Market Insights: Strength and Competition

Market Insights: Strength and Competition
February 12, 2018 Alex
In Cryptocurrency, Market Insights

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Disclaimer: Not professional or financial advice

Building Strength

We’re seeing bitcoin continue its sideways pattern, and the volume is increasing. This is a good thing to see after a somewhat tumultuous past week. There is new activity coming in that’s driving the price of bitcoin up, but there are still some resistance points ahead – $9,000 is bound to be one, as are the $9,400-9,500 levels – which we didn’t get through last time. Once we get through about $11,500, we’re in good shape for the future.

If bitcoin crosses $9,000 (and here you should look at ethereum and litecoin’s relative positions and support/resistance levels), a good strategy is to layer in some bids, and have tight stop losses in place to mitigate risk. If you don’t know how to do this, just keep dollar cost averaging, and increase the amount when/if you’re ready to.

When looking at market cap, we’ve seen an increase in volume, but it hasn’t seen a huge change. We’re seeing increased volume in BTC, but the overall market cap is hovering. Overall we’re seeing a strengthening of the market. BTC is beginning to hold its own in dominance, too.

Action In The Alts

As people gain confidence in the market as related to BTC, we’re beginning to see alt-coins swing. You see familiar patterns, like the most volatile coins rising the fastest and subsequently dropping the fastest.

Red Pulse was listed on Binance yesterday. It was originally listed on KuCoin, and there saw a huge run up, down, and then it got listed on Binance. When the announcement came out that it was going to be listed on Binance, there was a huge run up, but as soon as it started trading, the price started to trickle down. This is perhaps an indicator of a bigger theme. That is, relying on exchange arbitrage is become a less viable strategy.

When coins are hyped like crazy before they hit the market, it’s difficult for them to sustain that hype for a long enough period, especially with so many new products coming out at the same time, and other variables in the greater market. When companies/coins are doing a great job but aren’t flashy about it, a lot of their value is preserved by the time it hits the market. In a liquid market, when something has pent up potential, it can do well.

An Institutional Lens

When looking at the Nasdaq – which essentially mirrors the Dow Jones and S&P 500 – we can see a nice bounce back. We’ll see how this holds up, and how much volatility there might be. It’s good to keep an eye on this, and an eye on commentary surrounding it. The story of cryptocurrency in media is likely to be one of how it’s regarded by big institutions. Everything is about the story. 

Recently an article was released by Fortune about the amount Millennials have in savings. This kind of macro information is helpful in determining the psyche of who’s getting into crypto. All of the things we can talk about – price, volume, support and resistance sentiment, etc. – really all comes down to say a million individuals making decisions based on their own self interests. It’s all about what those decisions are. This kind of demographic information is especially illuminating in transition phases. Crypto is obviously huge with Millennials, and people are changing their beliefs along with asset allocations.

It’s important to know that when it comes to institutional money coming into crypto more and more, those institutions are going to be playing the game differently than retail investors. They’re not just coming with their check books. As hedge funds, investment banks, trading desks, private equity companies, and institutional money comes in, they’re going to come in with guns blazing. They’re bringing tech, high frequency trading, and every manipulation strategy they use elsewhere. They’re coming to win.

This means that we need to think about how to get a competitive advantage. This comes by way of research, having connections for information, analysis, etc. But if you don’t have a competitive advantage, it’s best to dollar cost average, maybe buy some dips, hold, step back, and let the market do its thing. If you can do something to gain a competitive advantage, do it. If not, don’t get caught up in the competition.

 

 

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