Haceru

BTC & co at the crossroads

BITSTAMP:BTCUSD   Bitcoin / U.S. Dollar
Today I was contemplating the charts on different time scales trying to figure out what lies ahead of the crypto-realm. So I decided to lay down a few points, just to have them on the record for later analysis once the outcome will become known.

From a peak of 812 Billion dollars on the 7th of January, in just four weeks the entire crypto-world lost 50% in value being down to 414 Billion on the 2nd of February. While me personally I don`t find this "market cap" indicator too relevant in terms of what the true value of each token / coin is (or of the entire crypto-realm for that matter), it`s dynamic does have small clues about what is going on. For example, it is worth noting that BTC dominance is down to 34% and ETH is around 21%, with BCH sitting way behind at 5%. For comparison, in February last year we were looking at BTC having 85%, ETH 5% and all the other alts counting for 10%. So, quite a change of the crypto-world in one year in terms of what is more valuable.

While this entire "crash" as some doomsday preachers are calling it might seem a dead song of the cryptos, in my opinion is nothing more than the end of the birth stage and the beginning of the growth stage. We are already 9 years into the blockchain technology, since the 3rd of January 2009 when Bitcoin was "invented" and boy did it teach us some. We saw the limitations of this wonder-kid technology that shook the financial paradigms of central banking and money printing, we saw the amount of greed that could be triggered at a very short notice in large masses of people, we saw scams, hacks, thefts and anything else the human mind can conceive in order to get rich fast. We saw the amount of energy the initial technology needs to function and we soon realize there is simply not enough. What we also saw was a growing interest for improvement, for identifying the bottlenecks and for trying to eliminate them. However the most important aspect noticed was the scarcity of the most valuable resource needed, the human developers able to tackle the tremendously complicated codes of the technology.

Now that all those technical aspects are known, the possible range of applications this technology presents is also known, we are at the point when regulators will step in in order to curb the greed of the masses and to reward the big boys playing by the rules. Going beyond the usual FUD and fake news always present in the mainstream media, there are already forces in motion to set the stage for the next phase. For example, exchanges already started to talk about limiting or even suppressing their retail operations focusing only on institutional clients, coin / token "compliance reviews" are being conducted, tax authorities are quickly drawing up taxation schemes, governments and regulatory bodies are conducting joint meetings and increase collaboration in drafting specific legislation.
The limit not to be crossed seems to be the fiat / national currencies / legal tenders.

This leads to the next point, the types of coins / tokens available on the markets. In my opinion we have the payment oriented coins, the value storage coins and the eco-system bricks type of coins. As examples - XRP, BTC and ETH respectively. Of course we still have the scam coins, but we don`t count them in here as they will be coming and going so fast in the future that won`t make any difference. Also, there will be a small percentage of coins / tokens focusing on privacy and anonymity, with the most obvious use case being tax evasion (like today the off-shore paradises) with an unknown future / market cap.
Comment: Now back to the opening part of the idea, it seems the market is at a point of its evolution where it starts to favor the eco-system / building blocks type of coins and to steer away (at least from the growth point of view) from the others. This makes perfect sense based on all the above fundamentals and the fact that politically the technology is accepted while the replacement of the legal tenders is not.
Even at the TA level, when we look at the BTC weekly chart we can see the price arrived at the crossroads. It has to decide where to go next. All the momentum indicators are weakening, the RSI is at 50, the MACD just had a death cross and the candles are exactly at the trend intersection, around the 0.618 Fib level of the last bull run. All those point to the middle, saying "BTC is looking for its identity". As outlined above, the entire crypto-world is shifting, evolving, maturing so basically the answer to this "identity" question will be offered by the real use-cases of the technology. The arrival of the ETFs and the derivatives marked the entry point of the "big boys" into the financial part of the market and there the key is stability. We might see price fluctuations up and down, just enough to make it attractive but I doubt we will ever see the huge swings we were witnessing until now. Instead, the focus will be on accumulation and diversification, in promoting the coins / tokens with real use cases values while having some sort of general indicator like the BTC price (at least for a little longer, until the entire market matures completely)
Comment: I had to split the text into several parts as there is a character limit so thank you for your patience and for taking the time to read it. Any comment, idea, though is greatly appreciated. Thank you
Comment: Just a bit off-topic but very interesting nevertheless. On Friday, Dow Jones closed 665.75 points down from the previous closing. How about that perfect number? Not to mention the big "jump" down just just a few days before. Is the stock market ready for a crash? Hmmmm ....
Comment: One more thing that was bugging me for the past day or so ... overnight, most of the major US banks decided to "protect" their retail customers by declining any crypto-purchases by credit card. So ... let me see if I get this right ... the BTC price and along with it the entire crypto-realm lost more than 50% of the market cap in about 4 weeks leaving a lot of small investors with big losses (most likely they panic sold so now they are left with a major credit debt towards the banks), the stock market and the treasury bonds market are about to go down big time and the good banks are closing the door on the face of those retail customers for the only hope they could have had to hedge the fiat losses ... the rebound of the crypto-market. Sounds about right :)
Comment: Oh boy what a day ! DJI almost on the oversold area on the daily and the BTC hit another interesting number ... $6600 . Precisely, right? A, meanwhile some UK banks decided to shut the door on the credit card purchases as well and China censors the access to all crypto-exchanges in the world. Looking forward for tomorrow :)
BTC it can't possibly stop at 6600 because we said 5420 LOL What a day is right!
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Haceru london55555
@london55555, Nikkei follows along the same lines; btw ... off topic, are you familiar with the concept of "prediction / predictive markets"?
Reply
@Haceru, Yes i am but only because we have a young guy much brighter than myself that explained it to me LOL as a matter of fact he's actually trying to write and algo for it in the future - so then he can explain it to me all over again!
+1 Reply
Haceru london55555
@london55555, you read my mind, that exactly what I wanted to tell you ... get your fired / re-hired algo guy to quantify the VIX ... or any other "mood" indicator; the results might be veeeery interesting :)
Reply
Haceru Haceru
@Haceru, PS ... as a hint, presidential campaign on Twitter was an "predictive markets" experiment and we all know the outcome :D
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@Haceru, actually he was already writing the algo for the vix but not "predictive" but i know he wants to because for a bright guy like him im sure it's a challenge - it's very interesting that you would even know about "predictive" my ego is blown i thought only i did LOL
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Haceru london55555
@london55555, LOL ... i guess then , since it seems it becomes main street ... we are entering it`s hype phase so the "pros" will stop using it :)))
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@Haceru, Funny yes ill tell our guy to not bother with the algo the word is already out. LOL
+1 Reply
Not sure if you recall but we had said that $BTC was a " leading indicator" for the S@P by about 6 weeks or so and it seems to be playing out that way once again. Not a good sign for the S@P if our
5420 BTC number comes to be. We'll see.
+1 Reply
Haceru london55555
@london55555, yes, of course I remember ... but I thought you said 8 weeks or so ... regardless, the charts are there and we had a week of selling already, both on the DOW and S&P, the yields are rising and all those "just happened" to happen right after the Davos meeting. And we have nice "perfect" numbers, as we were seeing in BTC on Bitstamp as well for a while now (for example, the 00 UTC closing for BTC on the 2nd of February was 8838.83 - note that 2nd of February is also the 33rd day of the year, and the BTC price completed that nice Fib sequence of downfalls 1,3,5,8,11,13; also it was the third fractal formation). Me, I stopped believing in coincidences long time ago ... so this is no different. The only thing I wonder is if they will blame this all on the cryptos :)
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