Bitcoin price action has turned bullish in anticipation of its upcoming halving since the start of 2019, and the leading crypto asset by market cap has only recently started to take a pause to consolidate on weekly price charts.Weekly resistance at $11,500 continues to play an important price level to beat, while bears have been unable to push below the mid-$9,000 range. One crypto analysts believe that the two price levels will act as a tight trading range on weekly price charts for the rest of the year and may not be broken until Bitcoin’s halving in May 2020.Bitcoin Price Could Be Locked In $2,000 Range For Rest of 2019In recent weeks, Bitcoin price was rejected at $13,800 after a three-month-long parabolic rally, and since then it has been ranging and consolidating. The market has, again and again, tried to choose a direction but indecision has kept Bitcoin price ranging between recent local highs and lows.Related Reading | Bitcoin Price Weekly Close Above $11,500 Would Be First in Nearly 18 MonthsIt’s something that crypto investors and traders may want to get used to, as it could last the rest of the year, and extend into 2020 until Bitcoin’s halving in May of next year.According to a weekly Bitcoin price chart shared by a prominent crypto analyst, the first-ever cryptocurrency could be trapped in a tight trading range between weekly resistance at $11,500 and weekly support at $9,500. The chart suggests that BTC could be locked in the range until Bitcoin’s halving. Others believe that Bitcoin price could be as much as $55,000 by that time.BTC Weekly:Range bound until the halving? pic.twitter.com/1HooowmAtP— Nunya Bizniz (@Pladizow) August 10, 2019The theory would fall in line with Bitcoin entering a reaccumulation phase and natural profit-taking, following post-accumulation markup selling, but before the real bull run begins.Alternative BTC Range With Wider Weekly Resistance and SupportBTC and other crypto-assets are highly volatile and often see massive, few-hundred and even few-thousand dollar price movements. By raising weekly resistance to the next logical level, and doing the same for support, a more realistic and less restrictive trading range is demonstrated.Both charts would still have Bitcoin price trading in a range for the remainder of the year through halving, but would also allow for a deeper correction and touch of a trend line extending back to Bitcoin’s bottom trading range below $4,000.At those lows, Bitcoin price was trading in a $1,000 trading range, but at that point represented over 25% of its price. At current prices, 25% of its price would be roughly $2,750 adding further credence to the tight trading range in the first chart as the market continues to show indecision.Related Reading | CNBC Host Pushes Bitcoin, Cites Halving and Scarcity As Catalyst for $55K BTC If either of the major weekly supports or resistances are broken with a weekly candle close, the wider range could be in play. Or, none of this happens and Bitcoin price reaches $55,000 according to other widely adopted models in circulation.
Archives for August 11, 2019
Bitcoin has been incurring increased levels of volatility as of late, which may be partially due to the newly formed inverse correlation between BTC and altcoins. As of late, most major altcoins have been facing strong selling pressure due to Bitcoin’s recent rally, but they appear to get some relief each time it drops.Importantly, embattled altcoins may soon be able to get some relief, as multiple analysts are now noting that they are targeting the $10,000 region in the near-future for Bitcoin.Bitcoin Stabilizes in Lower $11,000 Region, But Further Losses Are Likely At the time of writing, Bitcoin is trading down marginally at its current price of $11,400, which is down slightly from its 24-hour highs of nearly $11,500.Earlier this week, BTC faced a sharp bout of selling pressure after tapping the $12,000 region, which has proved on multiple occasions over the past several weeks to be a strong level of resistance that has so far been insurmountable.Importantly, the sell-off that came about after BTC was rejected at $12,000 may have caused some technical damage for the crypto, as analysts are now noting that it is likely to drop lower in the near-future.The Cryptomist, a popular crypto analyst on Twitter, spoke about this is in a recent tweet, explaining that she expects it to close lower by the end of the day.“$BTC: Bulls need a close above 11360 which I will be surprised to see. Weekly pennant present with support at 10060 region. Potential rising wedge present on smaller time frames. I suspect a drop before close today,” she explained.$BtcBulls need a close above 11360 which I will be surprised to see
Weekly pennant present with support at 10060 region
Potential rising wedge present on smaller time framesI suspect a drop before close todayTrade safe loveys pic.twitter.com/cY9ps0uDAv— The Cryptomist (@TheCryptomist) August 11, 2019Could BTC Target The Upper-$9,000 Region Next?Other analysts concur with The Cryptomist’s assessment of Bitcoin, as Murad Mahmudov, another popular analyst, recently shared his thoughts on the crypto, explaining that he believes it could retrace as low as the upper-$9,000 region in the near-future.“Two blue circles are buy the dip areas of interest for me with the higher one being more likely imo,” he explained in a recent tweet.Two blue circles are buy the dip areas of interest for me with the higher one being more likely imo pic.twitter.com/Ei8dAM8Jag— Murad Mahmudov 🚀 (@MustStopMurad) August 10, 2019Although it does look like a strong possibility that Bitcoin drops lower in the coming days, this drop may prove to be a positive thing for the aggregated crypto markets, as it may allow altcoins to experience a relief rally.Featured image from Shutterstock.
Youch. On Saturday, Bitcoin (BTC) was subject to the umpteenth flash crash in the past few weeks. Within a few minutes’ time, the cryptocurrency had shed $500 — around 4.5% — to lose the key support of $11,800.Related Reading: Crypto Tidbits: Bitcoin Mining by Blockstream, Ripple Investment Plans, Binance US Unveils Altcoin LineupBitcoin has since found some stability, ranging between $11,100 and $11,450. Altcoins have, surprisingly, outpaced BTC for the first time in a number of days, with some crypto assets managing to post slight gains on the day.Analysts Leaning Bearish on BitcoinDespite the stability and minor resurgence in altcoins, analysts are still leaning bearish on Bitcoin. You see, the sudden drop lower was not followed by a bullish rebound, as BTC remained trapped under a number of pivot points.So with it understood that Bitcoin isn’t doing all too well, where are Crypto Twitter’s top analysts and investors expecting for BTC to head?Adaptive Capital’s Murad Mahmudov, one of the most respected cryptocurrency traders on Twitter, recently explained that he is looking for a dip to occur — but one that won’t be that severe.Two blue circles are buy the dip areas of interest for me with the higher one being more likely imo pic.twitter.com/Ei8dAM8Jag— Murad Mahmudov 🚀 (@MustStopMurad) August 10, 2019As he outlined in the chart above, there are two levels that are currently piquing his interest — $10,900 and $10,000. Those two price points coincide with two technical levels: one being a moving average, the other being an uptrend that BTC has bounced off of at least three times during its recent rally.Related Reading: Bitcoin & Tether Trading at a Discount in China: What Safe Haven Narrative?Mahmudov claims that he believes Bitcoin is more likely to stay above $10,900 than to fall to $10,000. But, should a move lower occur, he won’t mind accumulating some coin at $10,000.The Adaptive Capital chief investment officer isn’t the only that expects for BTC to enter into the $10,000 range. Up-and-coming chartist Crypto Hamster recently explained that Bitcoin is likely to find support at prices lower than current trading levels.While he didn’t have an exact price target, he/she did note that there is a mass confluence of technical levels and trends in the $10,000 range.For instance, the 50-day moving average is currently at $10,930, and the low of the trading range is just $80 lower. Also, there are some key lines, like a rising support trend and Bollinger Band base, in the low-$10,000s, right above where Mahmudov’s secondary target is.Bearish short term scenario.
Long entry zone is shown in green.
Aggressive entry at 11020$.
Safer entry at 10250$.$BTC $BTCUSD #bitcoin pic.twitter.com/rUveOOAKdP— CryptoHamster (@CryptoHamsterIO) August 10, 2019In other words, if selling pressure is to persist and bulls fail to step in, Bitcoin is likely to find some reprieve around $10,000. But whether or not that to-be-had bounce has momentum remains to be seen.Trend Still BullishIt is important to note that the overall trend for Bitcoin is still bullish. As reported by NewsBTC previously, the Moving Average Convergence Divergence (MACD), a trend indicator, recently crossed into the positive — green — for Bitcoin’s one-day chart.The last time this technical signal was observed, BTC saw two massive rallies in the coming weeks. Should history repeat, the cryptocurrency still has a good 40% or so.Featured Image from Shutterstock
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Noelle Acheson is a veteran of company analysis and CoinDesk’s Director of Research. The opinions expressed in this article are the author’s own.
The following article originally appeared in Institutional Crypto by CoinDesk, a free weekly newsletter for institutional investors interested in crypto assets. Sign up here.
Last week’s kerfuffle over the launch-that-wasn’t of LedgerX’s physically delivered futures platform highlights two very important lessons, one obvious and one less so.
The obvious conclusion is that one needs to tread very carefully when it comes to claiming regulatory approval. LedgerX announced the launch of its retail physically delivered bitcoin futures platform, only to find that the Commodity Futures Trading Commission (CFTC) had not yet approved a necessary amendment to its clearing license. Tensions flared and the launch was subsequently walked back.
The confusion over the licensing process is a hindrance, but an understandable one given the complexity of the new products (physically settled bitcoin futures have many more moving parts than traditional futures, even beyond the custody issue). And the “ask for forgiveness rather than permission” approach to financial innovation is probably going to end up expensive.
Below I want to focus on the less obvious takeaway: the role of regulations in determining eventual market structure, and the danger of unintended consequences.
Apples and oranges and fruit
Obviously, established rules can encourage or discourage the take-up of new financial products. The LedgerX confusion, though, highlights a different type of barrier, also heavily influenced by regulation, but one based on relative risk rather than investor protection.
I’m talking about the difference between swaps and futures. In conversation with CoinDesk, Paul Chou pointed out that “the difference between futures and swaps is ridiculous, it’s the same product.” This is not true. While their hedging and speculative properties may be identical and their economic outcomes similar, in the eyes of regulators they are very different.
Before digging into why, let’s pull apart the semantics. A “future” is an agreement to pay a certain price for something at a fixed point in the future. A “swap,” on the other hand, is the commitment to exchange cash flows. In bitcoin, this could mean something as simple as “I’ll send you fixed payments in exchange for variable payments based on the bitcoin price.” Structured a certain way, the net effect could be the same as a futures contract.
But the markets are very different. Futures are standardized products that trade on exchanges. Swaps, on the other hand, evolved as bilateral contracts negotiated between two parties. They traded over-the-counter in opaque markets until the 2008 crisis revealed the size of the outstanding risk and the convoluted web of obligations that had not taken counterparty default into consideration.
The Dodd-Frank financial regulation bill, enacted by Congress in 2010, mandated that most swaps move towards a standardized model and be traded on and cleared by centralized intermediaries. The aim was to add transparency and reduce risk, while enhancing liquidity. The result was a bifurcated derivatives system that skews development momentum in the direction of futures.
Why? Because of cost.
Ebb and flow
Centrally cleared financial swaps require a much** higher margin than futures. In part, this is most likely due to the perceived relative illiquidity in swaps.
It could also be to compensate the additional risk to clearing houses. With futures, a trader will ask her futures commission merchant (FCM) to place a trade on a derivatives contract merchant (DCM), where it is executed and passed along to the clearing house. If a trader’s position goes spectacularly wrong, the risk to the clearing house is partially buffered by her funds held at the FCM and the margin deposited at the DCM.
With swaps, FCMs can be used, but they are optional and a relatively new feature. Often, a trader will enter into a contract directly on a swap execution facility (SEF), which will then pass it on to a clearing house. All else being equal, fewer buffers means greater risk which justifies a higher required margin.
In markets, however, all else is rarely equal, and some swap contracts are more liquid than some futures contracts, so there is considerable pressure to amend this rule as it is seen to unjustly favor futures over swaps.
Furthermore, swaps are almost exclusively an institutional product, whereas futures are also traded by retail investors. Most other financial regulations operate on the assumption that institutions understand and accept extra risk – asking them to pay more than they deem fair will nudge their business into other product types.
True, as always with financial regulation, there is a matrix of other causes and consequences to consider, and loopholes and exceptions keep lawyers busy.
But the point is that regulatory decisions in financial markets often have unintended consequences which affect capital formation. The higher cost of swaps compared to futures has led to the “futurization of swaps,” in which a swap is wrapped in a future and traded as such, with lower margin requirements. This favors DCMs over SEFs, since the latter cannot trade futures and therefore cannot enter into this type of regulatory arbitrage. Many complain that this does not mitigate risk, it just redistributes it, to the detriment of sector diversification.
Didn’t see it coming
Note that I am talking about non-crypto derivatives here. Bitcoin swaps and futures tend to have a much higher margin requirement than their traditional counterparts (maintenance margin for cash-settled bitcoin futures on the CME is 40 percent vs under 3 percent for gold futures). Rather than an attempt to dissuade investors from trading crypto products, this extra caution is deemed necessary given the assets’ heightened relative volatility. Fair enough.
As the contention mentioned above shows, we need to keep an eye on regulatory decisions within** an asset class; what’s more, not just on what the regulator is doing today, but on what the unintended consequences could be.
In the LedgerX case, we can glimpse the potential evolution of a sector structure that is probably not what either the regulators or service providers hoped for.
In taking extra care with LedgerX’s clearing license, the CFTC is shining a light on the role clearinghouses will have in the crypto ecosystem. This additional scrutiny, and the hoops and hurdles that are being imposed, could lead to crypto asset clearinghouse concentration further down the line, as scrutiny and hurdles create barriers to entry and add to operating costs. More clearinghouse concentration will increase** risk rather than decrease it, by centralizing the potential for something to go very wrong. In this case, the unintended consequences could be the opposite of the original goal.
An important factor is that LedgerX plans to sell bitcoin derivatives to institutional and retail investors. That generally makes the regulators sit up even straighter in their chairs, as protecting retail investors is a political imperative. So, we can expect even more care to be taken with settlement operations.
Another consequence of the delay is to give other potential competitors a chance to catch up: ErisX and Bakkt, both with bigger backers, are also gearing up to offer physically delivered bitcoin futures. I’m not saying this is the intention, it’s more likely to be another “unintended consequence,” but a greater choice for investors lowers risk overall.
The end game
In a fit of frustration, the CEO of LedgerX, Paul Chou, threatened to sue the CFTC over their handling of the approval. While it is generally not a good idea to be anywhere near Twitter when angry, attempting to sue the CFTC has precedent. In 2013, Bloomberg did just that over the “unfair” additional margin requirements for financial swaps vs futures that I mentioned earlier, which it saw as detrimental to the profit of its SEF. A court later threw out the suit.
I’m neither a lawyer nor a regulator, but it’s likely that the result would be the same should LedgerX press ahead with its stated intention. It would have a hard time arguing – as Bloomberg did – that the CFTC is favoring one product over another, thus putting its business model in jeopardy. The firm already trades swaps for institutional investors. The delay is affecting its intention to broaden its offering to include futures and options, and its target market to include retail investors.
It cannot even argue that the CFTC is anti-crypto. Outgoing Chairman Christopher Giancarlo has long been a thoughtful and informed advocate of innovation and blockchain technology’s potential.
It’s likely that tempers will calm and the fuss will blow over. The eventual launch of physically delivered bitcoin futures, whoever is first to market, will add a layer of maturity to a rapidly evolving sector by offering an alternative hedging mechanism in a format the market has been waiting for. That, plus the lessons learned along the way, will push the sector forward.
Meanwhile, we should all keep an eye on regulators’ actions – not on the obvious reasons, but on potential consequences and hidden messages. What they mask is often revealing.
Newton’s cradle image via Shutterstock
After a decent rise, bitcoin price topped near the $12,325 level against the US Dollar.The price is currently correcting lower below $11,500, with a bearish angle.There was a break below a crucial contracting triangle with support near $11,750 on the 4-hours chart of the BTC/USD pair (data feed from Kraken).The pair is currently holding the $11,200 support, but it could extend its decline to $10,500.Bitcoin price is currently correcting gains from $12,325 against the US Dollar. BTC price could correct lower towards $10,500 before it could rise again in the near term.Bitcoin Price Weekly Analysis (BTC)In the past few days, there was a decent rise in bitcoin price above the $11,000 resistance against the US Dollar. The BTC/USD pair traded above the $11,500 and $11,800 resistance levels. Moreover, there was a break above $12,000 and the price settled well above the 100 simple moving average (4-hours). A swing high was formed near $12,325 before the price started a downside correction.There was a consolidation pattern formed below $12,000 before the price started a downside correction. Moreover, there was a break below a crucial contracting triangle with support near $11,750 on the 4-hours chart of the BTC/USD pair. The pair declined below the $11,500 support plus the 23.6% Fib retracement level of the last upward move from the $9,147 low to $12,325 high.It opened the doors for more losses and the price declined below the $11,400 level. Bitcoin price is now trading above the $11,200 support level and is consolidating losses. If there are more downsides, the price could test the $11,000 or $10,900 support level. The next key support is near the $10,740 level. It represents the 50% Fib retracement level of the last upward move from the $9,147 low to $12,325 high.However, the main support is near the $10,500 level and the 100 simple moving average (4-hours). The final stop for the bears could be the $10,350 level. It coincides with the 61.8% Fib retracement level of the last upward move from the $9,147 low to $12,325 high. On the upside, an immediate resistance is near the $11,500 level.Looking at the chart, bitcoin price is clearly correcting gains from the $12,325 high. It might continue to slide towards the $10,500 or $10,400 support. On the other hand, a successful break above $11,500 and a follow through above $11,800 is needed for more gains in the near term.Technical indicators4 hours MACD – The MACD for BTC/USD is gaining momentum in the bullish zone.4 hours RSI (Relative Strength Index) – The RSI for BTC/USD is currently holding the 40 level.Major Support Level – $11,000Major Resistance Level – $11,800