Bitcoin: USD/BTC (BTC=X) Down Over 20%

Bitcoin: USD/BTC (BTC=X) Down Over 20%

Bitcoin: USD/BTC (BTC=X) Down Over 20%

My own sense is that crypto currencies in general and bitcoin specifically are not safe havens. They have failed the purpose they were intended to fulfill in that they are not actively used as a means of exchange. Few retailers accept them, fewer consumers actively use them and transaction costs are still very high.

The technology associated with cryptocurrencies is also complex enough to dissuade most households from using them. For many people the process of setting up a crypto wallet, and mentally translating crypto prices into everyday currencies is too demanding to bother with. This ‘ease of use’ is a cognitive barrier to entry and something that will take time for many to overcome, even Millennials.

In addition, the infrastructure around cryptocurrencies is fragile in at least two respects. Parts of that system, such as exchanges are prone to hacking and ransoming, and can also be shut down at the whim of governments.

Bitcoin Not A Safe Haven

From the point of view of cryptocurrencies as assets, very basic data analysis suggests that optically bitcoin has a low correlation with safe havens like gold. This does not mean that bitcoin is a good diversifier or a safe haven. It has been highly volatile over the past two years and is subject to trading and liquidity risks not normally associated with safe havens.

A further clue as to the true nature of cryptocurrencies as investable assets comes from the community of people who hold and trade them. The micro-structure (or plumbing) of markets, as well as the anthropology and sociology of those who populate them (which will have to be the subject of a future missive) is crucial to the way they behave and subsequently to their risk characteristics.

In this light the fact that the biggest holder of bitcoins is apparently the FBI says a lot. A good deal of trading in cryptocurrencies takes place in Asia, other emerging markets like Russia and in hubs like Zug.

Though admittedly not scientific, nor thorough, I suspect that many bitcoin traders also trade equity futures and currencies and use the same equity trading rules (technical) to buy and sell bitcoin (cryptos now have their own rating system, FCAS). If this generalization holds, it suggests that risk budgeting may drive a positive correlation between cryptocurrencies and equities, especially at market highs and lows.

Another observation is that for its size (the top ten cryptocurrencies barely add up to the market cap of Citigroup) the crypto market attracts an inordinately large amount of attention, which may draw money in at high points. To my mind this points to bitcoin having a pro-cyclical bias in terms of its riskiness as a trading asset.

Technical Indicators

Overall, the bias in prices is: Downwards.

Note: this chart shows extraordinary price action to the downside.

By the way, prices are vulnerable to a correction towards 8,482.59.

The projected upper bound is: 7,876.22.

The projected lower bound is: 6,197.65.

The projected closing price is: 7,036.93.

Candlesticks

A black body occurred (because prices closed lower than they opened).
During the past 10 bars, there have been 2 white candles and 8 black candles for a net of 6 black candles. During the past 50 bars, there have been 16 white candles and 34 black candles for a net of 18 black candles.

A spinning top occurred (a spinning top is a candle with a small real body). Spinning tops identify a session in which there is little price action (as defined by the difference between the open and the close). During a rally or near new highs, a spinning top can be a sign that prices are losing momentum and the bulls may be in trouble.

Three black candles occurred in the last three days. Although these candles were not big enough to create three black crows, the steady downward pattern is bearish.

Momentum Indicators

Momentum is a general term used to describe the speed at which prices move over a given time period. Generally, changes in momentum tend to lead to changes in prices. This expert shows the current values of four popular momentum indicators.

Stochastic Oscillator

One method of interpreting the Stochastic Oscillator is looking for overbought areas (above 80) and oversold areas (below 20). The Stochastic Oscillator is 32.6173. This is not an overbought or oversold reading. The last signal was a sell 25 period(s) ago.

Relative Strength Index (RSI)

The RSI shows overbought (above 70) and oversold (below 30) areas. The current value of the RSI is 23.21. This is where it usually bottoms. The RSI usually forms tops and bottoms before the underlying security. A buy or sell signal is generated when the RSI moves out of an overbought/oversold area. The last signal was a buy 48 period(s) ago.

Commodity Channel Index (CCI)

The CCI shows overbought (above 100) and oversold (below -100) areas. The current value of the CCI is -148.This is an oversold reading. However, a signal isn’t generated until the indicator crosses above -100. The last signal was a buy 7 period(s) ago.

MACD

The Moving Average Convergence/Divergence indicator (MACD) gives signals when it crosses its 9 period signal line. The last signal was a sell 16 period(s) ago.

Rex Takasugi – TD Profile

FOREX BTC= closed down -277.850 at 7,057.930. Volume was 93% below average (consolidating) and Bollinger Bands were 35% wider than normal.

Open     High      Low     Close     Volume___
7,076.7407,157.6006,969.2807,057.930 5,572
Technical Outlook 
Short Term: Neutral
Intermediate Term: Bearish
Long Term: Bearish
Moving Averages: 10-period     50-period     200-period
Close: 7,923.10 8,493.48 9,388.79
Volatility: 46 65 79
Volume: 63,711 76,610 85,922

Short-term traders should pay closer attention to buy/sell arrows while intermediate/long-term traders should place greater emphasis on the Bullish or Bearish trend reflected in the lower ribbon.

Summary

FOREX BTC= is currently 24.8% below its 200-period moving average and is in an downward trend. Volatility is Our volume indicators reflect moderate flows of volume out of BTC= (mildly bearish). Our trend forecasting oscillators are currently bearish on BTC= and have had this outlook for the last 10 periods. Our momentum oscillator is currently indicating that BTC= is currently in an oversold condition.

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