Market Insights: Learning Opportunities

Market Insights: Learning Opportunities
February 9, 2018 Alex
In Cryptocurrency, Market Insights

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Disclaimer: Not professional or financial advice

A Learning Opportunity

If we zoom on the 4-Hour chart for BTC/USD, we can see that while there is a recovery, there’s potential for some chop or volatility. We’re seeing decreasing volume with increasing price. So, while the price is indeed going up, we’re not seeing the strongest confirmation.

In a steep sell-off situation, the market can trick you. You want to protect your money, and have a very good idea of where things are headed before making a move. Doing less is often the best move, at least for long term plays.

However, when there is the kind of uncertainty we’ve been seeing, and you have volume, it creates an interesting trading environment. Opportunity can present itself in the form of bounces, as we’re seeing a bit of in the chart at the moment. At the very least this presents an interesting learning environment. If the market is only going up, it’s not as rich a learning opportunity. But when things are bouncing, and the price is figuring itself out so to speak, you can potentially learn about volume, breakouts, retracement, etc.

Litecoin’s Potential

Bitcoin is looking better, and seeing some good sentiment across the crypto community and social media. But so far as ROI, Litecoin is a play to strongly consider.

As of this morning, Litecoin has been looking good with a breakout. Once it gets through the $165-170 area, that could be a good place/time to get back in. If it goes back down first, give it time. But Litecoin is positioned to do very well this year.

Where’s the Money?

One of the big macro questions for crypto in 2018 is how crypto intersects with and gets compared to stocks. A lot of commodities have had a sell off, but they’re bouncing back to an extent (to what extent will be interesting to see). But relative to crypto, we care about what the volume and price action looks like in stocks, and how it translates into crypto markets. We want to ask, “is any of that cash moving into crypto?” And we want to pay attention to media, keep an eye out for some shift (for example: Are people starting to talk about crypto as a hedge against the market?).

Do note, though, that if people/firms in media are talking about making moves into crypto, they’re not going to tell you this before they’ve already done it and taken their positions.

Overall, it will be interesting if a case starts to be made that traditional equities markets can hedge themselves into crypto. Money always has to go somewhere, and we always want to be aware of where it is, and where it’s going.

As of now, corporate earnings are still huge. Companies at the top are starting to win big, as tends to happen in capital growth.

Relief and Purchases

We’re at ~420 billion in market cap right now. Many alts are in the green and seeing spikes. But what does this mean?

Typically in a speculative market, after fear and anxiety have washed over people, you get a period of relief, with people essentially saying “Ah, I can buy stuff again. I want that dopamine back.”

In macro/global capital markets, things are so big that they very much respond to cash flow. But in crypto it’s more simple, because there aren’t as many instruments as there are in traditional equities. So altcoins act as something of a barometer of/for the relief people are feeling. And recency bias plays in strongly, too. That is, the thing you’ve heard about most recently is likely to be the thing you’re most bullish on.

All in all, alt movement is a blend of relief and what’s hot/what people are talking about right now. You should take the movement with a grain of salt. Remember that you want to be selling when things are green, and buying when people are freaking out. Unless you’re going after short term trades, wait for confirmation.

Binance Relaunch

Binance is back up. At a quick glance, this shows how fragile the market is, such that if one exchange goes down, we see a huge liquidity drop. More importantly, it is a reminder that your crypto is not safe unless you have control over it. Exchanges can and will go down. Coins should not be kept on exchanges unless they need to be for a trading. But as soon as possible, get them off.

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