State of Coin 1: Minor Crash or Major Dip?

5 feb 2018

Since Dec 2017, Bitcoin and cryptocurrencies in general have been hit hard with bad news time and time again,
fuelling a historical selloff from the previous high of 20k.

Firstly, I would like to address some major issues:

1. Korea FUD and Bitcoin Exchange Bans in Asia

Time and time again we have heard rumblings and rumours of Bitcoin bans in China, Korea and even some rumours that Japan is seeking to work in conjunction with the aforementioned nations to draft a regulatory bill in regards to cryptocurrency. This time around, South Korean officials leaked news of a planned ban on exchanges. Despite the lack of evidence to support the claims, global Bitcoin markets entered a frenzy as Korean volume spiked and overall fear once again consumed the market.

The Silver Lining of this story is that once Bitcoin halved in price following the news, Korean regulators released an official statement claiming that it is "nearly impossible" to ban cryptocurrency exchanges and that the rumour was propagated by certain key individuals in an effort to manipulate the markets. As a result the ministers in question are now under investigation for insider trading.

Lesson 1: Bitcoin has been "banned" dozens of times in Asian countries. This is generally FUD used for manipulation of sentiment.

Lesson 2: Cryptocurrency exchanges are nearly impossible to ban. This is not just true for South Korea but MOST modern 1st world nations. As long as the exchange is not partaking in illegal activity and is operating legitimately under KYC & AML, they are safe. While this is difficult to prove, I think most of the community has an idea of which exchanges are not taking part in the proper procedures.


2. Collapse of Bitconnect (BCC)

With the collapse of the largest Ponzi Scheme in crypto it's hard not to imagine fear running rampant in the hearts of new comers. I mean after all BIT-coin, BIT-connect ... certainly some similarities there right? BTC's second and largest leg down was correlated with Bitconnect officially announcing the termination of their lending platform. With the collapse of the first large "lending platform ponzi" in crypto, we are seeing tighter government scrutiny on other similar projects such as Davor Coin (DAV). Although I don't believe that the collapse of BCC negatively impacts BTC in any other way than a sell off, it has left a bad taste in the mouth of millions and has potentially scared away millions more.

Lesson : Don't be f***ing stupid.
- No one can offer fixed return of 1% a day
- Just do the math... you would be a trillionaire within a year at those rates


3. Tether/Bitfinex Issue

I think by now most people know about the suspected Tether issue so I won't bore you with the details. When news came of the CFTC's subpoena to Tether, yet again the market reacted by dumping and maintaining the extreme bearish sentiment. Although this is a serious concern, I believe it has been mostly priced in at this point. What is more concerning to me is that IF the critics of Tether were accurate in their accusation of market manipulation, a large portion of the bullish driving forced behind BTC may be wiped out.


Technical Analysis

- Contracting wedge shape indicates momentum compression in the downward trend. This is often noted at the end of an Elliott Wave as an indication of pending reversal
- Strong stoch RSI support on the Daily/Weekly timeframes
- MACD divergence
- Bottom of 240 day MA (adjusted for crypto to 243.33). This is a significant level since the last correction to fall this deep was post first bull run out of the major Mt. Gox correction.

Long : $6000-$7000 range
Target 1: $10,000
Target 2: $12,500
Target 3: $18,000
SL: $4800

Closing Ideas:

There is alot of uncertainty at this time, no one truly knows what is going to happen. Scalping shorts may earn you quick profit, however for longer term traders with higher risk tolerance, these levels appear ripe for accumulation.