In this weekly op-ed, Pavel Schipanov, head of the analysis and research group of the ICBF, described the situation in the market of cryptocurrencies at the end of September and shared his forecasts for the rates.
The world's main cryptocurrency smoothly moves on the charts more often to the right than up or down, as in a professional investors joke. Bitcoin remains within the range of $6,000 to $6,800 due to a lack of understanding by crypto traders of how the trading of cryptocurrencies will develop further. Globally, it can be noted that the market is ready for the start of the growing movement, but it will be preceded by a decrease or a short lateral movement. The expected consolidation is connected with the unwillingness of the capital to start active purchases in conditions when the American financial controller has not made any decision regarding the applications for an ETF market based on Bitcoin. Note that in case of permission for the start of work for the VanEck SolidX Bitcoin Trust, the ETF immediately increased the volume of positions to buy in anticipation of the inflow of liquidity. Last week, the Securities and Exchange Commission (SEC) postponed the decision regarding the feasibility of starting the ETF for an indefinite period, although it had to either approve it or reject the commissioners' meeting on September 30. The regulator still cannot decide whether a Bitcoin ETF would be at risk of manipulation and whether its rate could be influenced by outside forces. It is assumed that the decision on this issue may be postponed to the end of 2018, or maybe even to April 2019. It should be noted that the inflow of funds into financial products related to Bitcoin will lead to the growth of Bitcoin in the first place, even to the detriment of other cryptocurrencies. As can be seen in the graph below, this movement occurred earlier at the time of the announcement of the launch of Bitcoin futures.
The market is already forming more and more reasons for long-term growth even without a decision from the SEC. The only question that remains open: When will this long-awaited process begin? The recently-announced Bakkt crypto exchange platform (its creator was the ICE corporation owning the New York Stock Exchange) that made a lot of noise in the community continues to amaze. One of the first products will be Bitcoin futures with fiat currencies with the fiat supply of cryptocurrencies. In fact, they could become a good competitor of the Bitcoin ETF (if it is approved, of course).
Continuing to develop the topic of financial markets, we note the news that shocked all the crypto community and came this week from the Circle exchange, which is the representative of the top-sized asset managed by the American bank Goldman Sachs. After the recent fake news about the abolition of the possibility to trade for clients of a credit institution with crypto loans, the true "balm for the soul" was the news about the creation of a stable coin based on the U.S. dollar, the USDC. This project will attract more funds from institutional investors because the only worthy competitor is Tether (USDT), which causes the crypto community to disagree because of the lack of transparency of the facts of reinforcement of each released Tether coin by the corresponding amount of physical U.S. dollars in banks. But the decision of the Goldman Sachs controlled investment and credit organization can give the market confidence in the early start of the inflow of large funds into the crypto market.
Their colleagues from Wall Street, the no-less-famous bank J.P. Morgan Chase, began developing an analog of the interbank transfer system SWIFT as early as in 2017. This week became more intense because of one more event as testing of the Interbank Information Network (IIN) began on the basis of the Quorum blockchain platform. 75 international financial organizations are ready to join this development, including the Spanish bank Santander and the French Societe Generale. The main purpose of this innovation will be the acceleration of payments so that users do not have to wait for the funds to be received within a few days, as it now happens within the framework of interbank transactions. The main competitor to this project will be Ripple, which also allows users to make payments with a delay of only a few minutes in test mode.
Continuing the theme of payments with the help of a blockchain, it should be noted that the emirate of Dubai, which is one of the most promising growth centers of world economies, presented the state payment system for the ministries and departments of the UAE. The ministry of finance of the Middle Eastern country was engaged in the implementation, but the successor to the throne, Prince Hamdan bin Mohammed, is in charge of it. Previously, the state payment system could stretch the delivery process for 45 days, but now, the speed will be increased to almost instantaneous, and all of them will become far more transparent.
No less positive news came from the American capital city of Washington. There was a roundtable discussion on the issues of ICO and regulation of digital currencies within the walls of the U.S. Congress with the participation of legislators and representatives of cryptocurrency companies and 45 other financial organizations. The participants discussed proposals for adjusting the current legislation and ways of protecting ordinary investors in such a volatile market.
As if confirming the thoughts of the crypto enthusiast Michael Novogratz about reaching the "bottom" price, the very daring words of the Morgan Creek Capital Management analysts spoke about the readiness of Bitcoin to grow to $500,000 and ousting of with fiat money from circulation in the future. But, of course, the exact timeframe for the forecast is not given, and although they mention the year 2024, it looks very vague. Based on the results of the fundamental analysis, we can say that there is a lot of positive information that will lead to growth in the long term. The light at the end of the tunnel still cannot be seen, however, because the short-term analysis of the upcoming weeks and months does not look so comforting.
We still have more sell signals on charts with a timeframe of more than four hours. Price growth is possible this week until the end of trading on Friday, which is usually observed before the expiration of futures contracts, and then we can expect the development of a sharp decline. Last Friday, September 28, trades on September futures ended on the CME in Chicago, and after this event, the price dump will traditionally begin when there is a strong collapse.
Another reason for the decline in the near future may be a message that in the 2nd quarter of 2018, Nobuaki Kobayashi, the trustee of the Mt.Gox exchange that went bankrupt due to the hacker attack and disorderly management, sold Bitcoins and Bitcoin Cash for $230 million. As agreed with the judicial authorities, almost 50,000 Bitcoins were sold and the same number of coins of its fork Bitcoin Cash. At the same time, it should be understood that this process has not yet ended and until 2020, Kobayashi will be engaged in the sale of cryptocurrencies stored on the wallet owned by the failed exchange.
On the chart below, we can note the possibility for a new short-term growth to the areas of resistance at $6,670, $6,820, and $7,000. The break above looks unlikely at the moment, but we note earlier consolidations taking place at a significant level of $7,200 and consolidation at the levels of $7,375 and $7,500. Overcoming them will be the basis for considering that a trend reversal occurred. But after a short-term growth against the background of the expiration of the expiration of futures for Bitcoins, we should expect a new cave in the movement of rates, and potential targets will be $6,400 and a cluster of levels $6,000, $6,111, and $6,200.
A powerful collapse in the next few days should not be expected, however, because the price will need to overcome the level of $6,000. Below it, there will be powerful support on the values of $5,776 and $5,880. In the case of a breakthrough, due to some significant news, the targets should be the levels $5,600, $5,280, $5,000, $4,741, and $4,800. A reduction in the volume of "short positions" speaks in favor of this version while maintaining the volume of "long," which usually indicates the game of the whales for luring, and it will end, most likely, in a large price collapse.
Global trend reversal can occur as a result of a breakthrough upward of the cluster of $7,375, $7,500, and $7,800 levels. At the moment, the targets outlined in the previous review are still in the form of a strong resistance at $8,000, $8,200, and levels of $8,500, $8,900, and $10,000.
Ether and Other Altcoins
The market of altcoins shows attempts at growth, but they consistently end with a strong pullback. Taking into account the expected growth in Bitcoin, one can expect a short-term shot upward from the technical formation "Wedge" for Ether. A move above $220 will give an opportunity to reach the levels of $230 and $240 (here is another 200-period simple moving average). If these resistances break, we can expect resistance levels to reach $251, $270, and $300. An alternative option for the development of trades involves withdrawal below the supports at $180 and a cluster of $193 and $200. Keeping the trend on the collapse will allow you to fix the profit at a decrease to $160, $131, and $100.
The market shows very high volatility and readiness to move in both directions as the whales decide, so be careful when opening new positions in the market.
Profitable trading for all!