Fresh weekly analysis from Pavel Schipanov, head of the ICBF analysis and research team. Let us talk about the parallels of the stock and crypto markets, the panic around the fall of stablecoins, and the news about the ETF.
The new week passed in a quiet and sleepy atmosphere, but professional market participants understand that this is only the beginning of great events, so one should definitely stay on guard. Let us warm up our brains first by distracting ourselves from the cryptographic market and take a look at what is happening in the stock markets.
An alarming situation is developing in the traditional ways of attracting funds due to the sale of U.S. and global stocks. Since the absolute record set on October 3, the Dow Jones 30 index showed a decline of 8.7 percent, while the index of the 500 largest S&P companies showed a drop of almost 10 percent in less than a month at the time of the greatest collapse. And, perhaps, these are not the final figures, because the same factors that simultaneously led to a decline are continuing to exert their influence. U.S. President Donald Trump continues to wage his trade war with China, Saudi Arabia is going to increase oil production in terms of imposing sanctions against Iran in November, and Russia may again be sanctioned, if it intervenes in the elections to the U.S. Congress on November 6. The predominance of negative factors is palpable. Let us look again at the cryptocurrency charts. Surprisingly, one can find calmness, similar to a calm sea. This cannot continue for long, and in the coming weeks, we will expect the appearance of a signal for a very powerful movement.
But if you think that Bitcoin and other leading crypto assets are the most volatile assets, then the research team is ready to argue with you, as it made a comparison of changes in the value of digital assets and stocks in the stock market. It turned out that over the past 365 days, even taking into account the November and December 2017 rally, Bitcoin volatility is between Alphabet (owner of the Google search engine), Facebook, Apple, and Ethereum, which ranks second in terms of capitalization among crypto assets, coincides with one of the largest manufacturers of video cards, the AMD.
One of the factors that could potentially affect the crypto assets is the burning of 500 million units of Tether, which were placed on the Bitfinex exchange. And by the time of this writing, another 130 million stablecoins will have been sent to eternal storage, which indicates the seriousness of the exchange’s efforts to restore the faith of the community, which had been shaken after a well-coordinated information attack on October 15. Every time additional stablecoins are emitted, the cost of the first largest cryptocurrency in terms of capitalization increases on the market, followed by the entire market, as can be seen in the graph below, where the vertical lines indicate the following days. The irretrievable sendoff to storage has not yet had any precedents, though, so its potential impact cannot be assessed so far.
It is also worth noting the expiration of Bitcoin futures contracts on the CME exchange took place last Friday, October 26th. This news can be both a pretext for the beginning of a collapse and have positive consequences. This is a possible trigger for the beginning of the growing movement with a consequent exit from the lingering trough. Additionally, a number of factors speak in benefit of the growth option in the perspective of a few weeks. First, there was news that the commissioners of the U.S. Securities and Exchange Commission (SEC) met with experts from investment companies that had submitted a joint application to create a completely new tool Bitcoin ETF for the financial markets. Thus, the VanEck SolidX Bitcoin Trust ETF application (one of the initiators of which is the CBOE exchange) has the greatest chances of being accepted. After the procedure of collecting opinions of supporters and opponents of the novelty was completed last Friday, October 26, the next logical step is a vote on November 5 with the possibility of launching an innovative financial product. It should be noted that this was just a discussion, and on October 23, the regulator's commissar Kara Stein, when communicating with Bloomberg, noted the lack of a final decision on this issue and the desire to see opportunities to store assets and ensure liquidity of trading, even in conditions of instability, which sometimes take place on the cryptocurrency market. A positive decision may be affected by the receipt of a New York state license to conduct custodial activities on digital assets (custody and accounting of client funds) by the Coinbase exchange. At first glance, this is little meaningful news, but in fact, this state license could bring the crypto sphere one step closer to legalization in the world.
Secondly, on December 12, 2018, the Bakkt platform (initiated by the ICE) is expected to launch the possibility of making transactions with cryptocurrency futures. The cost of the leading cryptocurrencies could be sent "to the moon" by the approval of this activity by another state regulator, the Commodity Futures Trading Commission (CFTC). Some institutional investors can start trading through this platform, including Goldman Sachs, which is interested in the field.
Thirdly, another news from news agency headlines pleased the crypto world with the fact that the SEC would not only regulate ICOs, but also help them in legal issues and support startups by advising and placing them on the single FinHub platform that is currently being created. To put it very gently, this is one of the most breakthrough news of 2018 for the crypto market, because recently, U.S. government officials mostly assessed the method of raising funds with the release of tokens as a fraudulent scheme. But now the business will be able to receive legally competent advice from automated advisors. By the way, users already have the opportunity to familiarize themselves with the functionality of the FinHub portal.
Summing up the above news for the week, it is necessary to note the saturation with a large number of bright events that can send the market much higher than the current values. In the current uncertainty and danger of a short-term collapse, the best strategy is to stay out of the market and wait for clear signals.
Below is a graph of the rate of Bitcoin to the dollar on the Coinbase exchange. We would like to note the continuation of consolidation with the remaining resistance in the form of a downward trend line in the region of which resistance levels of $6,555 to $6,600 are also located. Going above them will give a reason to go up to $6,800. Since we started talking about the possibility of developing an upward movement, we note other resistances at the level of $7,000, and a cluster of $7,200 to $7,250, where the 23.6 percent correctional level along the Fibonacci line and the 200-day simple moving average are passing.
Support for current rates is $6,300 and $6,200. If they are overcome, it will be possible to set goals for sales at the levels of $6,111, $6,000, and in the region of $5,882.
Breaking these values in perspective until the end of the current year may lead to a decrease to the levels of $5,600, $5,455, and $5,280. An exit above $7,200 and the 200-day simple moving average led to a consolidation of $7,375 to $7,500 and $7,800.
Ether and Other Altcoins
A dangerous sideways movement continues on the altcoins market, the outcome of which will surely be the development of a powerful movement. Ether continues unsuccessful attempts to break through the cluster of $193 to $200, and if successful, we can expect to reach $144, $131, and $100. Cancellation for this option of sales will be an exit above the resistance level of $230. Potential targets for the upward movement will be target values of $251, $300, $341, and $415, above which the 200-day simple moving average line is passing.
And at the end of the review, let us note the news from the Russian mining and metallurgical corporation Norilsk Nickel, which is ready to start the process of raising funds through the release of a cryptocurrency and present its own stablecoin. Of course, now our readers are wondering whether this is a dream. The immediate answer is no. One of the main owners of NLMK, Mikhail Potanin, spoke about such plans to “reach a new investment cycle” in an interview with Kommersant. The stablecoins will be provided with metal produced at the plants, and the ICO will be held in 2019 to attract funds to the endeavor.
Profitable trades for you all!