BTC/USD Fundamentals
LiteForex | Oct 15, 2018 06:23AM ET
Analysis of BTC/USD news backgroundInfluence of the U.S. stock market, problems with Bitfinex and Bitcoin trends
Dear friends,
Today, I offer an unusual crypto analysis, as I’d like to dwell upon the situation, going on around Bitcoin and the whole cryptocurrency market. I’ll focus on the fundamental analysis in this article. I’ll try to understand the recent events and draw the right conclusions.
Crash of the U.S. stock market
Many compare the recent cryptocurrency market crash with the panic in the U.S. stock exchanges.
It is clear in the chart above that S&P 500 has just crashed during the past few days.
If you compare the BTC/USD price chart and that of S&P 500 during the same period, you’ll see that they have far less in common as many people think.
S&P 500 trend is upward. It has been going up without any serious drops since spring 2009.
And even considering the recent drop, the U.S. stock market is trading in the global uptrend.
And you all know the case with Bitcoin. I can’t now say about any bullish trend. The crypto market has been in crisis since 2017.
Get The News You Want
In the chart above, there is the correlation index between BTC/USD and S&P 500 in the daily timeframe. As you see, over the past few years, there has formed a steady link between BTC/USD and the stock market index. And the correlation is swinging month after month form almost complete convergence to the completely opposite.
If you try to analyze, then where does the correlation come from?
There is hardly any real business in cryptocurrency other than mining. How should the economic situation in the world affect the cryptocurrency market?
Of course, stock market experts may say that this is a kind of hedging from risk. But, the crypto market has been falling since late 2017. Everyone who wanted to avoid the risks did it 10 months ago. In the cryptocurrency market, there are no institutional investors investing in the venture capital business. Those, who compare venture investments with the cryptocurrency market, just do not understand what they are talking about. Venture investments are made the long term goals of at least five years. In cryptocurrency market, no investor thinks about such long time horizons. Everybody wants to invest and take the profits at the hype. No one of those who have invested ICO ever waits to complete the entire road map, nobody really cares whether it will be a real business or everything will turn into nothing. Everyone is concerned only about whether the altcoin price will grow or not. And, believe me, that is not about the quality of the business, the team or about the business idea itself, this is about marketing alone and it depends only on how well the company manages to carry out the marketing company and convince the traders.
Of course, it is impossible to announce the complete absence of the stock funds influence on the cryptocurrency market. Surely, there are those who believe in this correlation, and, with the indexes drop, start to go short for BTC. But it is more a feature of human psychology, rather than macroeconomic factors. And if someone tells you that the cryptocurrency has crashed, following the falling stocks, do not believe, do not let it become another scheme for future manipulations.
Bitfinex problems
The situation that could have really crashed the cryptocurrency market is the news bit that on October 11, it became known about the Bitfinex had suspended cashing out of the digital assets. First to announce it was copy-trader and an investor in @cryptoSqueeze his twitter.
There hasn’t yet been a disaster, but it is clear that the news has become a surprise for the exchange itself; otherwise, there would have been some official comments on this alternation. In fact, this change has hardly affected anyone, as working with fiat is possible only for completely verified users, who number is about 10% of all exchange participants. Uncertainty is the worst of all in this story. The feeling of uncertainty results in the emotional tension in the cryptocurrency market; the fears that the scams of Tether and Bitfinex will repeat make investors panic.
If you look at the 15M chart above, you’ll see that the extreme of the crash began on October 11 at 4:00. Post publication time from @cryptoSqueeze was at 3:57. This user is quite popular. He/she is read by more than 100 thousand people, many of whom are big traders. Squeeze himself is not a small trader in the crypto market. And aware of his readers number, he has surely went short amid the news before publishing it.
In the end, we understand that this fall was, deliberate or accidental, another manipulation.
In the situation of the lack of information and trading ideas, people are ready to believe in nonsense, made up to move the market. And such information injection should be made, as it is an excellent opportunity to get rich instantly, almost out of nothing. In fact, there are no reasons to panic or sell off. All those who talk about the low at 5500 do it blankly, since the key levels are not broken out, and below, ranging from 6200 to 6000, the market has excellent support that won’t let the market go lower.
Still, the worst thing that could be imagined is the triangle broadening and the ticker moving to 6000 USD.
As long as Bitfinex keeps silence, the pressure on crypto market will continue. I don’t exclude that this situation works the exchange’s advantage, as in the context of fear and uncertainty, it is easier to manipulate the market. However, such situation can’t go on for a long time. Bitfinex will provide some comments that will somehow clarify the situation. Most likely, the exchange does have some difficulties with Noble Bank. But the news that the platform begins a partnership with HSBC looks like a saving straw that will prevent the entire crypto market from really dramatic crashes.
Summing up this unusual post, I suggest everyone remain calm and not give in to the feeling of panic or greed. Act according to your trading strategy and follow the risk management. This is the only way you can avoid losses and make money in such a complex market as the cryptocurrency market.
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