Archive February 2019

Bitcoin Making Little Headway as Resistance Caps Price Gains

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  • Bitcoin is struggling to cross the 50-day moving average hurdle for the fifth straight day. The repeated failure at that key hurdle has neutralized the bullish outlook put forward by Friday’s falling wedge breakout.
  • A convincing move above $3,630 (50-day MA) would revive the short-term bullish outlook and open the doors to $3,730 – the neckline of a potential inverse head-and-shoulders bullish reversal pattern on the 4-hour chart. A violation there would confirm a bearish-to-bullish trend change and could yield a rally to $4,130 (target as per the measured move method).
  • The bears could make a comeback if the 50-day MA hurdle remains intact for another 24 hours, pushing prices below $3,400.
Bitcoin’s struggle to cross a key moving average lined up above $3,600 is a cause of concern for the bulls. The leading cryptocurrency by market capitalization is currently trading at $3,575 on Bitstamp, having faced rejection at the widely followed 50-day moving average (MA) hurdle at $3,629 earlier today. Notably, that average line has been capping upside since Friday, countering expectations of a quick move toward $4,000 built following the high-volume falling wedge breakout. The sideways action below the 50-day MA has also invalidated the bull flag pattern created on the 4-hour chart over the last three days. So, the bullish case appears to have weakened and the probability of a drop to levels below $3,400 would rise if the 50-day MA hurdle remains intact for another 24 hours.

Daily chart

As seen above, the odds are stacked in favor of the bulls: the 5- and 10-day MAs are trending north, validating the falling wedge breakout. The 14-day RSI is reporting bullish conditions above 50.00. Even so, BTC is struggling to find acceptance above the 50-day MA, currently at $3,629. As a result, the bears may feel tempted to hit the market with fresh offers, driving the prices down to the ascending 10-day MA at $3,521. It is worth noting that the 50-day MA had worked as stiff resistance multiple times in the second half of the last month. As a result, a convincing move above that average is needed to revive the short-term bullish outlook.

4-hour chart

BTC is likely creating the right shoulder of an inverse head-and-shoulders pattern on the 4-hour chart. A break above the neckline resistance, currently at $3,730, would confirm a bullish breakout and could be followed by a move higher to $4,130 (target as per the measured move method). So, while a break above the 50-day MA would revive the bullish outlook, only an acceptance above the neckline hurdle of $3,730 would put $4,000 back on the table. Disclosure: The author holds no cryptocurrency assets at the time of writing. Source: www.coindesk.com

Litecoin’s Halving Is Months Away, But Traders May Already Be Pricing It In

Litecoin has rallied sharply in the first six weeks of 2019, triggering speculation that investors may be pricing in a supply reduction that’s scheduled to occur in August. The world’s fourth largest cryptocurrency by market capitalization is currently trading at $44, having clocked a high of $47 last week. At that price, LTC was up 56 percent on a year-to-date basis, according to CoinMarketCap data. LTC picked up a bid near $20 in December, tracking the corrective rally in bitcoin – the world’s largest cryptocurrency by market capitalization. Both moved pretty much in unison in January. Things, however, changed last week, with LTC outshining BTC’s 7 percent gain with a 41 percent rise. LTC’s strong performance comes at least five months ahead of the mining reward halving, or the time at which the amount of litecoins produced as a network subsidy for each transaction block falls is cut in half. On Aug. 8, the mining reward will be reduced from 25 LTC to 12.5 LTC. Markets are always forward-looking and hence could be pricing in the impending supply drop. Validating that argument is historical data, which shows that the cryptocurrency had rallied in the months leading up to the first mining reward halving, which took place on Aug. 25, 2015. Litecoin’s performance in 2014-2015 and 2018-2019As seen above, LTC carved out a long-term low at $1.12 in January 2015 and rose to a high of $8.72 in July before falling back below $4.00 ahead of Aug. 25 – a day when mining rewards fell from 50 LTC to 25 LTC. So, it could be said that markets bought LTC in seven months prior to reward halving and booked profits a few weeks before the event. The chart also shows that the cryptocurrency exited the bear market (long-term falling trendline) well before the reward halving. Litecoin’s recent surge is reminiscent of the price action witnessed in early 2015. As noted earlier, the cryptocurrency has appreciated by more than 50 percent in the six-weeks and has crossed the 12-month-long falling trendline. History seems to be repeating itself and so LTC could spend the next couple of months trading in a sideways manner before seeing a possible gear-shift in June and July. Such a possibility is also pointed to in the price chart analysis. Weekly chart LTC closed last week at $46.30 on Bitstamp, confirming a bullish higher high and higher low pattern. The 5- and 10-week moving averages (MAs) are also trending north, having produced a bullish crossover in mid-January. The move through the long-term trendline hurdle was backed by a jump in trading volumes to the highest level since February 2018. The bearish-to-bullish trend change, therefore, looks legitimate. Bitcoin’s Halving History Litecoin isn’t the only cryptocurrency to undergo a reward halving roughly every four years. In fact, so does the world’s largest cryptocurrency, bitcoin. Since bitcoin’s inception 10 years ago, the cryptocurrency has experienced two reward halvings, the first on Nov. 28, 2012 and second on July 9, 2016, and is estimated to undergo a third in May of 2020. As seen in the chart above, both halvings were preceded months in advance by significant price growth and full-fledged bull markets after the event. Upon close inspection, it’s clear the halvings elicit a brief “sell the news” reaction from the market in the weeks leading up to the event. In that time, bitcoin witnessed price drops of 30-50 percent, which is comparable to litecoin markets in the few weeks leading up to its first halving. Disclosure: The author holds no cryptocurrency assets at the time of writing. Source: www.coindesk.com

Blockchain Sleuthing Startup Chainalysis Raises $30 Million

Chainalysis, the cryptocurrency transaction analysis startup, has raised $30 million in Series B funding. The firm will use some of the funding to open a new office in London and a research-and-development lab in a bid to expand its presence in the U.K., where it has worked closely with the likes of Barclays, the High Street bank. The funding round suggests that investors are still putting their money into industry businesses despite the prolonged bear market in cryptocurrencies. The round was led by seasoned VC firm Accel and included additional investments from Benchmark, which led Chainalysis’ $16m Series A last April. Accel’s investment was led by Amit Kumar and Philippe Botteri, and Botteri will represent Accel on Chainalysis’ board of directors. Michael Gronager, CEO and co-founder of Chainalysis, said the investment demonstrates a continuing appetite to make a long-term bet on the foundations of the emerging crypto ecosystem, telling CoinDesk:
“The investment and the timing of it shows that, despite fluctuating prices, there is quite a strong conviction among some very big VCs that this is not a short term play.”

London calling

Although there are concerns among businesses about Brexit – the U.K.’s pending departure from the European Union – Gronager highlighted the importance of London as a leading fintech hub. Chainalysis currently employs over 100 people and has offices in New York, Washington and Copenhagen. In addition to opening a new London office, Chainalysis will also explore research partnerships and collaborations with universities in London, which Gronager said are leading the way in some areas of cryptocurrency research. Asked if that meant University College London (UCL) or Imperial College, he said: “We haven’t chosen a side there. So we are happy to work with everyone.” Chainalysis’ longstanding relationship with Barclays was an important driver early on in the crypto space, helping to establish a bank account for Circle, for example. Gronager said there is now a growing interest from both mid-tier and top-tier banks to come in and work with crypto companies, such as exchanges (Barclays’ banking relationship with Coinbase is often cited in this regard.) Although he wouldn’t name names, Gronager said: “There are bigger banks outside of the U.K. that want to enter banking relationships with crypto exchanges, essentially following the same procedure as Barclays.”

Know-your-stablecoin

Having launched real-time AML software Chainalysis KYT (“Know Your Transaction”) last year, the Chainalysis team has now expanded this beyond bitcoin, ether and litecoin to encompass the growing trend for stablecoins, or tokens that are linked in some fashion to fiat currencies like the U.S. dollar. Gronager said that while stablecoins are not problematic in the way that ICO tokens are to regulators, concerns remain over where the stablecoins are moving exactly – and whether there is proper regulatory oversight. Chainalysis has moved fast to support different stablecoins, said Gronager, so that providers can have proper oversight and show that to regulators, adding, “The anticipation is this will create a lighter touch on how to regulate these,” he told CoinDesk. “So that as well as being able to use them for settling between crypto exchanges, they can be used for transferring funds across the world.” Source: www.coindesk.com

SEC Commissioner Peirce Confirms Guidance on Crypto Tokens Is Coming

The U.S. Securities and Exchange Commission (SEC) plans to clarify when securities laws might apply to crypto token sales, an official said Friday. In a speech at the University of Missouri School of Law, Hester Peirce, one of the SEC’s commissioners, said that the agency’s staff are working on “supplemental guidance” to help projects determine “whether their crypto-fundraising efforts fall under the securities laws.” While the Howey test – the U.S. standard for determining whether something is a security – generally provides clarity, she said, there is a “need to tread carefully” as token offerings do not always resemble traditional securities offering. For instance, capital raised from decentralized token offerings could mean it is not truly owned or controlled by a company or person, unlike with traditional securities which are controlled by issuers or promoters, Peirce explained, citing a report from Coin Center. The application of Howey test can also be “overly broad,” the commissioner added. She did not provide an idea as to when the guidance might be issued. In November 2018, William Hinman, SEC director of corporation finance, also said that the regulator intends to release “plain English” guidance for developers on when and how crypto tokens may be classified as securities. On the subject of cryptocurrency regulations, Peirce continued to say, “ambiguity is not all bad,” and that the delays in bringing regulatory clarity may, in fact, allow “more freedom” for blockchain technology to grow and projects to mature. The commissioner further said that the SEC is also mulling whether new rules need to be put in place to regulate the crypto space, adding:
“If we act appropriately, we can enable innovation on this new frontier to proceed without compromising the objectives of our securities laws – protecting investors, facilitating capital formation, and ensuring fair, orderly, and efficient markets.”
Peirce argued that the SEC sometimes can be “impulsive” in dealing with crypto project and offerings. “We owe it to investors to be careful, but we also owe it to them not to define their investment universe with our preferences,” she said. In July 2017, the SEC notably declared that securities laws could apply to some token sales, after an examination of ethereum-based project The DAO, which had collapsed in 2016 losing investors $60 million., Source: www.coindesk.com

Little Relief in Sight as Bitcoin Price Closes at 7.5-Week Low

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  • Bitcoin suffered its lowest UTC close in over seven weeks on Wednesday, reinforcing the bearish view put forward by the rejection at the 50-candle moving average (MA) on the 6-hour chart yesterday. The close at multi-week lows also dashed hopes of a falling wedge breakout.
  • The cryptocurrency also created a bearish outside reversal candle on the daily chart yesterday, opening the doors for a drop to falling channel support at $3,230.
  • A strong move above the 50-candle moving average on the 6-hour chart, currently at $3,434 will likely weaken bearish pressures and yield a corrective bounce to the resistance near $3,650.
With bitcoin (BTC) closing yesterday at the lowest level in 7.5 weeks, the gradual sell-off is showing no signs of abating. On Wednesday, the leading cryptocurrency by market value ended the session (as per UTC) at $3,328 – the weakest daily close since Dec. 16 – according to Bitstamp data, dashing hopes of an upside break of the falling wedge pattern carved out over the last six weeks. Further, BTC created a bearish lower high at the crucial resistance of the 50-candle moving average (MA) on the 6-hour chart. That average line has thwarted several fledgling rallies over the last three weeks, as discussed yesterday. As a result, the slow drip sell-off from December highs above $4,200 witnessed over the last six weeks is likely to continue. BTC could soon challenge recent lows near $3,300 and may extend the decline toward the low of $3,100 seen in December. At press time, BTC is trading largely unchanged on the day at $3,380.

Daily chart

As seen above, yesterday’s high and low engulfed Tuesday’s price action as indicated by a bearish outside candle. Effectively, the day began with optimism but ended on a pessimistic note, meaning the “sell-on-rise” mentality is still strong. Hence, the cryptocurrency risks falling to the descending channel support, currently at $3,230. Supporting that bearish case are the 14-day relative strength index of 38 and downward sloping 20-day moving average (MA).

6-hour chart

On the 6-hour chart, the 50-candle MA has proved a tough nut to crack for close to three weeks. A convincing break above that average, currently at $3,434, might lead to a stronger rally toward resistance at $3,658 (high of the bearish gravestone doji created Jan. 26). Disclosure: The author holds no cryptocurrency assets at the time of writing. Source: www.coindesk.com

Bitfury Partners to Launch Bitcoin Mining Centers in Paraguay

Bitfury Group and South Korean R&D firm Commons Foundation are jointly launching a network of bitcoin mining operations in Paraguay. Announcing the partnership on Thursday, Bitfury said a series of mining centers will be set up in the South American country using its BlockBox AC bitcoin mining devices. Further,  the mines will be powered by two major hydroelectric power plants, Itaipu and Yacyreta. The collaboration is a part of Commons Foundation’s Golden Goose project, backed by the government of Paraguay, which aims to establish the area as world’s largest crypto mining center given the country’s ample supply of cheap and clean electricity. Paraguay currently only utilizes roughly half of the electricity produced by the two plants, according to Bitfury. Sandra Otazú Vera, a senior staff attorney in Paraguay and advisor to Commons Foundation, said that Paraguay is exploring “creative ways to use emerging technologies, like blockchain and cryptocurrencies, to benefit their economy and their citizens.” Commons Foundation is also planning to launch a cryptocurrency exchange in Paraguay later this year. The platform will integrate Bitfury’s compliance analytics platform Crystal, according to the announcement. Bitfury, which specializes in manufacturing crypto mining infrastructure and also mines itself, is reportedly considering an initial public offering (IPO) in Amsterdam, London or Hong Kong, possibly to be held early this year. In November 2018, the firm raised $80 million in funding led by venture capital firm Korelya Capital, with Mike Novogratz’s Galaxy Digital, Macquarie Capital and Dentsu Inc. also participating. Source: www.coindesk.com