ETHUSD update: Bearish price action leads to break of major support area. Now that key levels like 400 and 374 have been cleared, the broader strength of this market is thrust into question.
And the answers can be found when you look back in time. The 300 area, which dates back to November of 2017 was a major break out for tihs market. There is a tendency for old resistance to become new support and if the inversion holds true, 300 area is a possibility to consider.
The fact that price broke 374 places it into a very wide reversal zone that has a boundary in the 280s (not on chart for simplicity). This means next 100 points below offer increased potential for a broader reversal.
At S.C., we had long swing trades in this market and in LTC which were stopped out. The stop at 386 saved us from an additional 40 points of pain. We still hold inventory in BTC because as ugly as this sell off is, the broader structure is not bearish yet.
This entire space is contingent on BTC recovering. And as bearish as the herd is, they are not paying attention to the probability of the location. As long as the low 6Ks or even 5750 holds, the broad bullish impulse structure is still intact. The potential for a bottom to materialize in this area is high.
At S.C., we do not make "predictions" like many of the other "experts". Instead we evaluate probabilities, manage risk and adjust to new information. Following the herd is something we do not participate in.
Probabilities tell us that the current lows are an accumulation opportunity across the board. Our risk management rules tell us to wait. We intend to buy inventory and take on another swing trade long when the structure lines up.
In summary, price can remain weak on the short term, but it is nothing more than an ugly shake out. Just like 18.5K on BTC had the world betting on 30K, these depressed prices are the polar opposite. Even if we could short here, we wouldn't even think of it.
It is funny how no one is afraid to buy at 1250, while no one is afraid to sell at 350? History has proven the crowd is usually wrong at extremes and this situation is no exception.
I just realized that I have never disagreed with a single word you have written here on tradingview since I began reading around the summer of last year. It's all just so sensible and level-headed. Bravo my friend.
majika_trader
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@TheChartmergeny, exactly my thoughts after reading this analysis / break down. nice level-headed summary .. @MarcPMarkets Bravo indeed ;)
VisionCodeX
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Latest BTC price target update, and takeaways from my meeting to VeChain's CEO Sunny Lu:
Hope you don't mind me sharing here.
GL all!
llertas
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I have a question: When you do TA, do you look only at charts or do you take into account other factors such as mining? When looking at it from a miner's perspective I see alarming issues.
Let me explain: Mining is a complicated and operation based on a balance of difficulty/price of the coin mined. And since price follows difficulty (or at least it used to) then when the price goes up so does the difficulty.
That said, the more people mine a coin, the less coins they get but if the price is going up then their FIAT payout stays pretty much the same. If the difficulty rises but price goes down, then you are nearing the cost area and even going into the red since your output when converted to FIAT (usd/eur) is not enough to pay for operational costs and ROI of the equipment.
For ETH and BTC we are now in this zone! Have a look here: whattomine.com/asic and you will see daily "profits" of 0.51/miner! If you account other OPEX such as ROI of the equipment (at around 3K $) and personel costs, rent etc etc, BTC is in the RED zone. So imagine the price of BTC going to 5K or even lower.... Similar situation is for ETH.
That effectively means that the "home" miners will stop/have stopped mining and only big mining companies can continue, although I cant say for how long as they would expect the price to recover so thay can make profit. If not they will go bust.
Mineable coins such as BTC and ETH cannot exist without miners....
So if investors/whales want to buy the coins cheap, we are at the bottom (or close) but if this trend continues we may go into uncharted territory for the future of crypto altogether....
What do you think?
SriEdHorn
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@llertas, Mining difficulty decreases when the total hashing power decreases to make sure blocks will always be mined within reasonable time. So the more miners quit, the lower the difficulty would move, which could create an incentive for new miners to step in. Anyway it's unlikely that a price drop would bring the network to a halt.
llertas
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@SriEdHorn, You are (partially) right! Block time remains constant. Its the payout that makes mining profitable or not. So if you invested 3K in a miner, and have to pay for facilities, internet, staff etc and the profit of that miner is around 50$ per month, how many miners do you need to break even? And then when is your 3K ROI coming back?
A year ago, ROI was around 4 months and now is > 24 months, not even counting the other expenses. Also the profit was around 400$ per month compared to the current 50$
So unless difficulty drops like 70% , and most miners are dropping out, the payout will not be motivating to continue mining. That said, the Chinese may be still left in the game which would give them control of the blockchain network (bad thing!) and the transaction prices would skyrocket plus transaction times would go to hours or even days.
The overall ecosystem relies on mining to function.
To conclude, a price drop will not make the network halt but a prolongued low price will (IMHO). My concern is that any TA that doesnt take that into account is like someone looking at a stock price chart without looking at the company performance. Would you buy stock of a failing company?
Disclosure: I am a professional miner
SriEdHorn
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Interesting. But I assume the big miners would have hired professional traders, and some of them must have sold close to the top, or opened large short contracts. I mean... you cant run a big operation without big cash reserves now can you? Well we might be about to find out...
llertas
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@SriEdHorn, I am guessing the same :) One more fact is that miners (equipment) have a short life span so if you burn them while mining at a loss, you wont have cash to buy new ones or your ROI is longer than the life of the miner, putting you at further loss.... So deep pockets for miners in a bear market ;)
Larrycrypto
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@llertas, noob question, how would the lightning network affect mining or miners ? just out of interest
llertas
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@Larrycrypto, I dont see any real impact since miners work on the blockchain directly and lightning is "bypassing" it in some way. Lightning is focused on solving transaction speed and costs while mining is more about discovering blocks (coins) and less about transactional profit from taking comission, and maintaining the public ledger of the blockchain. Miners would stil get coins even with no transactions, as long as the blockchain is releasing blocks to be mined ;)
Hope I answered your question