Saturday 26/05/2019, 11:15CET
Today I want to cover the dour state of the crypto market over the last week and what it means going forward.
First let's look at the chart to get a feeling of the last week of price action...
The first serious red candle happened on tuesday which closed on our upward trend line and on the important 8000usd level. Momentum was too strong and the next 24h saw an equivalent dip again closing the day of trade well into the 7k area. The weak hands were spooked again and this kept the sell side strong.
Thursday and friday saw prices in the low 7k levels but the candles formed doji's which signify a rebalancing of bear vs bull players in the market. Seems today that we may have put a floor under the lastest correction at the 7.5k level.
We now sit at only 1000usd above the "second bottom" of bitcoin this year which happened on April fools days and saw us bottom out at 6425usd. Following that event we had a +50% retracement to challenge 10k within the 30 days that followed.
So where to from here?
Well I am taking this as a continuation of our consolidation period.
Neither the buying bursts or selling routs we are seeing in the markets of late are accompanied by volumes that signify a fundamental change in sentiment.
The overall slow slide in volume, albeit not encouraging, is also not surprising as pure speculative money hesitates to enter the market till a clearer sign of reversal appears. All the while "smart" money enters the space through the back door thanks to OTC providers. These trades will continue while sentiment is not reversing, as OTC whale sellers do not see a reason to remove their 'asks' and wait for a better prices. Once(if) a bullish sentiment settles in, the ask side of the OTC trading desks will dry up and force the remaining "smart" money onto the open markets boosting volumes and upward prices completing the self fulfilling prophecy.
As volumes remain suppressed and falling, this makes movements in the price more volatile as the density of orders on either side of the book thin out. This also makes market manipulation easier/more effective for larger players
If you want to learn more about manipulation in the crypto markets, this vid is a great primer
Make no mistake here people, BIG INSTITUTIONAL MONEY is entering bitcoin and the overall crypto space. And they are totally OK with manipulating the market to their ends.
There is a growing pool of anecdotal evidence on the periphery pointing to this activity, and by the very nature of OTC markets, these whales want to remain in the shadows because the widespread knowledge of their deals would move the markets against them. Off course, there must be sellers to match in each of these deals, who knows what they are being offered/promised in these deals.
We must remember that the "smart" money has an excess of liquidity at the moment which was virtually gifted to them by their respective central banks. They have ever less and less great opportunity to park it and profit. The traditional stock and bond markets look over stretched and fragile, and interest rates are bottoming out after a massive and long standing central bank intervention. (see charts)
The best of the +30y bull economy we have had is over and the future looks less certain that it has in a long time.
And finally, the "smart" money knows very well just how the monetary system works. They know that it is flawed by design. They also know that these flaws are not permanent - that these flaws will eventually destroy the underlying system.
What keeps them in the system at the moment, just like drunks at last calls at the bar, they want to stretch the fun till the last possible moment.
Also they find the prices cheap at the moment to hedge their bets with crypto. Buying in now allows them to have a foot in the door in case the "open cryptocurrencies" will end up becoming the standard safe haven assets of the digital world, and/or they want ammunition to conduct manipulation operations in the crypto markets in the future.
So just to share a perspective view of the state of the proxy of the cryptocurrency world, #btc, here is a realistic possibility over the next days, week...
We may be lucky and the bottom of the 3rd low of the year is in, or it may extend down to the upper 6k level and bounce off this macro trend line. Either way I see the likelihood of a break of this trendline as highly unlikely. Supporting buyers at the moment are showing that the sentiment in the market is not bearish, just uncertain.
As most market prognosticators believe, I think we will see a continuation of this consolidation period for at least the next few weeks and maybe longer, then a slow uptick in prices with higher highs and higher lows and an uptick in volumes.
This will be accompanied with more gains in the altcoin markets, what some call the alt cycle, which will keep btc, and potentially ethereum more subdued as more risk taking takes place. These main currencies then acting more like gateways to the alt world.
EOS main net launch will be a milestone all in this space will watch very carefully. It has the potential to signal a disruption to Ethereum's dominance as the default infrastructure blockchain featuring significantly more throughput potential, and many other interesting innovations that ethereum does not have.
In fact I would go as far as say that this is the market event of the year!
A successful launch of EOS with no major upsets will put the spotlight back onto the crypto world and the awesome potential it holds. It may spook some Ethereum longs which could lead to a stagnation in the growth of the ether price.
We may see a move or even a rush into EOS as an ICO token platform, taking away some of thunder of Ethereum in this role, again adding a selling catalyst for ether.
In general we should start to see some of the earlier ICO players start to come out with production versions of their projects. I think it is unrealistic to imagine they will all successfully release according to their road maps
Conversely, a problematic launch of the EOS mainnet will further reinforce the current hesitant sentiment around cryptocurrencies and could spark another selling wave.
The participants in the crypto world that have reached a point of understanding the technology (as opposed to pure speculators who would bet on 2 flies on the wall) and its potential will not be easily shaken out of the market by a poor EOS launch. The tech has proven itself now and the future innovation on top of this is just a matter of time and capital. But the weak hands will fold, sending prices further with the potential of breaking the key market support structure at 6k.
This is the big fear I have right now. If this were to happen, then we would enter a bear market which could stretch for the remainder of the year and into 2019. Something like 2014-2015. Liquidity would dry up for the alt coin projects and their timelines would be pushed back adding more negativity to the sentiment. A vicious cycle. Players like myself will hold on for the long haul but we will not be adding enough fuel to the fire to get it burning like crazy any time soon.
Yes. IMHO, an EOS launch failure right at this moment in time represents a potential for outsized reaction from the market on the downside. It is our moment of truth this year.