reached.

Burniske said that Bitcoin is likely to see a swift recovery after the global financial market stabilizes, but until the stock market effectively bottoms, Bitcoin remains vulnerable to a bear market continuation.

He said:

“But the next really strong support I see is our last bottom (low $3000s). Futures were offered around there in size last Thursday, and if there’s more bad news for the world ahead (there is), $BTC is unlikely to be spared. Once the world has stabilized, I do expect BTC, ETH and quality crypto assets to be some of the fastest recovering assets out there, but we’ve got a tunnel to navigate before then.”

However, a highly-regarded cryptocurrency trader known said that the Bitcoin price trend can only be evaluated on a case by case basis, and a clean break above $6,900 would trigger the resumption of a bull market for BTC.

An optimistic case to be made due to spike in spot volume

Exchange data shows that the recent Bitcoin upsurge was primarily led by spot volume rather than futures volume.

That indicates investors are accumulating Bitcoin and other cryptocurrencies, and the move is not based on highly-leveraged markets.

Bitazu Capital partner Mohit Sorout noted that the low open interest on BitMEX further indicates that spot volume is main trigger behind the crypto upsurge.

In previous rallies, the Bitcoin price spiked to local highs as a result of spoof orders or fake buy orders attempting to cause fear of missing out (FOMO) amongst traders. That caused significant short liquidations, inorganically pushing the price of Bitcoin to high levels.

A spot volume-led accumulation phase shows that real retail demand is starting to come to the crypto market after arguably the steepest sell-off of Bitcoin in a 24-hour span on March 12.

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Does Bitcoin Have Intrinsic Value or Is It Based on Thin Air?

Does Bitcoin have no intrinsic value? Blockchain experts and government officials seem to disagree vastly on the issue.

In early March, the Bank of England’s governor-designate, Andrew Bailey, said that Bitcoin has no intrinsic value. He controversially stated that any investor that holds Bitcoin should be prepared to lose all of the money. Bailey said, “If you want to buy it, fine, but understand it has no intrinsic value. It may have extrinsic value, but there is no intrinsic value.”

Throughout the past several years, many high-profile investors and government officials such as billionaire Mark Cuban, Berkshire Hathaway’s Warren Buffett and United States President Donald Trump have criticized Bitcoin for its lack of real value.

Argument for why Bitcoin does not have any “intrinsic” value

In July 2019, President Trump echoed the sentiments earlier shared by Buffett and his business partner Charlie Munger when he claimed that the value of Bitcoin is “based on thin air,” implying that it has no intrinsic value. At the time, President Trump said:

“I am not a fan of Bitcoin and other Cryptocurrencies, which are not money, and whose value is highly volatile and based on thin air.”

The argument for the lack of value in Bitcoin derives from its origin: a decentralized and peer-to-peer network of miners, users, developers and node operators that has been running since 2009 without the presence of a central entity or a group that oversees the blockchain protocol.

Hence, the concept that a decentralized and completely open-source network, which in theory is software, is foreign to many investors. In 2018, Berkshire Hathaway vice chairman Charlie Munger said that Bitcoin is “worthless, artificial gold,” describing it as a piece of clever computer science. Munger told CNBC:

“Bitcoin reminds me of Oscar Wilde’s definition of fox hunting: ‘The pursuit of the uneatable by the unspeakable.’”

Most of the negative stances towards Bitcoin and the skepticism about its value stems from its distributed structure and the digital nature. But, cryptocurrency industry executives and prominent investment firm operators perceive the value of Bitcoin differently.

Crypto industry experts disagree

In an interview with Cointelegraph, BlockTower Capital chief investment officer Ari Paul explained that the value of Bitcoin comes from the control it gives to users that own the asset. The non-confiscatable characteristic of Bitcoin provides users with an unprecedented level of financial freedom when compared with traditional assets.

Safe haven assets like gold, for instance, which investors foresee Bitcoin would compete against over the long run, have seen many instances wherein gold held by individuals were seized by governments in the past. Paul told Cointelegraph:

“BTC is many things: its value comes as the only way to pay for Bitcoin blockchain space (aka censorship resistance as a service), but I’d argue far more of its value comes from its seizure resistance. If I want to store $1 of wealth in a way that can't be arbitrarily seized by governments, I need to own $1 of BTC, regardless of BTC’s price per dollar. With that framing, it’s vaguely comparable to the offshore banking system which is roughly $30 trillion.”

The argument that the value of Bitcoin comes from its seizure resistance goes in line with the sentiment of Wences Casares, the CEO of crypto custody and wallet provider Xapo. In an essay titled, “The case for a small allocation to Bitcoin” published in March 2019, Casares suggested that every $10 million portfolio should have at least $100,000 invested in Bitcoin with a long-term investment thesis. 

Casares explained that growing up in Argentina, he saw his family lose their savings three times over, and the last time was due to unfair confiscation of assets.

Related: Crypto Traders Explain What Caused the Bitcoin Price Plunge to $3,000s

Founder of Quantum Economics Mati Greenspan told Cointelegraph that whether Bitcon has any “intrinsic” value purely depends on the perception of an investor of Bitcoin and the entire asset class. By definition, the term intrinsic value refers to the true, inherent and essential value of an asset, commodity or currency. But value is subjective and oftentimes changes significantly based on varying circumstances.

As an example, before President Richard Nixon essentially eliminated the gold standard by disallowing the Federal Reserve to reclaim dollars with gold, the “intrinsic value” of the dollar came from the backing of gold. But when the gold standard was abolished, other countries started to print money and the inflation rate of reserve currencies began to rise.

A case can be made that the intrinsic value of a reserve currency is the government or the country behind it, but the value of it can change rapidly depending on varying factors, according to Greenspan:

“Intrinsic value is defined as ‘an investor’s perception of the asset’s value,’ so whether Bitcoin does or does not have it depends entirely on the perspective of the prospective investor. Perhaps it holds no value for Mr. Carney at this time, but it certainly has value to millions of other people around the world.”

Why Bitcoin’s “intrinsic value” can increase over time

Despite the emergence of trusted custodians and strictly regulated exchanges that have contributed to the establishment of a rapidly improving infrastructure supporting the market, Bitcoin is still an emerging asset.

Since the Dow Jones fell sharply on March 12 due to heightened levels of fear from the coronavirus pandemic, Bitcoin has shown a high level of correlation with the U.S. stock market. This tight correlation has devalued the image of Bitcoin as a safe haven asset. Prior to March 2020, BTC was never tested under an environment where the global financial market started to crash and show signs of extreme uncertainty.

Related: Bitcoin Price Correlates With Traditional Assets, but Not Entirely

The volatility of BTC and its correlation with stocks this month primarily stem from the fact that its market capitalization is still hovering at around $116 billion. That is merely 1.37% of the $8 trillion market cap of gold.

As the market cap of Bitcoin increases over time, it will show less volatility and increased levels of stability, which would allow it to be seen as a safe haven asset in times of global market slowdown. Tyler Winkelvoss, the billionaire CEO of U.S.-based crypto exchange Gemini, said recently on the matter:

“Bitcoin is not a hedge to pandemics, it is a hedge to fiat regimes. A sudden, negative demand shock in the global economy’ will affect every asset, including gold, in the short term. The world will get through this, but at what long-term, Faustian bargain? Bitcoin is not making any deals right now. It has the resilience and endurance to last in the infinite game.”

With a larger market cap, stronger infrastructure, higher liquidity, clearer regulatory frameworks and increased levels of mainstream awareness, the value proposition of Bitcoin can improve significantly over the next decade. And eventually, the argument that Bitcoin lacks “intrinsic value” is likely to weaken, as its non-confiscatable characteristic, decentralized nature, and fungibility will add to the asset’s value.

Bitcoin price surging 26% in less than 2 days is worrying traders, here’s why

The Bitcoin price has increased by 26 percent within the past two days, rising from sub-$5,000 to as high as $6,400 across major crypto exchanges. But, several top traders are not optimistic in the short-term.

Many technical analysts have anticipated the Bitcoin price to surge past the $6,000 resistance level after a major sell-off to $3,600. The $6,200 to $6,300 area has remained as one of the key resistance levels since early March.

If the bearish market structure of Bitcoin continues, there exists a strong possibility that the entire move to the mid-$6,000 could be a large bull trap, prominent traders noted.

bitcoin price
The Bitcoin price rises to as high as $6,400 across most spot exchanges (source: tradingview.com)

Why is Bitcoin going up in the first place?

Ever since Bitcoin’s steep fall to $3,600 on March 12, the dominant cryptocurrency has been largely moving in tandem with the U.S. stock market.

On March 19, for the first time in a week, the Bitcoin price broke its short-term correlation with the U.S. stock market, surging by more than 10% while the Dow Jones Industrial Average (DJIA) plunged below 20,000 points.

The near-50% decline of Bitcoin within a 24-hour span likely created significantly oversold conditions, prompting bids to be filed in at low $4,000s to be carried onto the next heavy resistance level.

Cryptocurrency trader Michael van de Poppe said:

“$6,400 hit. Monthly level hit here. Expecting to consolidate and reach a temporary top here.”

Another cryptocurrency technical analyst said that the move resembles a typical bull trap. It wiped out many shorts from the market and re-sparked bullish sentiment amongst traders. That often results in a pullback based on the historical price trend of BTC.

However, the analyst emphasized that the strength of the move could punish traders that try to trade against BTC too early, which may cause another minor short squeeze.

TraderSZ, a renowned trader that forecasted the downtrend of Bitcoin to $3,000s and the recovery to above $6,000, said that an upsurge to $6,500 may come first before the market consolidates.

The $6,410 to $6,500 range marks the December 2019 low, when the Bitcoin price showed a short-term bottom and eventually rallied to $10,500 once again.

Weekend is soon coming

The predictions of a consolidation phase for Bitcoin come as the cryptocurrency market head towards the weekend. When traditional markets close, the volume of BTC tends to drop and volatility intensifies. Many previous weekends have led to abrupt short-term pullbacks for Bitcoin and the rest of the crypto market.

With the Dow Jones trading over 20,000 following the release of strong stimulus packages from the Federal Reserve and central banks in Europe, the Bitcoin price had a strong foundation to rebound from on the day.

Whether the momentum could carry on over the next day or two remains to be seen, as it is now hovering at a heavy resistance zone with large sell bids to overcome.

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Bitcoin is up 24% in 2 days, but it’s showing two key signs of a local top

The Bitcoin price has recovered by 24 percent in the last 32 hours from around $4,394 to $5,500. It has since stabilized at $5,300, but it is now showing two signs of a local top.

What are the two signs Bitcoin is showing?

While the Bitcoin price has shown a promising upsurge since March 16 despite the 13 percent drop of the Dow Jones Industrial Average (DJIA), its momentum has slowed down since.

The first technical sign that the Bitcoin price could face a short-term pullback is the rise in price met with declining volume.

Historically, when the Bitcoin price saw a short-term upsurge without an increase in volume, it often became vulnerable to a near-term correction.

For instance, when the Bitcoin price was hovering at $9,000, its price slowly increased to around $9,220 with declining volume. In the days that followed, the Bitcoin price dropped to as low as $7,700.

The second technical sign that indicates weak momentum in the current price trend of Bitcoin is the third rejection of the same resistance level at $5,500 at lower time frames in the past three days.

Although the Bitcoin price briefly surged to $5,900 on March 16, it immediately fell back into the $5,100 to $5,500 range, which then led BTC to fall to the mid-$4,500 region.

bitcoin price
The Bitcoin price is struggling to break out of the $5,300 to $5,500 range (source: tradingview.com)

For the Bitcoin price to confirm another move down to the $4,000s, it would need to show a clear rejection of the $5,100 to $5,500 range in the near-term.

U.S. Treasury Secretary Steven Mnuchin’s proposal of a $1 tillion stimulus package and the Fed’s aggressive approach in injecting liquidity in the stock market could be a variable that alleviates selling pressure on both Bitcoin and the cryptocurrency market in general.

The case for a new BTC bottom

Several renowned cryptocurrency traders have suggested in recent weeks that the Bitcoin price may not record a bottom until the coronavirus pandemic subsides and the number of cases begin to drop.

The severity of the coronavirus outbreak has been the main factor of the panic-led sell-off in the global financial market, which ultimately led to a frantic sell-off of crypto assets.

One trader said that the momentum of Bitcoin is currently weak, and the coronavirus outbreak would need to pass its peak for the dominant cryptocurrency to find a bottom.

The trader said:

“Bitcoin is weak and coronavirus fear hasn’t finished. Only when the virus fear finishes or reaches maximum climax is when I believe bitcoin has found a bottom. Until then I expect 3k or lower in the coming weeks. Sooner rather than later.”

Analysts including Ed Keon, chief investment strategist at QMA, have said that the stock market bottom will purely depend on factors that are out of the market’s control. Keon emphasized that it would be foolish to conclusively state that the market reached a bottom until a confirmation can be drawn.

“It’s hard to put a number on. Only a fool would try to say this is the bottom, but does that mean it’s another 5% or lower? It’s hard to say. It’s going to depend on factors we don’t know yet. Our base case right now is a shallow recession in the U.S.,” said Keon.

There is an argument to be made that Bitcoin will not bottom unless equities bottom out in the future, based on the correlation between the two asset classes in recent weeks.

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Binance stablecoin’s exponential growth shows crypto investors are flocking for safety

Binance’s BUSD has become the fifth largest stablecoin by market capitalization, as investors flock to safety amidst extreme volatility in both the crypto and global financial market.

BUSD was launched in September 2019 in collaboration with Paxos with the approval from the New York State Department of Financial Services (NYDFS).

Changpeng Zhao, the CEO of Binance, said at the time:

“We hope to unlock more financial services for the greater blockchain ecosystem through the issuance of BUSD, including more use cases and utility through the power of stable digital assets.”

Uncertainty in the global financial market has rattled crypto, but Bitcoin isn’t performing all that bad

Amidst heightened fear towards the coronavirus pandemic, the global stock market downtrend has consistently shown a lack of appetite from investors towards high-risk assets in recent weeks.

While Bitcoin and cryptocurrencies in general cannot be categorized as a risk-on, risk-off, or a safe haven asset as of yet, the frantic sell-off of all asset classes including gold have led the crypto market to pull back.

As investor increasingly move towards the stablecoin market as a hedge to uncertainty in crypto, major stablecoins have started to overtake top cryptocurrencies in terms of market capitalization.

bitcoin crypto
The Bitcoin price dropped to $3,600, breaking below all major support levels (source: tradingview.com)

As of March 17, Binance’s BUSD ranks as the 35th largest crypto asset by market capitalization, overtaking cryptocurrencies like Hedera Hashgraph, TrueUSD, and VeChain.

The rapid increase in the market capitalization of BUSD primarily shows that the confidence of investors towards an NYSDF-regulated stablecoin is noticeably on the rise.

Will the rise of stablecoins continue?

According to Chris Burniske, partner at New York-based venture capital firm Placeholder, the bottom of Bitcoin may have not been hit in the recent correction to $3,600.

Burniske said:

“Lots of people asking where BTC bottoms. The short of it is I wouldn’t be surprised to see a retest of our 2018 lows near $3000. Historically, I’ve relied on the 200 week moving average (yellow line below) as our bear market bottom, but we we fell through that at ~$5500 last Thursday.”

Similar to the U.S. stock market and the breach of multi-year trend lines by both the S&P 500 and the Dow Jones Industrial Average (DJIA), the abrupt fall to $3,600 by Bitcoin on March 12 led nearly all major support levels to be broken in quick succession.

With large stimulus packages and changes to fiscal policies having minimal impact on the U.S. stock market, the Bitcoin price remains vulnerable to another large pullback in the near-term if the correlation with stocks continues on.

If the volatility in the crypto market intensifies once again in the coming days following the 13% drop of the Dow Jones on March 16, the demand for stablecoins like Tether and BUSD is likely to increase in the near-term.

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Aftermath of bizarre Bitcoin crash: BitMEX overtaken by FTX and Deribit in Ethereum futures

BitMEX, one of the largest cryptocurrency futures exchanges in terms of daily volume, has fallen behind OKEx, FTX, Deribit, Huobi, and Bybit in Ethereum open interest after the overnight Bitcoin drop to $3,600 on March 12.

The exchange was criticized for not using a large part of its insurance fund as $1.2 billion worth of long contracts were liquidated on a single day, within less than 24 hours.

Will BitMEX remain the dominant bitcoin exchange?

Some users were left dissatisfied with BitMEX in the aftermath of the unexpected Bitcoin price crash, as the exchange’s liquidation engine reportedly sold $10 million at a time with a thin order book.

The insurance fund of BitMEX could have been used to prevent auto-deleveraging the positions of users, but the exchange’s insurance fund hit a record high on the day instead.

“BitMEX uses an Insurance Fund to avoid Auto-Deleveraging in traders’ positions. The fund is used to aggress unfilled liquidation orders before they are taken over by the auto-deleveraging system,” reads the BitMEX website.

Possibly due to the controversy around the expansion of BitMEX’s insurance fund while Deribit and Binance injected millions of dollars of corporate funds on March 12, the Ethereum futures open interest of BitMEX fell behind five exchanges.

OKEx has long been the main competitor of BitMEX, especially in the Asian crypto makret. But, Deribit and Bybit have started to gradually eat up the global cryptocurrency futures market share in recent months, proving to be potential competitors in the long-term.

As of March 17, the Ethereum futures open interest of BitMEX remains at around $26.4 million. In comparison, OKEX, FTX, Huobi, Bybit and Deribit each have $107.8 million, $62.6 million, $55.9 million, $31.3 million, and $30.8 million in open interest for the Ethereum futures contract.

ethereum open interest as bitcoin falls
Overview of the Ethereum futures open interest (source: Skew.com)

BitMEX still remains as the dominant platform for Bitcoin futures trading. Currently, at the time of writing, BitMEX has an open interest of $540 million for Bitcoin futures, nearly as much as Deribit, Huobi, and FTX combined.

Based on the Ethereum futures data alone, it is premature to predict that the dominance BitMEX maintained over the past several years is expected to decline rapidly in the short to medium-term.

However, it may open the market to new alternatives as new generation exchanges fight for the share of the Bitcoin and Ethereum futures market.

What will happen next?

Industry executives have proposed various solutions following Bitcoin’s drop to the $3,000s, which theoretically could have crashed BTC to zero on paper.

Some have said that integrating a circuit breaker across all of crypto could be a viable option, while others have said that exchanges were simply not ready to see a near-50 percent drop on a single day, and need time to strengthen the infrastructure.b

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Trader warns institutions won’t ever invest in Bitcoin large-scale due to the overnight plunge

The Bitcoin price plummeted by 50 percent on March 12 in a steep sell-off, and one cryptocurrency trader said that it could eliminate the appetite of institutional investors to invest in the space at a large-scale.

“Bitmex is the main reason institutions won’t ever invest in BTC in large scale. Too much manipulation. Seriously if you ran a fund managing client monies and saw what Bitmex did to Bitcoin recently would you put your client money and reputation and trust in BTC?,” trader John Wick said.

The statement follows the controversy around the insurance fund of BitMEX, and how the liquidation engine of the exchange had about $200 million left to sell with virtually no buying demand on the order book.

Will institutions not commit to Bitcoin again? or is it a short-term trend?

When the Bitcoin price fell to sub-$6,000 right before the sudden drop to $3,600, it started to cause a significant amount of long contracts to be liquidated.

That led the insurance fund of major cryptocurrency exchanges to reach zero. Deribit, for instance, had to put 500 BTC of company funds into its insurance fund.

“Due to extreme volatility, we’ve seen a significant impact on our BTC insurance fund. In order to prevent socialized losses we have decided to support the insurance fund and strengthen it by injecting 500 BTC of company funds,” said Deribit.

BitMEX, however, was criticized for not using more of its insurance fund as the Bitcoin price plummeted to $3,000s with an unbalanced orderbook.

One trader said:

“What is the point of the insurance fund if, after the worst & most violent day ever in crypto, none of it was used? 3/11/2020 – 35,508 XBT 3/14/2020 – 35,210 XBT (though I will say there was some ‘USD value’ of the fund used, that is pretty minimal)”

Following arguably the crypto market’s worst sell-off in history, well-known entrepreneur Kim Dotcom said that institutions were dropping out of Bitcoin.

Due to the extreme uncertainty in the global stock market and the worsening coronavirus pandemic, institutional investors started to move out of high-risk assets.

Dotcom noted:

“Institutional investors are dropping out of Bitcoin. That’s good. Crypto needs more users, not more speculators. Mass utilization is accelerated by the economic crash. But crypto needs more easy-to-use & secure apps allowing users to pay for real things in real-time at low fees.”

Whether institutions would not commit to Bitcoin at a large-scale due to a single-day 50 percent drop in the long-term is still premature to call.

Tyler Winklevoss, the billionaire CEO of cryptocurrency exchange Gemini, said that that unexpected reaction to the recent global economic downturn shows just how early Bitcoin is in its growth phase.

What’s needed for BTC to stabilize?

Before the drop, the market capitalization of Bitcoin was hovering at nearly $200 billion, around 2 percent the market cap of gold.

For Bitcoin to stabilize and fare well to extreme market conditions in the long run, it would have to establish itself as a major asset through large fiat inflows and strong accumulation.

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Bitcoin hashrate barely dropped price crash to $3,600: here’s why it’s a positive sign

The hashrate of the Bitcoin blockchain network barely flinched as the price of BTC plummeted to $3,600, by around 50 percent within a 24-hour span. It may indicate that big mining firms have not capitulated amidst the drop, going in line with theories put out by respected industry executives.

What’s the theory? and is Bitcoin hashrate remaining high a positive factor?

High-profile investors in the cryptocurrency market such as BlockTower Capital chief investment officer managing partner Ari Paul said that investors did not decide to sell at low $4,000s.

The abrupt liquidation of a billion dollars of long contracts across major cryptocurrency exchanges led to a flash crash-esqe decline to $3,600, margin calling many positions.

That may show that major players in the cryptocurrency market are unlikely to have capitulated in the quick move down below $4,000.

The strong belief of large Bitcoin holders such as the Winklevoss Twins and Galaxy Capital CEO Michael Novogratz suggest that whales who have not sold during the initial drop to the mid-$3,000 region are not likely to capitulate in the short-term.

Large-scale mining centers are said to have prepared at least 12 months of mining costs ahead of the block reward halving in April 2020. That could prevent a potential sell-off of big miners in the upcoming months, which could apply significant selling pressure onto the market in theory.

bitcoin price
The Bitcoin hashrate is unfazed by price crash to $3,600 (source: blockchain.com)

The relative stability in the hashrate of the Bitcoin network also indicate that miners remain confident in the long-term price trend of Bitcoin.

Can BTC recover by the year’s end?

Much of the sell-off in the cryptocurrency market was caused by the frantic selling of stocks in the U.S. and Europe as fear towards the coronavirus pandemic intensified.

That means that if the U.S. and European equities market begin to recover in the upcoming months as the expansion of the coronavirus outbreak slows down, it could potentially revive the appetite for crypto assets including Bitcoin.

While the confidence in the government of the U.S. to contain the coronavirus outbreak has declined noticeably since early March, the progress shown by China, South Korea, and Singapore have demonstrated that it is possible to eradicate the virus.

Balaji Srinivasan, former Stanford professor and highly-regarded researcher with papers in clinical and microbial genomics, said:

“China, Korea, Singapore, Taiwan show that it may be easier to completely eradicate new cases than we thought. If so, our goal shouldn’t be to flatten the curve but to smash it. Get new cases to zero while accelerating diagnostics & drugs with expanded right-to-try.”

Throughout the next several months, the correlation between Bitcoin and the U.S. stock market is expected to continue, leaving the likelihood of a Bitcoin recovery by the end of 2020 dependent on the progress of containing the coronavirus outbreak in the U.S. and Europe.

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