Pavel Shchipanov, head of the ICBF analysis and research group, described how the possible approval of ETF applications by the SEC will affect the crypto market, as well as what achievements can be expected from Bitcoin in the near future, and when a mass transition of crypto projects to a new level will take place.
In this article, we will peruse the most pressing issues: what is needed for the flow of funds to the market of cryptocurrencies, and when is it worth waiting for explosive growth? To answer the first question, we will consider the three main ingredients of this “cocktail of success.”
First, it is the inflow of capital from those who possess the largest amounts of funds in the world. Of course, we are talking about banks and investment funds. As Bitcoin is often considered “digital gold,” we can safely compare the digital asset’s price action to that of the real precious metal. The most anticipated news of the upcoming weeks is the possible approval of requests for the registration of cryptocurrency ETFs filed with the U.S. Securities and Exchange Commission. There was a message from the SEC about the postponement of registration deadlines until September. This applies to applications submitted early in 2018 for the launch of ETF trades. This caused a slight panic among the community, which could be noted in some high-profile Telegram channels, and later this message was also picked up by news resources. When looking at the price of Bitcoin, however, it was unclear as to why it continued to remain on the highs, rather than recoiling to the minimums of this month. And only with subsequent analysis did it become clear that these were applications from smaller companies and exchanges, including the Gemini ETF from the Winklevoss twins. Applications for crypto ETFs from the "pillars of the financial system" of the U.S., from such exchanges as the CME and CBOE, are all still relevant. The SEC does not have an exact date for the announcement of the decision, but it can be made as soon as August 10. With almost 90 percent probability, the decision will be positive. Frustration due to unfulfilled hopes can prevail in the case of another postponement of consideration for all of the applications because of the ending of summer vacations for market players. This will be the reason for a corrective movement.
To understand why such a wave of discussions is taking place around the possibility of launching cryptocurrency ETFs with specialized resources, let's look at the trading behavior of gold over the last 68 years.
Bitcoin has already passed a similar stage as gold with the launch of futures on the CBOE and CME exchanges. Let us the remember the explosive growth of Bitcoin in the period from November to December and note a similar price movement occurred for gold in 1974, followed by a correction (very similar to the dynamics of Bitcoin, right?). And the most interesting situation occurred after the start of ETF trading for gold. The growth from 2003 to the maximum in 2011 was 478 percent. The market is waiting for the same effect to occur for Bitcoin. If the SEC gives approval, one should expect inflows of investments from both private capital and top financial organizations by the end of 2018 and the beginning of 2019. This will trend will not only survive for one or two months, for it is likely to last for several years.
Secondly, the technological development of blockchain projects is growing. Thus, it can be noted that most of the projects are already at level two, and a number of them have already made a step in the direction of the third stage. The first two stages assume only the storage of data on the blockchain and the activation of PR activities across social networks. A new stage in the development of crypto projects intersects with the stage experienced by the entire Internet, and that is the opportunity to improve what exists, making it convenient for users to apply the technology and monetize it. That is, users can receive tokens for viewing content, participating in community activities, and proving loyalty to a project. And in case of a successful entry onto the exchanges, such a project will potentially mark a lot of growth, and they can be profitable for conversion into fiat money.
Last but not least is the government regulation of the cryptocurrency market. Many "crypto-anarchists" and supporters of anonymity may disagree with this point. Their main argument will be the idea of the creator of the first cryptocurrency, Satoshi Nakamoto (by the way, his real name is still a mystery), which was laid out initially as transactions between wallets open to any participants, which preserve the identities of their owners. Almost immediately after the FBI closed The Silk Road, a site that used Bitcoin for drug trafficking, however, many of the Bitcoins that were sent were seized and arrests of administrators and top traders followed. Therefore, we can say with confidence that the time of full permissiveness is long gone and the orderliness of the system has arrived, and along with it, the "sheriff has come to town."
This role has already been tried on by a number of organizations, including the United States government. Thus, the struggle between the SEC regulators and the CFTC for recognition of tokens as currencies or commodities has already started, while the legislature, that is, Congress, cannot yet determine the legal status of cryptos. They do, however, have a very serious attitude toward dealing with this issue, for which they have enlisted the help of leading experts. Therefore, we can expect that after the summer holidays, the legislative process will finally bear fruit. For this reason, we can say that 2018 will be a year of positive changes in the crypto industry, primarily because of the readiness of the G20 states to acknowledge and regulate this industry.
Now that we have mentioned the global situation and the external conditions for trade, let's make a brief summary. There are grounds to believe that large capitals around the world have already come to the market, but they have already invested their money or are negotiating investments, and they are also considering the possibility of mergers and acquisitions of budding blockchain companies (traditionally designated in the financial sector as M&A). So let's recall the most vivid example in the form of a purchase by the Circle startup (owned by Goldman Sachs, a top four bank in terms of volume of assets in America) of the Poloniex exchange for $400 million. The diagram below shows that even in the conditions of a falling market, investments by venture capitalists and other investors are continuing. Just in the first two months of 2018, $323 million was invested in crypto projects, and this figure exceeded $1 billion over the previous year. And we can expect that the willingness to regulate the industry will lead to an inflow of investment funds directly into the projects themselves, as well as into the purchase of their tokens.
In order to get an answer to the second question regarding the expectations of explosive growth made at the beginning of the article, let's take a look at the leading assets.
The current analysis of Bitcoin can be constructed on two diametrically opposite expectations of dynamics, which will also set the benchmarks for the movement of the entire market. The first option assumes the possibility for the development of growth in the coming months. Yes, if a number of conditions are fulfilled, in addition to the three external factors described above, you will have a clear indication of the future price movements.
Let's note the steady growth of rates from the area of $6,000 and the overcoming of the level of $8,000, above which the price is located at the time of writing of this article, within the framework of the implementation of the "Inverse Head and Shoulders" model of technical analysis. Throughout almost all the weeks of July, there was a progressive, unhindered increase in the price of Bitcoin. The bulls have enjoyed their victory and are clearly not ready to surrender. The benchmark of the cryptocurrency market, provided that the level of $8,500 is overcome by several day candles, will offer chances to earn on the growing market trend within the second half of 2018. Yes, it’s vital to understand that in any case there will be corrections, so you should not have any illusions about a price of $2 million for one Bitcoin. This notion looks almost unrealizable. You can, however, expect moderate growth to levels that, over the past eight months, have become the maximum values, and the points at which the price reversal began. Analysts of ICBF in the previous review have already mentioned the levels of $10,000, $12,000, and $17,000.
By carrying out a more short-term analysis of the prospects for the upcoming weeks, one can note the opportunities for the development of a “respite.” The buyers who pushed the price upward after meeting a very important level of $8,500 (the signal line of the 200-day moving average is located here, the breakthrough of which can mean a reversal of the trend) have decided to take a pause before undertaking a new assault. This was taken advantage of by the sellers who are quickly pushing the price back to the $8,000 support, which will be followed by $7,600, $7,400, and $7,000. But do they have enough power to squeeze it, or is it time to start cheering for those who are taking the hold position? If $8,500 is overcome, then the buyers will be able to record profits on a sequential move from level to level: first $8,950, then $9,470 and after that, $10,000.
At the same time, current growth, according to less-optimistic experts, is just a "game" for luring capital, and further stalling to a "tailspin" below $6,000 may continue from the area of current values.
The growth of Bitcoin has not yet led to a surge in active purchases for all altcoins. In particular, Ether remains near its support levels and cannot gain a foothold above the resistance points of $480 (An 11-percent Fibonacci correction) and $487. The targets for the potentially growing movement will become $520, $530, and $570, and the overcoming of the $600 mark will help restore the market of altcoins in the future. If the assumptions about the continuation of the market decline are confirmed, however, then we should expect a drop below the support levels at $370 and $358.
When assessing all the above factors and the situation shown in the charts, it is necessary to note the emerging signals for growth, but you must individually decide on investing in each of the projects with certainty. Keep an eye on the reviews written by market professionals, as we wish you profitable trades!