Market Analysis This week
Last week the global market had three major events, the Federal Reserve meeting, the British Elections, and the ECB meeting which have indirectly shown their impacts on Bitcoin’s prices. All three were focused on friendly monetary policies and Brexit which gave British pound an up move followed by correction. British Pound’s upmove has been negatively corelated to Bitcoin over the past years.
The landscape of the top 100 cryptocurrencies seem to change every 6 months.
We are not witnessing seasonal bullishness at the end of the year this time. Seen within CoinGenius long term indicators, the price trends have been fairly weak with low volatility on 2-year basis. The weak momentum is not a good sign for the HODLers but short term traders are able to find ways to earn using the movements.
Negative bias has been always here in the financial markets where Bitcoin up $500 is seen as a small move and down $500 is seen as a volatile disaster.
In this time of the year, the wall street and investors wish to cash out their holdings to go on vacations and calculate their annual returns. The narrative for the institutional traders is completely different. In the end of the year, their positions are closed to calculate their annual performance and the performance bonuses are distributed in early March. This traditional culture of institutions drive the market prices due to heavy sell-offs. On the contrary for the retail investors, there always have been the psychological/emotional roller coaster in the market which is driving the price movements. This time the prices drop due to high bearish pressure and the retail investors tend to pick up their coins in ‘Christmas Clearance’ because the prices are running in their lows. The trader’s superstitions come into play and the repetitiveness of patterns compared to the last year are seen as the reason to objectify these superstitions.
The sterling jumped was because the markets like uncertainty and the prices look sustainable until something does something stupid again. Bitcoin markets have certain amount of maturity which doesn’t exist with other cryptocurrencies. People accept bitcoin and its price movements more than other altcoins and this can be seen in the recent rallies and the 2017 rally when it climbed from $2000 to $19000 as well. They are open to accepting Bitcoin above than what it currently stands at any point of time. It’s the head and shoulders effect where the current shoulders exist near $4000. If you liked Bitcoin at $10000, you must absolutely love it at $6600.
December 17, 2017 was the first day when the Bitcoin futures was traded and the public bought the whole way up with new expectations. The first trade in Bitcoin futures was an all time high trade, and within 10 days. the trades were cut in half. Bitcoin futures were being listed publicly in CME and CBOE, not in any exchange. The hype got people enter the positions and within a week, they exited. For early adopters in any market the people lie in the lower gradient and take advantage of the price jumps, but as the markets gain more acceptance, the charts flatten out and the prices drop. It took a month for the prices of Bitcoin to drop to $10,000. For Bitcoin futures the liquidity is there to trade, but if we physically exchange Bitcoins in the OTC markets, the liquidity will not be there.
There are so many different ways the prices and the sentiments are impacted in this Bitcoin market. The current bearish run is not as dramatic as it has been in the past. Crypto sentiment in social media channels and news move the emotions in the people. If we look at the mining and look at the upcoming halving, mining is not as profitable now as it was earlier. The Block rewards will be cut off. So the miners might wish to sell their Bitcoins to recover their losses. Later, the miners will be unwilling to sell their tokens due to low rewards and bullish shift has to drive the prices up which has to be produced by retail and institutional investors. CoinGenius is trying to incorporate all these factors which are impacting the price volatility of not just Bitcoin, but all the top coins in the cryptocurrency space.
If we believe that Bitcoin markets are dependent upon the new inflows to drive its prices up, it is completely opposite of the traditional equity markets, because for these markets, December is one of the best performing months. With public crypto markets, 40% of the total flow is with the HODLers. It is a perfect setup for the potential downside. It’s like a stop-less get in scenario where there is no headline news which will increase the demand. The lack of demand or neglect and a significant number of people being positioned wrong-footed is keeping the market’s potential bearish. You go on social media and see everyone talking about the new low Bitcoin is going to drop to, which can also mean the experienced traders are preparing for the upswing. The consensus in the market currently is that the halving is going to drive the markets to the new time high. Traders look already priced in or are prepared to leverage this event.