Diupdate

Crypto in a "holding pattern" waiting for breakout

The fundamentals for crypto haven't significantly improved in recent weeks but the market has stabilized itself perhaps due to some enthusiasm for hard forks like Litecoin Cash and a lack of significant adverse news (aka FUD) and no huge ripple effects from equity market volatility.

Jeffrey Gundlach recently came out and said that Bitcoin was acting like a proxy for equity market volatility given the nature of crypto as a highly speculative asset class. It seems to me it could be the other way around with Central Bank interest rate worries rippling across all asset classes with Bitcoin somewhat more correlated to equities than other assets when the market gets nervous.

TA suggests an inverse H&S pattern forming which could be a positive sign for market recovery. Other positive signs would be an article that recently discussed alternative stablecoins, which could mean any Tether fallout could be limited by another entity that steps in. Overall, exchanges are still a huge weak link with the SEC recently arresting an exchange founder that failed in 2013 and huge catastrophic losses from CoinCheck and BitGrail. Generally, crypto is reprising the security PR nightmare that was 2013-2014.

Google Search Trends are still negative for Bitcoin and cryptocurrency but slightly positive for Litecoin though still far below previous peaks. Litecoin Cash remains strong in search enthusiasm as it continues to show search growth. I think crypto needs to show some positive trends in order for the market to stabilize and recover and this current period of relatively lower volatility could bring more activity into the market. Bitcoin volume remains extremely low for both on-chain and exchange transactions while Litecoin is up significantly, pushing above Ethereum in the charts for a close battle for second place in transaction volume. Market cap is only important in showing differences in coin emissions and supply but volume suggests actual network use which signals valuation trends.

Overall, if Litecoin and some others can continue to show positive network activity then perhaps there will be some short term positive growth of these coins relative to Bitcoin (i.e. a substitution effect). Still, I'm not really sold on Litecoin yet given the low volume and the overall lack of innovation. Litecoin has historically been underrated and when the market turns negative it tends to fall a lot more due to its less prominent position relative to Bitcoin. Given the lack of developer leadership in Litecoin since it is nearly a 1:1 knock-off of Bitcoin with some supply differences it seems unlikely that Litecoin will make that much of a dent in Bitcoin's dominant position in the market.

Right now, the price to watch seems to be 11k. A break above 11k signalling a breakout from the inverse H&S neckline would be a strong buy signal for the market but given the overall dampened enthusiasm for crypto this might be wishful thinking. Order books suggest strong selling pressure below 11k so bulls might be waiting for a stronger push above 10.5k before entering.

ADX, which I find to be one of the most useful indicators, shows a bottoming of the current negative trend. The ADX of the previous trend failed to break 50, which suggests an uncertainty about the direction of the market but the current DI+ and DI- are converging which reflects a turning point for the market to signal a reversal or continue the negative trend in an even stronger way.

Given the overall short term positive momentum I'd call this a "HODL" for the market generally with some stop-losses in place should the inverse H&S fail to breakout upwards. Breaking would be extremely positive and this could be the signal the market needs to push stronger search trends and a positive DI+/ADX to bring renewed interest into crypto markets.

Regulatory shocks still lurk so I would keep longer term positions relatively smaller and trade as much as possible outside of CFTC and SEC working hours.

Catatan

Overall, I still think cryptocurrencies have exhausted their public enthusiasm and overall negative sentiment from "smart" money remains very strong.

The fact that substitution effects can harm the network so quickly and dramatically isn't a good sign for Bitcoin, especially for institutional investors watching closely and carefully to determine whether or not to enter the market.

Why not just create your own $300 M "coin" and pump and dump it yourself? That would be the obvious and riskless way of participating in the crypto markets rather than buying another person's overpriced Bitcoin. If you look at the history of people like Dan Larimer, that is precisely the strategy they have employed, creating an endless stream of overhyped projects that have yet to generate any "real" revenue streams.

Another coin that I have soured on is Monero, as they have openly abandoned their human miners for "botnets" run by rogue hackers looking to exploit security holes in other users systems. This create a very bad economic incentive for participating in the Monero network and I think this could spell the end of Monero 1.0 as we know it given the overall small volume and small network size. If Monero devs abandon ship for another similar coin that better reflects their ideals then we could see a good investment opportunity in the "next" decentralized privacy coin. So far, most privacy coins have come across as scammy, pre-mined junk, but maybe I need to do more research.

Catatan

Notably, on-chain transactions took a big swing above 200k in the last few days while Google Trends still shows "Bitcoin" falling off the map, down an estimated 25% from last week.

The big sell-off at 11k doesn't suggest a lot of momentum and given the total lack of volume all across crypto markets generally with ETH unable to break $1 B in "total vol. 24 h" and Litecoin falling off significantly I don't see much trading on sentiment.

Notably, when I made a LTC trade on GDAX earlier there was very obvious spoofing with the order book increasing by around 6000 LTC within $0.02 of the mid-market price which led to a noticeable shift in seller behavior that was likely human (due to the slow speed of the cancellations), which led to a rapid pump in LTC prices when the order book had previously suggested more selling pressure than buying pressure. Examining the order history showed no huge buy orders were executed so clearly some whalebot is pressuring LTC prices higher.

This article points to the ease and relatively low risk of simply forking your own coin off the work of other developers:
news.bitcoin.com/trading-tip-the-wall-absurd-profits-from-zclassic-a-k-a-bitcoin-private/

Catatan

I should say that "breakout" also implies "breakdown" if this pattern doesn't hold. The bounce off 10,214 was pretty sharp so the market could retest that level again before deciding which way to go. I haven't been observing the market as much as before but I've noticed spoofing.

Based on figuring out probabilities of price movement using the order book (which seemed to work fine before all of the price manipulation made me reevaluate the market) I don't see a breakout happening at the moment.

I can see some more bouncing on the way down but given the strong support/resistance between 10200 and 10400 my feeling is that 10k will breakdown pretty quickly to 9700-9800 where there will be a much stronger bounce and the market could push back to retest 11k.

Just based on search trends and the generally weak volume my feeling is that this market will need some disciplined 'hodlers' to avoid a general decline in price as equity markets start to get testy and traders pull funds from crypto to trade gold, volatility, and FX as illiquid crypto markets start to get a bit too high risk and BTC not really such great risk:reward at the current price level.

Catatan

Tom Lee has been pretty consistent in his bullish view of Bitcoin and cryptocurrencies and has come out and bumped up his price targets from $11500 for mid-2018 to 20k.

cointelegraph.com/news/fundstrats-tom-lee-stays-bullish-on-btc-price-sees-major-firms-joining-crypto-sphere/amp

What's strange is that he clearly sees the pattern of companies "creating" their own riskless crypto, which has been proven to compete with Bitcoin as we saw in the case of Ripple getting pumped like crazy, which shows the willingness in the market to substitute for Bitcoin as a speculative asset.

I'm sure Tom Lee knows a ton of institutional investors that are talking up Bitcoin and crypto, but my feeling is that these institutional investors know there will be a better opportunity to buy than right now. Just like Warren Buffet sitting on $100 B in cash, the "smart money" knows how to exercise patience in the market to find the best entry point, and with the market up close to 100% off previous lows and a downward trend that has yet to signal a full reversal there should be more meaningful opportunities.

On a weekly time scale, the market hasn't hit a bearish trend and given the lack of any reversal in relative interest via Google Search Trends I think it will pay to be cautious as many markets will start to sync up as a result of rising interest rate expectations.

Catatan

Despite a lot of buy orders coming through sell pressure seems likely to end this rally to $10423. This would be a moment where spoofing usually happens noticeably and so far it hasn't happened.

Catatan

What I didn't really see is how thin the order book is right now. This should rally back pretty quickly.

Catatan

What's crazy is that rally to 10445 had two orders totalling over 32 BTC and the market just cruised right through it, which led to a fairly empty order book and now sell pressure is building up again at 10445.

Catatan

Notably, "cryptocurrency" as a search term is still near late November levels while "Bitcoin" has dipped to Aug-Oct. levels.

Catatan

Big WSJ article from today:
wsj.com/articles/sec-launches-cryptocurrency-probe-1519856266
“We’re seeing the tip of the iceberg … there is going to be a ton of enforcement activity,” said Dan Gallagher, an SEC commissioner from 2011 to 2015 who now sits on the board of blockchain company Symbiont. Mr. Gallagher told an SEC conference in Washington last week that the largely unregulated token offerings are “the freaking Wild West—it is ‘Wolf of Wall Street’ on steroids.”

Catatan

Also from this article:

"A soon-to-be published Massachusetts Institute of Technology study of the ICO market estimates that $270 million to $317 million of the money raised by coin offerings has “likely gone to fraud or scams,” said Christian Catalini, an MIT professor."

If I'm watching this unfold I'm not about to ratchet up my risk tolerance so generally this doesn't suggest a strong market going forward until the SEC and CFTC clean up the mess or crypt "self-regulates", whatever that means.

Catatan

What I meant to say is that self-regulating has proven to be extremely difficult and contentious given the lack of a central organizing entity which means the government will likely be the main force to compel action.

Catatan

Notably, "blockchain" as a search term is only off by about 50% relative to the December peak which would suggest overall interest remains strong in anything "blockchain" which could translate to opportunities whether in Bitcoin or something else.

Catatan

Goldman Sachs, like JP Morgan and a few others, doing fairly comprehensive analysis on cryptocurrencies, released their own report.

"The key to determining fair value, says Allison Nathan, senior strategist for Goldman Sachs Research, is identifying the economic problems cryptocurrencies solve—an exercise that leaves Goldman Sachs economists cautious. “In most areas of the world where we have well-functioning fiat currencies and reliable banking systems, there just doesn’t seem to be a need for digital currencies,” Nathan says, though she notes that Goldman Sachs Research remains optimistic that blockchain, cryptocurrencies’ underlying distributed ledger technology, can have a transformative impact across a wide range of industries."

Catatan

Another Goldman talk here underscores the disruptive value that ICOs offer in creating liquidity for generally illiquid equity investments. Once the market matures and scams are weeded out these platforms could be significantly disruptive, which is why Ethereum and NEO could hold up as well as Bitcoin over the longer term, but a lot of their value is probably priced in already and future platforms like Cardano and others will likely reduce the overall growth trajectory. Also, overall, exchanges still play a critical role in influencing value, as seen recently by the very rapid decline in value of Zclassic due to Bittrex's decision not to allow trading of Bitcoin Private.

Catatan

It seems like GDAX is getting some crazy bot action now as volume just picked up out of nowhere after 2:10 AM EST.

Catatan

Buy volume above 10400 just ramped up in a big way. At 10450 there was a single order for over 16 BTC.

Catatan

Maybe this bot is triggered by some level of activity that recognizes optimal conditions for easy manipulation of a mostly empty order book.

Catatan

This buy volume very quickly disappeared at 10500

Catatan

It seems like a spoofing bot has entered the market or turned on in the bid...

Catatan

Just saw a single sell order for 16.2 BTC at 10528.56 so maybe that bot pushed some scalping price action.

Catatan

The way this bot could work is as follows:

Recognize an easy opportunity for the price to move based on a largely empty order book and place a strategically sized buy based on some measurement of the ask volume between a specified price range.

Place bids far enough away from the market price to influence price movement but not close enough to fulfill. Recognize an exit based on order book balance less the orders your bot placed.

There's probably something wrong here but I'm not in the mood to think about it.

Catatan

Based on the flurry of extremely small "layering" buys that just executed it seems like some bot is active again after a brief pause.

Catatan

Based on the idea that prices tend to move after hours it would seem easily testable whether buying dips in price headed into "after hours" (say 5 PM EST) proves to be profitable. Lately, this has seemed to be fairly common.

Catatan

An order for 20.13 BTC just went through at 10600

Catatan

I'm not sure what the logic is behind the layering orders I'm seeing on both sides of the market with orders of 0.001 BTC...

In any case it seems like there is one big player in the market and then a handful of smaller players and maybe another handful of even smaller players.

Overall, I'm tempted to say there are fewer than 50 traders in this market with a lot of them bots making high frequency trades.

Catatan

Unlike in the BTC/USD market the LTC/USD market seems to have some very blatant spoofing going on.

Catatan

It's strange how no one talks about BTC/LTC arbitrage because that and BTC/ETH would seem to be the most obvious strategies for making fairly easy returns using a bot.

I would need a bot to even keep track of that possibility.

Catatan

Forgot to link to this Goldman interview:

businessinsider.com/goldman-sachs-outlook-for-bitcoin-and-ethereum-2018-2

Catatan

Buy volume looks low right now near 11k but if we see a huge number pop into the order book very suddenly then we know there is some manipulation going on.

While I can't see what's happening on Bitfinex it's notable that Bitfinex is slightly above 11k and GDAX is slightly below and a massively disproportionate amount of sell volume at 11k would logically discourage buyers from entering the market...

Catatan

Almost as soon as I wrote that Bitfinex fell back below 11k. Most of these orders I'm seeing executed are very small "layering" type orders so the order book is somewhat thin.

Given the huge plunge in equities markets today it will be interesting to see whether this rally holds up.

Catatan

Given the failure to break 10200 the market is much stronger than I expected. Volume has continued to decline though which doesn't could make it difficult to break from 11k to as needed to fully (or nearly fully) indicate an inverse H&S.

11k to will be a zone in which a lot of traders will once again seek to take profit leaving someone else "holding the bag" to push past 12k. Basically, the market needs more buyers and some kind of big trigger needs to happen to push new buyers into the market.

As of this moment, institutional sentiment is across the board nearly 100% negative. Reports have been issued by JP Morgan, Goldman, BofA, and notable figures have weighed in on the "dangers" of cryptocurrency. This combination of extremely negative expert sentiment, constant security PR nightmares/losses, and ... (I lost my train of thought here because the market hit 11k)

Catatan

Wow. I just saw about 4 or 5 orders that totalled 140 BTC combined.

Catatan

I meant to say market buy orders.

Catatan

Just saw two market sells totalling 30.8 BTC.

Catatan

it was actually three market sells totalling close to 40 BTC. Still not a lot of huge buy orders other than that flurry of huge orders at 11k. Volume has dropped off to nothing again.

A 35.24 BTC buy order at 11k

Catatan

Following that big buy order the market dropped by $40 and then shot right back up. Notably when the order book gets quickly cleared like that and you see nearly 100% market orders showing 0.01-0.001 BTC trades some layering or scalper bot is at work.

I can't say that I've seen spoofing but wash trading would need to happen for these scalper/layering bots to work.

Catatan

I think the "trade history" only shows "taker" orders so I could be making some incorrect assumptions here based on that.

Catatan

Logically, it would make sense for Bitcoin markets to become "less" manipulated given CFTC scrutiny while very blatant tactics continue to be used in non-CFTC scrutinized markets such as Litecoin.

That being said LTC hasn't really moved lately and I was reading something that said futures traders are demanding LTC and XRP futures.

Given the abysmal volume in BTC futures I don't see how that would make any sense for CBOE/CME unless trading volume in the spot markets really picked up. XRP is already looking pretty dead.

Catatan

So far I've seen a buyers market yet when you look at the trades it seems likely a handful of huge market buy orders have managed to push the price above 11k, which doesn't make any sense given the imbalance between buyers and sellers in the order book.

It's funny how buyers are called "bulls" and sellers "bears" when in reality, sellers that don't chase the market downwards are just as much a "bullish" force and buyers that pull back their bids in a weakening market are just as much a "bearish" force.

Catatan

Looking at the order book on a 0.01 interval there's clearly some kind of "spoofing" going on as the ask looked really thin below 11k which made it fairly easy for the price to move between $10970 and $10995.

Catatan

Sell volume just picked up a lot. Notably the spread on Bitfinex, GDAX and most other exchanges dropped almost to 0 before this move from $10995 to $10977 with Bitfinex going up and GDAX going down.

Catatan

The spread that I'm generally seeing right now is about a $35 premium on Bitfinex over GDAX. I'm not sure why the spread has tightened so much from pre-February when Bitfinex was usually $100+ more than GDAX prices.

Catatan

As an alternative to the idea that there is some "scalper" bot that is moving thin order books this bot could just be creating liquidity, which isn't really price manipulation since anyone can create a bot to do the same and try to make fairly low risk profits off of small price movements.

Catatan

cointelegraph.com/news/liechtensteins-bank-frick-introduces-direct-cryptocurrency-investment-and-cold-storage

This would seem to be a positive sign.

Also, Square and Robin Hood providing crypto trading access to their users would also seem to be a big positive. Hard to say whether that's happened, but Google Search Trends for "Bitcoin" could be flattening out. Won't know until Mar. 3 given the weekly interval for the full results.

I hadn't been looking at regional trends but I'm now realizing that's an important feature. South Africa is peaking right now, but given South Africa's extremely tight monetary system I doubt any enthusiasm there for crypto would be tolerated. In other African countries like Zimbabwe we've seen crypto take over as a secondary system but South Africa is much more developed and connected to global markets.

Catatan

Basically, nobody knows what's going to happen with BTC/crypto prices.

coindesk.com/consolidation-mode-bitcoin-awaits-decisive-move/

Bear Case:

Failure to take out the confluence of resistance at $11,640, followed by a quick drop below $9280.4, could yield a sell-off to $6,000 (February low).

Bull Case:

The descending trendline resistance and the inverse head-and-shoulders neckline are shown to converge at $11,640 by Saturday.

A high volume break (UTC lose) above $11,640 would signal long-term bull market revival and could open up towards $17,000-$17,400.

Catatan

cryptocompare.com/coins/zcl/forum/BTC

Just reading these comments you get a sense of how many dumb schmucks are still trading shitcoins in an attempt to generate high risk profits. Someone has to be left holding the bag...

Looking at Litecoin Cash, the price isn't holding up, which suggests most are selling it off, which also suggests that there is no "economy" for Litecoin Cash users. The "value" of a coin is derived from its utility. So far, there has been little development in the "utility" aspects of Litecoin Cash.

That being said, it could be a coin that a whale miner could have an interest in targeting in just the same way several "abandoned" coins continue to live on, being heavily manipulated by large stakeholders.

Catatan

Naturally, given that there are "two" Litecoin Cash's, there is now a huge amount of confusion over the "value" of each coin:

cryptocompare.com/coins/lcash/forum/ETH

cryptocompare.com/coins/lcc/charts/USD

Catatan

I think it's safe to say on short duration intervals there's zero correlation with equity markets and traders aren't too concerned with interest rate expectations.

For longer durations (like more than 1-2 days) there could be increasing correlation, perhaps related to more sustained movements that reflect greater overall market volatility.

Catatan

Kind of a mini-breakout just before 8:30 PM EST. Saw a 11.2 BTC buy order at 11109.50.

A bunch of buy volume at 11100 split with some chasing the price lower, which has led to a fairly clear order book below 11090.

Catatan

These intermittent groupings of larger volume in the ask seem to compel a tacit collusion. If sellers try to jump in front of this block they could get punished with a falling price. By following the larger block everyone can benefit (until the pressure to sell becomes too great).

Catatan

Saw a 11.86 BTC buy order at 11100...

Catatan

and a 23.97 sell order for 11108.99

Catatan

and another sell at 20.997 for 11101.77

Catatan

On the one hand it would be reasonable to have an expectation that enforcement actions will provide some parties a bit of leeway to clean up their act, assuming that something bad hasn't already happened. While this makes sense for some players, I'm convinced that quite a few bad actors will be uncovered given that CoinCheck, Nicehash, and BitGrail have all had major disasters happen in the last few months.

coindesk.com/sec-ico-probe-underway-stories-conflict-extent-sweep/

"On the eve of major SEC action, [Poloniex] sells for $400 million ... it appears to have been given a huge pass," Van Cleef said.

Poloniex was throwing off huge red flags by requiring their users to reverify, which for me, I could not do, so I had to move all of my funds, at $2000 a day equivalent, out of there, paying excessive fees.

I hope Circle did their due diligence in this deal, but it could be early still given the way Poloniex has imploded in the past year from being a market leader to one of the smaller exchanges.

Catatan

Just to be clear I could not reverfiy because Poloniex's system did not work. And contacting support did nothing. Whereas with Kraken their system worked except to Tier 3, where I asked support what the problem was and they told me my picture wasn't clear and I was able to reupload and verify in a day.

It's going to be interesting to see how this Poloniex regulatory situation plays out.

Catatan

This is kind of hilarious.

Two days after publishing an article on how China's crypto exchanges are thriving outside of China:

coindesk.com/chinas-crypto-exchanges-didnt-just-survive-theyre-thriving/

Coindesk publishes an article talking about how Chinese Internet Police are watching foreign exchanges:

coindesk.com/chinese-police-extend-crypto-exchange-monitoring-overseas/

I think it's safe to say that breaking the law in China carries much harsher punishments than in less authoritarian countries so it will be interesting to see how much longer these foreign exchanges can function if Chinese money starts to dry up.

coindesk.com/chinese-police-extend-crypto-exchange-monitoring-overseas/

Catatan

11200 appears to show resistance ratcheting up by a multiple or two so it will be interesting to see whether this results in a sell-off or if these orders pull-off higher. Last time around the sell-off at 11800 was fairly strong. There appears to be a lot of resistance consolidating below 11300.

Catatan

volume really dried up for a moment and then price dipped below 11060 and popped back up almost immediately.

Second time we're testing 11060 in the last 30 minutes.

Catatan

This market is getting pretty boring. It doesn't seem to me like a lot of enthusiastic buyers are in this market but enough "volume" is positioned at 11k for buying to jump in front of that to keep the price up.

Personally I don't see how the market is going to move higher without a lot of new money coming in. But as I speak the price is falling and "magical volume" has appeared out of nowhere to keep the price above 11050 so we'll see if this works.

Catatan

And nope that "magical volume" just ran away scared...

Catatan

We'll now see how much of this volume at 11k is willing to buy into the market...

Catatan

Even though volume on an hourly basis appears to be close to the same level as earlier in the day it's crazy how thin the order book is. I can see this being pretty boring...

I walked away to watch basketball a while ago without positing this. Looks like the market is starting to break down a bit now.

Catatan

It looks like most of this volume at 11k didn't execute but the ask is looking pretty thin so we could get another weak rally off 11k before moving lower. The market's been trading in a tight range for 2.5 hours now...

Catatan

If this breaks down a good entry would be at the 50 day SMA around $9764, i.e. ~$9800.

Catatan

The amount of support at 10200 really surprised me because I thought the price would get pulled closer towards the 50 day SMA before bouncing back, but if you consider 10250 as roughly the midpoint between the right shoulder around $9500 and the neckline, near 11k, then that makes sense.

Catatan

Another test of 10250 would suggest a triangle pattern, which usually results in a continuation of a previous trend so not a good sign for the inverse H&S. The triangle isn't really symmetrical so this isn't a solid pattern but if we get sideways price movement consolidating around 10500 then I would call it a triangle and expect a breakdown of the inverse H&S unless some other external trigger plays out.

Yesterday's dip at $10250 was an optimal entry given expectations of the inverse H&S. Revisiting $10250 might lead to a weaker rally that then results in a dip back to $9800 which would be near the 50 day SMA.

Catatan

The 50 day SMA has been falling since shortly after the ATH and now would be the exact moment when it would need to flatten out and signal a reversal. Given the weight that technical analysis seems to hold over market participants a failure here could signal a lot of negative events.

A lack of breakout of the inverse H&S would suggest an ADX that continues the previous negative trend except stronger given the current dip in the ADX a new trend should start very soon, a 50 day SMA that continues to point towards the 200 day EMA, and should the 50 day SMA dip below the 200 day EMA then we'll be in a decidedly bearish market.

The current 50 day SMA has not fallen below the 200 day EMA since 11/8/2018 which was near the start of the current "bull" market.

Previously, when the 50 day SMA fell below the 200 day EMA, it was in April 2014, just after Mt. Gox, and that signalled a bear market. Even in the most recent huge run the 50 day SMA has had a strong pull on prices.

The problem with TA is that you can look at these charts and then come up with completely different conclusions for yourself and then rationalize two completely different sets of decisions with completely different outcomes. That naturally serves no point if you're trying to understand the market.

Given the current declining volume I think the market will need a big trigger to avoid a breakdown here but since this neckline is declining we could see a slow dip back along the neckline over the next few days which could be extremely boring.

Catatan

I meant to say 11/8/2015 above.

Catatan

Two orders just bought 15 BTC at $11110

Catatan

The market is so slow right now orders are coming through every ten seconds. So it would seem the bots don't necessarily work "nonstop". As soon as I wrote that volume bumped up and buy volume evaporated.

Catatan

Again, kind of a chicken or egg type analysis:
coindesk.com/bitcoin-brushes-11k-as-bull-case-strengthens/
Further, daily trading volume has averaged around $7.73 billion from Feb. 7 to date, compared to a January average of $13.42 billion, as per CoinMarketCap. The drop in the daily average trading volume during the recovery period could be an indication of a lack of confidence among investors about the sustainability of the corrective rally.

That said, volumes will likely rise if BTC sees longer-term bullish reversal via a break above the confluence of the inverse head-and-shoulders neckline and the descending trendline resistance.

Catatan

One of the key problems is crypto is "amateurism". While Satoshi Nakamoto created a useful thing, we're still in the second inning with innovation. This report sums it up when talking about the flaws of Ethereum's transition to PoS with "Casper."
coindesk.com/fundamentally-vulnerable-ethereums-casper-tech-takes-criticism-curacao/
Learn from history
As someone who's been studying distributed systems for years, Malkhi's biggest concerns stem from the two properties that should be preserved by the technology - safety and liveness.

Within blockchain systems, these attributes help indicate if transactions will go through properly, and if the system itself will move forward with time.

"I had a conversation with [ethereum's Casper lead author] Vlad Zamfir yesterday," Malkhi said. "He argues, isn't it still useful if it's 'mostly' live?"

In Malkhi's mind, the answer is no, since there are vulnerabilities in how some blockchain projects, such as Casper, are currently laid out.

"We have several decades of experience here," she said.

Her remarks suggest her concern is that not enough traditional academic rigor has been applied to the idea, and that by doing so, key assumptions could be invalidated.

"Seriously, it's very easy to come up with a solution which is not live. It's trivial. The only thing we need to do in this field is generate mechanisms that are both safe and live," she said.

Catatan

Just saw 2 market buy orders of 40 BTC go through. That's a total of 80 BTC and at least one other of 10 BTC.... around 11120.

Catatan

The "other" Litecoin Cash is now trying to do a token sale.

cointelegraph.com/press-releases/litecoin-cash-ltch-token-sale

Guess this is just going to turn into a total shitshow...

Catatan

They can't even write a press release using proper English...

"Today the market have lot of offers for investing and gaining money via cryptocurrency. But not all of them are good to invest. Litecoin Cash system will help you to assure your gaining in a secured and a comfortable way. You just have to buy our TOKEN with a cheap price at the ICO."

They said it. Not all of them are good to invest. Litecoin Cash "token" included.

Catatan

cointelegraph.com/news/price-analysis-march-02-bitcoin-ethereum-bitcoin-cash-ripple-stellar-litecoin-cardano-neo-eos

"Cautious traders also don’t venture out in a falling market because it is always better to trade in a market that is in a clear uptrend. Both these reasons combined have led to a fall in volume.

Though we do keep an eye on the volume, we should not get worried about this fact, because we analyze the price action and use it for our trading decisions."

Currently, the bulls are attempting to break out of the descending channel and move towards the neckline of the inverted H&S pattern. The moving averages are on the verge of a bullish crossover.

All of this indicates that the bulls have an upper hand right now. Hence, chances are that the price will continue to rise in the ascending channel. The BTC/USD pair will gain momentum above $12,200.

However, as traders, we have to be ready for any turn of events. If prices fail to break out of $12,200, chances are the cryptocurrency will become range bound between $9,500 and $12,200 for the next few days.

Therefore, traders should watch the price action at the $12,200 mark carefully and book profits if they find that Bitcoin is not able to break out of it."

Catatan

The problem with this idea is that volume reflects demand. Increasing volume generally reflects increasing demand. You can certainly have high volume when prices are falling if there are more sellers than buyers, but buyers and sellers are making transacting in equal amounts.

Assuming you buy into a market, with falling volume, there are fewer opportunities to exit profitably. This is a basic understanding of liquidity. If you buy the world's only Batman painting and nobody else wants to buy it then you can't exit that position until someone else comes along to enter the market.

More liquidity is ALWAYS better than LESS liquidity. Just like after hours markets are extremely volatile and illiquid, meaning you likely can't get the price that you want, illiquid markets like crypto mean the price probably isn't moving the way it would in a more liquid market where there is more competition on both the bid and the ask.

Catatan

The bid around 10990 looks strong but there's probably even more volume below 10300 in the ask.

That nearly 90 BTC set of orders would have been $1,000,800 at $11120.

Even that was only good enough to move the market price up $40.

The volume around 11k isn't chasing the price into $11200 so there needs to be more volume to break $11200.

Catatan

If there's spoofing in the bid I certainly can't tell. It could be that spoofing doesn't work so well when volume is falling because you end up getting screwed by a bot that places large market orders.

Catatan

The idea being that if your bot thinks the order book looks thin enough to manipulate and another bot sees you entering with relatively small spoof orders they can throw in a big market order and wipe you out.

Catatan

While I'm not sold on the idea that price manipulation is more than 50% behind crazy crypto prices extreme volatility and asymmetric information between participants can certainly leave many participants exiting until they see assurances that their investment will generate a return.

When prices hit 20k there was just no more room to run. The bottom fell out like in a cartoon...

Catatan

Even though 24 hr volume shows a big dip the order book definitely seems to have much more volume than last night when nothing was happening.

Catatan

Still, resistance between 11200 and 11400 is heavy. This looks like a buyer's market, which is why it didn't make sense that 3 market orders would come through on extremely thin volume for 90 BTC.

Catatan

Wow, the volume for Monero has been skyrocketing the last few days. I assume this has something to do with the Monero V hard fork coming March 14th. Seems a bit risky but these hard forks seem to be good momentum opportunities.

twitter.com/monero_v

Catatan

Bitfinex / GDAX spread is now +$50 so I'm thinking those big orders earlier were an arbitrage move.

Catatan

The market is running out of steam around 11300 but volume has definitely picked up a notch so there could be an optimal entry point soon.

Catatan

Given the spread between Bitfinex and GDAX there should be relatively strong buy pressure on GDAX after price falls given the arbitrage opportunity, i.e. buy BTC on GDAX, sell BTC on Bitfinex.

Catatan

My target entry is around 11k with an exit just below 11.5k for about 4-4.5% gain but I would consider half of the position entering at $11150 since the market might not dip to 11k. If the market bounces off $11150 then the $11500 exit stays the same but I would watch the volume around $11500 to see if it pulls off since a break to $11600 could trigger a much more bullish wave of new volume that might call for an additional entry rather than an exit.

Catatan

My feeling is that $1150 could be bot controlled volume that will pull off based on what the sell side shows but that's roughly the mid point of the rally that started at 6:30 PM EST Friday 3/2/2018 (today).

My exits aren't really well though out but the rationale is that 11.5k shows very heavy resistance which leads to believe there will be a bounce there that could provide another entry point somewhere between 11.2k and 11.5k.

Catatan

It's notable that practically all day there was hardly any volume then come 8 PM EST on Friday volume just magically picks up and the price takes off.

Catatan

Almost half the volume around $11150 has gone away, perhaps moving closer to the market price though I'm not sure.

Catatan

Monero is still going pretty crazy. It will be interesting to see how this price action plays out in relation to BTC.

Catatan

A buy for 20.455 BTC at $11307.25

Catatan

This market is going nowhere but this $60 spread between Bitfinex and GDAX is holding up...

Catatan

coindesk.com/bitcoin-struggles-to-stay-above-11000-amid-low-volumes/

What's notable here is that he distinguishes between the descending trend line of the "linear" versus "log". According to the log scale the price needs to break $11600, which matches what my chart shows.

Catatan

From the same article:
Since BTC has moved by a large percentage over the last year, log price scale is preferable as it plots two equal percent changes as the same vertical distance. So, regardless of where we are on the graph (at $2,000 or $20,000), a significant percentage move will always correspond to a significant visual change.

Catatan

While I would prefer the inverse H&S breakout when I look at the slope of the 50 day SMA and how close it is to intersecting the 200 day EMA and the very tight (~7-8%) margin of difference I have to go back to March 2014 to see another instance where the price hit an ATH and started a steep correction staying below the descending trend line for 6 months with the 50 day SMA crossing below the 200 day EMA after the ATH.

Similar to 2014 the 200 day EMA flattened out before the 50 day SMA crossed below it. In 2014 the 200 day EMA stayed mostly flat for about 8 months (shortly after the ATH).

The move from the ATH to the low happens to be nearly identical between 2014 and 2018, with a high around $1169 to a low of $338 (71%) versus a high of $19900 to a low of $5800 (71%). Similarly there was a long period of sideways price action before the "capitulation" period in which price dipped below 81.6% of the ATH but tested the 81.6% level repeatedly between 1/15/2015 and 8/26/2015 during the worst of the last Bitcoin Bear Market.

If you simply look at the history of Bitcoin price movements this looks awfully familiar.

Catatan

If you consider an ultra bear scenario where BTC loses 90% off it's ATH ~$1990 and then consider that BTC has lost about half of its marketshare going from 80% to 40% (and sometimes less) of the total crypto market cap then realistically the ultimate dip could test $1000. That being said, if such a scenario played out the market would have to be suffering from some extreme dysfunction or shock (like a big hack similar to Mt. Gox on a relative scale) and given other factors such as the potential for institutional investors buying large amounts and Bitcoin halving on June 2, 2020 a bear market reversal would logically coincide with expectations of reduced coin emissions.

While other coins could theoretically displace Bitcoin what we really haven't seen are real network effects from other coins and the corresponding infrastructure built around them. Simply forking Bitcoin is the easy part, but recruiting users and building actual systems around a fork is hard and if the economic incentives aren't there then those coins likely will struggle to survive.

This new coin "eco" from Garrett Camp, co-founder of Uber, looks interesting, but when you read the white paper, it's just another fantasy that will take far more research and effort than the founders realize. The great thing about Bitcoin is that it is "as real" it gets when you think about money or an asset whereas other coins like ADA, XLM, and NEO are still very early, and feel like vaporware. An ideal portfolio would allocate a percentage to a number of different coins but given the possibility that the markets (including equities, hard assets, etc.) will get soft for an extended period of time it will pay to be patient.

Catatan

The upside to all this talk of apocalyptic (yet totally within the scope of historical Bitcoin/crypto price action) is that we're seeing radical maturing of various market functions like regulatory awareness and development (notably on a global scale) and everything is "blockchain" (to the point that companies and countries are creating their own crypto). These foundations will allow crypto markets to recover, perhaps at a much faster pace than in previous bear markets, as participants develop confidence that bad actors have been weeded out.

Perhaps Circle will lead the way with their acquisition of Poloniex. Or perhaps we'll need to see a big regulatory crackdown phase involving the SEC and CFTC. Given the recent wave of SEC notices, this is again, EXTREMELY familiar, and in my mind, extremely likely. Given the number of fucktards operating scams I see a massive amount of negative PR for crypto as people lose their money from ICOs and cryptos tank in parallel due to enhanced regulatory scrutiny of various shady institutions such as exchanges.

You only have to go back about 38 years to 1981 to the Denver Penny Stock mania.

Surprisingly, no one really talks about this yet this is by far the BEST example of a bubble similar to Bitcoin due to the regulatory similarities.

The bubble from 1979-1981
washingtonpost.com/archive/business/1982/07/18/cold-wind-hits-penny-stocks-in-denver-area/9586c811-159a-4670-8a05-da56759a1090/?utm_term=.2a94eb95fcd4

First person account of the end where a plane full of SEC examiners went to Denver resulting in most firms to shut down
wallstreetmainstreetlaw.wordpress.com/2012/10/05/looking-back-july-1982-part-three-the-states-come-to-denver/

Finally a recovery in 1983
nytimes.com/1983/02/27/business/investing-surge-at-denver-s-penny-stock-market.html

Catatan

And... some dumbasses lost $50 M... like it's no big deal... normal for crypto:

coindesk.com/south-african-investor-makes-off-50m-in-crypto-scam/

This is the tip of the iceberg, and again, history is repeating itself. If you go back to Bitcointalk forums from 20113-2014 there are many threads speculating on which exchanges were likely to be scams. Some of those exchanges have actually survived until today but naturally many of them ended up causing losses of user funds.

Catatan

I like these guys. Smart approach...

multicoin.capital

one of their principles was quoted in an article that Bitcoin seemed to be on the decline as major users are moving off of the network.

fortune.com/2018/03/02/bitcoin-price-transaction-volume/

Catatan

This article had a TERRIBLE headline but it basically breaks down a lot of the future of crypto through discussing the history and organization of Circle as well as other players. Not that much detail about acquiring Poloniex. A lot of interesting stuff about how whales get liquidity.

Highly recommended and an easy skim...

fortune.com/2018/02/26/circle-cryptocurrency-trade-bitcoin/

Catatan

There was so little volume between 8:05 AM EST and 8:22 AM EST that the price stayed exactly at $11388 for 17 minutes. And then some magical volume just caused the price to shoot up $80 at 8:30 AM EST Saturday morning. I wasn't looking so I didn't catch any big trades.

Clearly, something wacky going on here with bots. 24 hour volume for BTC has fallen below $4 B so nobody is really trading.

Notably, the spread between Bitfinex and GDAX is basically gone.

Catatan

I cancelled my entry for $11150 since that target didn't get hit in the timeframe that I expected but kept my entry for $10990. Given an extreme decline in volume all across the board in crypto markets I think some consolidation needs to happen with sufficient volume to generate more momentum before there's any chance of breaking $11500.

Not really worth chasing after low risk:reward trades.

Catatan

This thread has been interesting to follow:

twitter.com/PeterLBrandt/status/969948740969627655

Lot of people commenting on the low volume and problematic inverse H&S price action.

Catatan

Not going to sit on this order overnight. I should've adjusted my previous $11150 order to $11050 and I would have made a justifiable short duration trade but I was taking a break so not really working.

Catatan

The big difference between the 2014 ATH and the 2018 ATH is that in 2014 the 50 day SMA flattened out well above the 200 day EMA prior to converging with it and price stayed above the 50 day SMA for about 3 months (leading to a flattened 50 day SMA) before dipping below it. So in 2014 the correction was less dramatic than in 2018 in some ways. Given Mt. Gox it was much more volatile overall since there was some kind of flash crash in February.

Markets then were completely illiquid compared to now so the historical comparisons can only be taken so far.

Catatan

Following the 2014 move below the 50 day SMA things got crazy with 40-50% dips. Given better liquidity and less overall volatility in 2018 that seems unlikely unless there is some huge adverse shock (like CFTC issuing a notice).

powderpc

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