BITCOIN - Will a Recession Sink the Crypto Market? Part 2
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Are you strapped in? Elliott Wave Theory
Elliott Waves Explained
It’s no secret that analysts adhere strongly to Elliott Wave Theory. Far from being a one-stop principle that explains everything happening in crypto trading, it does help us tackle the cyclical nature of markets.
Developed by Ralph Elliott way back in the 1930s, Elliott Waves describe the belief that price action plays out over observable patterns that repeat time and time again. In EW Theory, there are two types of waves:
1. Impulse Waves
2. Corrective Waves
Impulse waves are moves in the direction of the predominant trend, whereas corrective waves move against the trend. You can easily think of this by imagining BTC having a strong months-long uptrend, followed by a downward correction. The waves in-line with the uptrend are impulse waves, and those moving against it and pushing the price down are corrective ones.
It’s wrong to think that impulse waves can only correspond to moves up, however. Impulse waves are just about trends, regardless of whether they are up or down. A correction can occur to the upside, shaking out a downward trend. In that case, a corrective wave up would still be properly considered a correction.
Impulse waves move in packs of five, meaning you’ll always get five on-trend impulse waves before being hit by three corrective waves. That gives you a total of eight waves in a given cycle before the next trend takes hold.
Although EW Theory describes market action, it’s also an ace piece of psychological work. Traders’ emotions move in cycles of highs and lows. No one stays positive about a trend forever, and neither do they stay negative. The data which informs traders’ decisions and rationale shifts all the time, making it foolish to stick with any position dogmatically.
The cyclical nature between positive and negative/optimistic and pessimistic states of mind factors heavily into EW Theory’s own dynamic wave structure. Like the market, Elliott Waves never stand still. However, that doesn’t make them ideally suited to short time frame charts. Because Elliott Waves describe trends, they’re best applied to long time frames – especially if you’re just beginning to interpret the market with them.
Will a Recession Sink the Cryptocurrency Market?
For the first time since 2007, 10-year bond yields dipped below 2-year bond yields.
For the record, every time that happened in the last 50 years, a recession followed. We’re the first ones to say that past performance doesn’t indicate future results, but hey, you’ve got to admit that’s a pretty rockin’ track record.
It isn’t just the US standing on the cusp of what seems like an impending recession. Bloomberg had this to say in wrapping up the world’s financial woes:
“China reported the weakest growth in industrial output since 2002. Germany’s economy shrank as exports slumped, and euro-area production plunged the most in more than three years as the overall expansion cooled.”
So, yeah, not looking too hot out there. What does it mean for the cryptocurrency market? BTC dropped below $10,900 while ETH, XRP, EOS, TRX, XTZ, and several other blue chips fell off the proverbial cliff. For anyone who is keen to think that crypto markets are decoupled from traditional markets – think again.
At a very fundamental level, the fortunes of all markets are tied together by whichever is the true hegemonic power. While we love crypto, it would be an outright lie for us to claim that digital assets assume more importance, economically speaking, than traditional global markets. With a total market cap that is less than Amazon’s, the cryptocurrency market pales in comparison to global stock markets, which are valued somewhere north of $60 trillion.
Bitcoin is just a drop in the bucket compared to the squidzillions at play in the bigger picture around the world. For those of you who, like us, are living and breathing crypto every day, this may be a hard fact to accept. However, being aware of it will strengthen your position and keep your hand steady. There is nothing financially worse than being caught by surprise.
BTC may act as a store of value during a recession
Bitcoin was born along with the last global recession back in 2008. Satoshi understood the ill effects of centralized finance and knew that bankers were sending the world economy straight for the dumpster.
While the Great Recession hit hard in countries around the world, BTC gained notoriety at first, and then real value right around 2013, when signs of relief from the recession first flickered. The rest of the digital asset market as we know it today emerged during a period of economic expansion and rebuilding in the US, Asia, and many European countries.
As such, the cryptocurrency market hasn’t faced a real recession, so predicting how it will react to a global economic downturn is more or less impossible. However, without recession fears at hand for last year and most of this one, altcoins have performed dismally. It’s highly doubtful that a downturn of the kind anticipated will help matters on that score.
Bitcoin, on the other hand, may perform better than expected. Safe-haven assets like gold and bonds have rallied in recent days. In 2008, the USD jumped nearly 20% against other currencies. Can Bitcoin make a safe-haven case?
Well…“Bitcoin is a remarkably stable and reliable store of value” said no one ever. With all due respect to Anthony Pompliano, it’s possible to be bullish on both Bitcoin and reality.
Look, we definitely puff puff pass the crypto hopium. But believing that people everywhere will suddenly flee for safety into an asset class based on bleeding edge tech defies reason. Then again, if Bitcoin has done anything well over the last decade, it’s defy reason.
Bitcoin’s drop was understandable. If someone says recession, everyone jumps back. The coming weeks and months will be crucial, though. Do we trend higher as hopes for the global economy sink further? That’s for time to tell.
Bakkt announced it would open physically-settled futures trading on September 23. That’s only about a year later than anticipated, but better late than never, right? Now, the skeptics out there are saying (with a smug smile, no doubt) that since Bakkt already delayed several times, nothing is keeping them from doing so again.
After all, this isn’t the first (or second) time Bakkt has hit us with a date for release. However, optimists that we are, we think it’s different this time.
Bakkt is a Big Deal
Bakkt is bringing two massive infrastructural changes to the crypto table. On their own, each would be a big deal, but together – well, that’s what really gets us excited.
1. Bitcoin Warehousing: Institutions want to buy Bitcoin, but they have no idea how to store it. Even if they did, they want someone else to be responsible for it in case something happens. Typical, but understandable. Bakkt is providing warehousing for physically-settled Bitcoin futures for exactly that reason, and it should be the icing on the cake for institutions who have been sitting on the sidelines so far.
2. Physically-settled futures: Back in 2017, everyone got super excited about CBOE futures, only to realize way too late (see: after the dump) that these futures had almost nothing to do with actual BTC. Physically-settled futures change all that. Instead of being settled in cash, these BTC futures actually deal in the asset itself – it needs to be held as part of the futures contract.
In this one-two setup, we’ve got a reason and way for institutions to buy BTC, even if for purely speculative purposes, and we’ve got qualified custodianship in the warehouse. The whole thing is such an obvious win for the crypto space.
We said that Bakkt dropping a date is different this time. Why is that, you ask? Because before, Bakkt waited for the CFTC to drop in and approve the custodianship angle, but after waiting and waiting, it never materialized.
So, Bakkt changed tack and went after the New York State Department of Financial Services for the green light. The September 23 live date is a result of that shift, and New York’s willingness to get the job done.
Who Says Altcoins Aren’t Getting Adopted?
Altcoins have (understandably) been taking a lot of heat from HODLers. After doing nothing but lose sat value for the better part of 1.5 years, it’s tricky to stay upbeat about them.
And yet, there’s a delicate balance to maintain between becoming jaded and going overly optimistic. Zcoin is a perfect example of the benefits of keeping an eye on the right projects. Two days ago, the Zcoin team announced a major partnership with Satang App, a Thai payment app with five million merchants already on board.
The result of the partnership is that XZC is now spendable with those millions of merchants by Satang App’s estimated 50 million person userbase. Had you completely checked out of the crypto news cycle, you’d have easily missed this, despite potentially maintaining that no one uses crypto.
It’s the little things that count – they add up and make the big picture even sweeter.
Elliott Waves Explained
It’s no secret that analysts adhere strongly to Elliott Wave Theory. Far from being a one-stop principle that explains everything happening in crypto trading, it does help us tackle the cyclical nature of markets.
Developed by Ralph Elliott way back in the 1930s, Elliott Waves describe the belief that price action plays out over observable patterns that repeat time and time again. In EW Theory, there are two types of waves:
1. Impulse Waves
2. Corrective Waves
Impulse waves are moves in the direction of the predominant trend, whereas corrective waves move against the trend. You can easily think of this by imagining BTC having a strong months-long uptrend, followed by a downward correction. The waves in-line with the uptrend are impulse waves, and those moving against it and pushing the price down are corrective ones.
It’s wrong to think that impulse waves can only correspond to moves up, however. Impulse waves are just about trends, regardless of whether they are up or down. A correction can occur to the upside, shaking out a downward trend. In that case, a corrective wave up would still be properly considered a correction.
Impulse waves move in packs of five, meaning you’ll always get five on-trend impulse waves before being hit by three corrective waves. That gives you a total of eight waves in a given cycle before the next trend takes hold.
Although EW Theory describes market action, it’s also an ace piece of psychological work. Traders’ emotions move in cycles of highs and lows. No one stays positive about a trend forever, and neither do they stay negative. The data which informs traders’ decisions and rationale shifts all the time, making it foolish to stick with any position dogmatically.
The cyclical nature between positive and negative/optimistic and pessimistic states of mind factors heavily into EW Theory’s own dynamic wave structure. Like the market, Elliott Waves never stand still. However, that doesn’t make them ideally suited to short time frame charts. Because Elliott Waves describe trends, they’re best applied to long time frames – especially if you’re just beginning to interpret the market with them.
Will a Recession Sink the Cryptocurrency Market?
For the first time since 2007, 10-year bond yields dipped below 2-year bond yields.
For the record, every time that happened in the last 50 years, a recession followed. We’re the first ones to say that past performance doesn’t indicate future results, but hey, you’ve got to admit that’s a pretty rockin’ track record.
It isn’t just the US standing on the cusp of what seems like an impending recession. Bloomberg had this to say in wrapping up the world’s financial woes:
“China reported the weakest growth in industrial output since 2002. Germany’s economy shrank as exports slumped, and euro-area production plunged the most in more than three years as the overall expansion cooled.”
So, yeah, not looking too hot out there. What does it mean for the cryptocurrency market? BTC dropped below $10,900 while ETH, XRP, EOS, TRX, XTZ, and several other blue chips fell off the proverbial cliff. For anyone who is keen to think that crypto markets are decoupled from traditional markets – think again.
At a very fundamental level, the fortunes of all markets are tied together by whichever is the true hegemonic power. While we love crypto, it would be an outright lie for us to claim that digital assets assume more importance, economically speaking, than traditional global markets. With a total market cap that is less than Amazon’s, the cryptocurrency market pales in comparison to global stock markets, which are valued somewhere north of $60 trillion.
Bitcoin is just a drop in the bucket compared to the squidzillions at play in the bigger picture around the world. For those of you who, like us, are living and breathing crypto every day, this may be a hard fact to accept. However, being aware of it will strengthen your position and keep your hand steady. There is nothing financially worse than being caught by surprise.
BTC may act as a store of value during a recession
Bitcoin was born along with the last global recession back in 2008. Satoshi understood the ill effects of centralized finance and knew that bankers were sending the world economy straight for the dumpster.
While the Great Recession hit hard in countries around the world, BTC gained notoriety at first, and then real value right around 2013, when signs of relief from the recession first flickered. The rest of the digital asset market as we know it today emerged during a period of economic expansion and rebuilding in the US, Asia, and many European countries.
As such, the cryptocurrency market hasn’t faced a real recession, so predicting how it will react to a global economic downturn is more or less impossible. However, without recession fears at hand for last year and most of this one, altcoins have performed dismally. It’s highly doubtful that a downturn of the kind anticipated will help matters on that score.
Bitcoin, on the other hand, may perform better than expected. Safe-haven assets like gold and bonds have rallied in recent days. In 2008, the USD jumped nearly 20% against other currencies. Can Bitcoin make a safe-haven case?
Well…“Bitcoin is a remarkably stable and reliable store of value” said no one ever. With all due respect to Anthony Pompliano, it’s possible to be bullish on both Bitcoin and reality.
Look, we definitely puff puff pass the crypto hopium. But believing that people everywhere will suddenly flee for safety into an asset class based on bleeding edge tech defies reason. Then again, if Bitcoin has done anything well over the last decade, it’s defy reason.
Bitcoin’s drop was understandable. If someone says recession, everyone jumps back. The coming weeks and months will be crucial, though. Do we trend higher as hopes for the global economy sink further? That’s for time to tell.
Bakkt announced it would open physically-settled futures trading on September 23. That’s only about a year later than anticipated, but better late than never, right? Now, the skeptics out there are saying (with a smug smile, no doubt) that since Bakkt already delayed several times, nothing is keeping them from doing so again.
After all, this isn’t the first (or second) time Bakkt has hit us with a date for release. However, optimists that we are, we think it’s different this time.
Bakkt is a Big Deal
Bakkt is bringing two massive infrastructural changes to the crypto table. On their own, each would be a big deal, but together – well, that’s what really gets us excited.
1. Bitcoin Warehousing: Institutions want to buy Bitcoin, but they have no idea how to store it. Even if they did, they want someone else to be responsible for it in case something happens. Typical, but understandable. Bakkt is providing warehousing for physically-settled Bitcoin futures for exactly that reason, and it should be the icing on the cake for institutions who have been sitting on the sidelines so far.
2. Physically-settled futures: Back in 2017, everyone got super excited about CBOE futures, only to realize way too late (see: after the dump) that these futures had almost nothing to do with actual BTC. Physically-settled futures change all that. Instead of being settled in cash, these BTC futures actually deal in the asset itself – it needs to be held as part of the futures contract.
In this one-two setup, we’ve got a reason and way for institutions to buy BTC, even if for purely speculative purposes, and we’ve got qualified custodianship in the warehouse. The whole thing is such an obvious win for the crypto space.
We said that Bakkt dropping a date is different this time. Why is that, you ask? Because before, Bakkt waited for the CFTC to drop in and approve the custodianship angle, but after waiting and waiting, it never materialized.
So, Bakkt changed tack and went after the New York State Department of Financial Services for the green light. The September 23 live date is a result of that shift, and New York’s willingness to get the job done.
Who Says Altcoins Aren’t Getting Adopted?
Altcoins have (understandably) been taking a lot of heat from HODLers. After doing nothing but lose sat value for the better part of 1.5 years, it’s tricky to stay upbeat about them.
And yet, there’s a delicate balance to maintain between becoming jaded and going overly optimistic. Zcoin is a perfect example of the benefits of keeping an eye on the right projects. Two days ago, the Zcoin team announced a major partnership with Satang App, a Thai payment app with five million merchants already on board.
The result of the partnership is that XZC is now spendable with those millions of merchants by Satang App’s estimated 50 million person userbase. Had you completely checked out of the crypto news cycle, you’d have easily missed this, despite potentially maintaining that no one uses crypto.
It’s the little things that count – they add up and make the big picture even sweeter.
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