What we’ve seen in the prices of cryptocurrency markets for the past weeks and the majority of the past two months can be characterized by some fatigue and a hint of euphoria. Bitcoin, the largest cryptocurrency by market cap volume, had a “relatively” calm week with its prices going down about 5% from ~$10,196 to ~$9,608. The top 10 cryptocurrencies are also trading below their 200 day price averages. This comes as no surprise as the entire market cap of cryptocurrencies (ex BTC) felt a decrease of around 9% over the past week.

On a longer time frame, since June, BTC has been witnessing a consolidation of prices, meaning lower highs and higher lows, with speculation of a price breakout in the near term. However, the BTC year-to-date return has still been strong at 151%. In comparison, the equity markets year-to-date return has dialed in at 15% (with the S&P500 as a proxy). Although BTC and the S&P have their differences the S&P500 (an index comprised of the top US publicly traded stocks) is still the most popular and robust index used by financial outlets to measure against for investment returns.

Macro events such as politics and traditional market trends affect the cryptocurrency markets as well. Just this past week, the interest yield on the US treasury's 10Y Notes dipped even lower than the US treasuries 2Y Notes (what exactly are treasury notes?). This sparked fears of a coming recession as it indicates that investors are flocking towards safe, long term bonds over worries of a global slowdown. This, then, in turn pushes down rates due to the inverse relationship between price and yield. An array of events such as the US-China trade war to the uncertainty of Brexit still unfolding have pushed the price of 'store of value' assets up by around 20% YTD. Will the US Federal government cut rates again this month, and will this further spook the traditional markets and push ‘store of value’ assets, such as BTC, up once again? Maybe so, as it is likely investors will see this rate cut as another “manipulative” form of controlling the monetary system. People are getting tired of central banking. People are yearning for a different option. An option where science and math can be trusted rather than the untrustworthy and perhaps corrupt hands of a few individuals.

chart of the week 2.9.19

Chart Analysis
Since June, we have seen a weekly price consolidation of BTC form a symmetrical triangle pattern. Symmetrical triangle patterns happen when you can see the lowest price points move higher, and the highest price points move lower over time. When this pattern can be seen it means that supply and demand are approaching equilibrium (people are buying and selling at similar rates at similar volumes). However, equilibrium never lasts long in the cryptocurrency trading world (or anywhere for that matter!) and so once the points of the top and bottom line get close to touching experts always predict a breakout (bullish rise of prices) or breakdown (bearish fall of prices) in the cryptocurrency or stock.

There are two key factors that could predict a breakout from this period's symmetrical triangle pattern: (1) The 21 week SMA (what's a Simple Moving Average?) has maintained above the 50 and 100 SMAs. Both the 50 SMA and the 100 SMA are common graph lines that traders use to predict the market and "In a sustained uptrend, the price generally remains above the 50-day moving average, and the 50-day moving average remains above the 100-day moving average (Source: Investopedia).

(2) People are investing more in "store of value" assets such as BTC and gold due to 
instability in traditional markets in light of macro events such as the US-China trade war and Brexit (read more below). Regardless, when the triangle 'breaks' we can expect a price target of around $15,000 as, as a rule of thumb, prices generally reach the same height or depth as the highs and lows recorded the start of the triangle pattern.

3 Things you should know about the Cryptocurrency Market

ONE
The Swiss asset manager and one of the largest banks in the world, UBS, for the first time since the financial crisis has turned bearish on stocks. Citing the trade war as part of the reason, UBS is cutting their investments on equity in favor of investment grade bonds and have also begun to go long on gold (what does going 'long' mean?).

TWO
Alan Howard, who runs the Brevan Howard hedge fund, is now launching a crypto hedge fund. Along with Elwood Asset Management, this new venture will seek to invest in other crypto hedge funds (also known as a fund of funds) and will only be available for institutional investors.

THREE
A study conducted by Coinbase found that out of the world’s top 50 universities, 56% of them offer some type of blockchain or crypto classes this year (Coindesk). This is up from 42% last year which goes to show the increasing awareness and potential adoption of this emerging frontier industry.

 

Digital assets trading is highly risky and therefore not suitable for the vast majority of people. You acknowledge and understand that investment in digital assets may result in partial or total loss of your investment and therefore you are advised to decide the amount of your investment on the basis of your loss-bearing capacity. You acknowledge and understand that digital assets may generate derivative risks. Therefore, if you have any doubt, you are advised to seek assistance from a financial adviser first. Furthermore, aside from the above-mentioned risks, there may also be unpredictable risks. Therefore, you are advised to carefully consider and use clear judgment to assess your financial position and the above mentioned risks before making any decisions on buying and selling digital assets; any and all losses arising therefrom will be borne by you and we shall not be held liable in any manner whatsoever.

 

BXB Team

2019/09/02