Bitcoin Price Analysis: Amid Continuing China Rumors, BTC Fails to Break Key Resistance

When it rains, it pours. Last week, news began to hit the crypto community that China was taking harsh measures to reign in their various cryptocurrency exchanges. Several exchanges closed down and others were given a deadline to properly cease trading operations. This news came hard on the heels of recent directives that banned ICOs in China, leading to dramatic drops in cryptocurreny prices across the board.

After this latest news settled, bitcoin managed to slightly rally before topping out around $4100. However, early this week, rumors began to circulate that executives associated with Chinese exchanges are being prohibited from leaving China. At the time of this article, BTC-USD is sitting just at $3900 and is showing signs of further pullback:

Figure 1: BTC-USD, 12-Hour Candles, GDAX, Macro Fibonacci Retracement Values

The figure above shows the whole, macro bull run from the $1700s. One important feature of the trend shown above is the 61% retracement down to the $2900s. The retracement down to such a low value shows that sell pressure is very strong in the current market and hints toward bullish exhaustion within the macro trend. Another key feature to note is the following:

Figure 2: BTC-USD, 2-Hour Candles, GDAX, Failed 100% Retracement

An important test of this rally was the 100% retracement of the bear run, post-China news. Sitting just below the 23% Fibonacci Retracement lies the bear run. The test of the 100% retracement is important because that resistance line marks a strong shift in market sentiment. A failure to break through those values shows that, even though there was a strong rally, the market is still bearish in nature and is likely to continue.

Figure 2 also shows several tests and rejections of the 2-Hour 200 EMA (Exponential Moving Average). The 200 EMA is a common tool used among traders to objectively view the state of the market compared to the prior trends. A trend existing below the 200 EMA is bearish in nature, and trends that show support on top of the 200 EMA are bullish in nature.

At the time of this article, the BTC-USD is displaying two failed tests of key resistance levels and its showing little sign of upward pressure. Currently, the trend is sandwiched between the 200 EMA and the 50 EMA. Both moving averages can used in conjunction to gauge just how strong the market is. Like the 200 EMA, the 50 EMA shows short-term bullish and bearish trends relative to the EMA line: Trends above are showing bullish traits, and trends below are showing bearish traits.

Right now, we are in the middle of a crucial test of both support and resistance lines as the market decides where it will go next. A break below the 50 EMA will ultimate show the long-term bearish intent of the market and will lead to tests of the low support values:

Figure 3: BTC-USD, 1-Hour Candles, GDAX, Support Levels for Current Rally

At the moment, BTC-USD is making its third test of the current rally’s 23% retracement values. A break below this line will have bitcoin testing the macro 38% retracement values in the $3700s. If bitcoin manages to break the 38% retracement values somehow, there will be strong support around the $3400s as the 50% macro Fibonacci Retracement values (shown in Figure 1) have historic significance and support.

If bitcoin is going to see any significant price growth within this rally, it will have to pick up some major buy volume and break through very strong, historic resistance values. It’s extremely unlikely that, given its repeated failures to break resistance and the inherent bearish news looming over the bitcoin community, BTC-USD will shove to new highs without strongly testing lower macro support.

Summary:

BTC-USD had a strong rally, but ultimately topped out around $4100.
At the moment, BTC-USD is testing macro support levels and shows very little, significant upward strength.
Should we break support in the $3900s, we can expect a test of the macro 38% Fibonacci Retracement values in the $3700s.

Trading and investing in digital assets like bitcoin, bitcoin cash and ether is highly speculative and comes with many risks. This analysis is for informational purposes and should not be considered investment advice. Statements and financial information on bitcoin Magazine and BTC Media related sites do not necessarily reflect the opinion of BTC Media and should not be construed as an endorsement or recommendation to buy, sell or hold. Past performance is not necessarily indicative of future results.

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November 4, 2017

The Large Numbers Effect: Cryptofunds Are Spreading

People have already made fortunes from crypto fever and cryptofunds, and many more will make money as well. But not everyone.

The Cryptofund Lifeline

Like any rapidly developing market, the cryptocurrency industry provides opportunities, but there are only a few who can really use them. A significant share of the cryptocurrency market is owned by the those who mined it but have no idea how to handle it. Almost all of these people are at risk of ultimately losing their bitcoin or Ethereum.

Cryptofunds help people survive in this market. For a Blockchain neophyte, such institutions are a throwback. Today, a company doesn’t need any ‘linings’ to raise money transparently and distribute profit.

Indeed, the structure of these kind of organizations is reminiscent of conventional venture funds. But they do work and are indispensable for the new economy.

Financial Bridges

Market expertise is the main product of any cryptofund. Funds form a team of professional traders and analysts, i.e. of those who are considered useless by the majority of Blockchain partisans in new economy.

Blockchain is characterized by transparent transactions, but it doesn’t necessarily mean the same for a business owner or a business model. Only experienced professionals can separate the wheat from the chaff and find reliable tools in a stack of hollow shells.

Cryptofunds play an important role in the cryptoeconomy. Among other things, they support new projects that create products and develop a Blockchain ecosystem. They also provide money to those who would probably never get a bank loan or investments from venture funds. It’s not necessarily because their projects are bad, but because neither banks nor VCs know how to work with blockchain projects and it’s doubtful that they’ll learn to do so anytime in the near future.

Meanwhile, a cryptofund’s global role is to raise money within the unregulated economy; it’s a bridge for institutional investors.

Explosive cryptocurrency growth attracts investors longing for risk, but it doesn’t mean they have enough money, and institutional investors will never take a risk without funds’ expertise. Truly large-scale projects can’t survive without big money and long-term finance, and the cryptoeconomy isn’t yet able to set up a strong bond with the conventional economy.

I would emphasize that we’re talking about the future. Right now, the market is still too small for major investors, but current growth rates will not keep them away for long. And until then, individual investors are the main source of money along with growing cryptocurrency rates which inflate funds’ value with no external sources.

Strong And Weak Spots

There are several other growth drivers for cryptofunds, apart from the desire of cryptocurrency owners to make their money work:

Low setup and management costs. The difference from conventional funds is immense. Executives can easily take all the profit, while the cryptoeconomy has avoided this for the moment.

Near-instant entry and exit. Thus, many players buy discounted tokens at pre-sales and then sell part of them on the stock market after fund’s listing. There’s nothing wrong with that – it’s standard behavior for speculators and long-term investors.

Openness, transparency and tokenization of cryptofunds are their integral features as explained by technology platforms. No auditor or disclosure could give you such transparency and publicity.

It may seem that this way money flow should be unstoppable and without any restrictions (shutupandtakemymoney!). ICO evangelists think the same way, but in real life, there are some restrictions that hamper the development of cryptofunds and cryptotools.

Lack of trust in the system. Technology transparency means nothing if you don’t understand its principles. Many find it hard to believe that some ephemeral 0 and 1 somewhere on the internet can guarantee something. In several years people will still have no good understanding of the basics of the cryptoeconomy, but they’ll get used to it. And that’s already something.

There is no legal bridge to the traditional economy. Major players are simply afraid to enter the sphere with a legal gray area. It’s also a question of time – state grindstones run slow but hard.

Limited access to liquidity. Due to the legal vacuum, there are no reliable cryptocurrency exchanges at the moment. The existing ones are dangerous, slow and have almost no obligation to their clients. And reputation doesn’t seem to matter a lot in the cryptoeconomy yet.

Technical issues of tokenization. A platform defines cyber resilience, security and productivity. It’s essential to choose the right one, even though this is really difficult.

Smart contracts. Smart contracts can either lead to success or ruin the whole business. In this sphere, developers are in high demand, and as a result, they are overloaded with work, extremely expensive and work very slowly.

In Need Of Change

The first three problems are long term one and will be resolved as the cryptoeconomy develops. But the latter ones can be tackled by active players.

The market desperately needs a simple, legal, technology-based and out-of-the-box solution for cryptofunds. The company that can deliver it will not only have a chance to beat out the competition but to boost the development of the cryptoeconomy, producing benefits for everyone involved as well.

This article was written by Vladimir Smerkis, Co-founder of Tokenbox and Token Fund.

What do you think about cryptofunds and the cryptoinvesting process in 2017? Let us know in the comments below!

Images courtesy of Shutterstock, Pexels

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