Cryptocurrency Update – Week #5 in the World of Bitcoin Futures

The View from LaSalle Street

I was hoping to post this update on Monday or Tuesday of this week, but it wasn’t until Tues, late, that the crypto coinage market began what is being called, by the hardcore buy and hold crowd (“HODL” for you newbies), “the Crash”. This kind of event, so unfamiliar to these wealthy new asset class holders, is all the talk among the crypto intelligentsia on social media sites where I tend to hang out (representing the Lunch Pail Investor as is my mission). The tone of our dialogue tended to shock me into sitting back and watching the ‘carnage” commentary over the last two days.

Now that we have today’s (Thursday, January 18) little pullback to the upside, naturally those recent new buyers, especially of Altcoins, are clueless, directionally. So here I am.

If you’ve read any of my past posts on blogsites such as ForexFlow, of late, or on LinkedIn, you’ll likely know I’m a traditional trader and analyst of commodities and FX instruments. I come from a background of non-regulated trading when the Forex market was in its infancy as a public trading medium, and watched and participated in its maturity into becoming a fully regulated marketplace. I have and will always criticize the method and means used by the regulators but this kind of growth is necessary for any asset class to become mainstreamed.

Such is the case with Crypto trading, although you’d never know it by reading only the posts of the HODL crowd. Digital currency MUST become regulated for it to gain global acceptance and therefore longevity as an investment class. The True Believers have created a mania, complete with “rules” for trading digital that run the gamut from the great “never trade with money you can’t afford to lose” to the ridiculous “you can only LOSE money if you sell” concept. In other words: BTFD or your FOMO will kick in, creating a HODL fail, and you’re a dopey NoCoiner.

Translation: Never use stops. That way you can never lose money. Right?? Yeah, sure.

For my readers who are “Coin Speak challenged”, here’s a partial glossary for you:

What the writers of “the rules” tend to leave out is the possibility of a hacking attack that can easily wipe out not only your investment but the existence of the commodity (altcoins) itself. Of course, why mention the 800 lb. gorilla in the middle of the pool party? {It’s like Jimmy Stewart’s invisible 6-ft rabbit pal in the film “Harvey” — where Jimmy’s character introduced him around town, buying everyone drinks to lighten up the mood all along the way. Few folks actually believed in his buddy’s existence, but Jimmy’s character played it as if there was never a doubt he was there at his side}.

I’ll take that role here, because the background of digital mining and transacting (its blockchain) must be understood by the Revenuers (regulators) if this class is ever to get over the hump of legitimacy.

Cryptomaniacs (my term) have yet to accept how their marketplace must evolve to become legitimized for everyday investors, which HAS GOT TO happen if digital currency is to become long-lived enough to receive the backing of “the system”. You can’t have it both ways. They want it to gain wide acceptance as a fungible asset, yet they’re in love with the idea that they are anarchists who will at some point overthrow the “fiat” marketplace that underlies every economy on Earth.

This aversion to regulation is at the heart of what will become likely the bane of the existence of investing in the fringe digital coin market but as a caveat, we never now just what (blockchain) technology might do to create a legitimate underlying class for hedging the coinage. Remember this rule: It is the ability to hedge price risk that is what will ultimately be needed for true institutional and commercial acceptance. We’ll be monitoring it right here regularly.

To close, let’s look at the crypto (cash) markets this week in percentage terms but first, let’s examine BTC’s journey since the inception of its Futures Derivative:

Week #1 saw a brand new high over 20000 USD, followed by a collapse of over 40%. This was, as we’ve recalled, the week before Christmas. (IF you’re following this blog, you’ll know my reasoning for the exchange’s MO for the holiday release of the futures contracts). Week #2 and #3 were basically inside weeks, with highs in the 17000 region and lows in the mid-13000’s. Week #4 was the first week of non-holiday trading, and was essentially a sell-off week, particularly in the altcoin markets with lower closes across the board.

The along comes this week:

BTC along with the other “majors” (altcoins), again my term, had an inside day on Monday, printing a higher high, but closing just off its lows at 13600. Tuesday saw the “crash”, including some very high-volume numbers, with a fall from the previous close and a nearly 28% drop to around 9940. Wednesday caught a continuation to a new low of 9231 until new buyers came in to rally-up a close at 11100. Today, we’re on track to close above Weds’ close, with a high on the day of around 12000, and volume numbers moderate. The same percentages are fairly consistent for the major altcoins, where real volume numbers are available (recommended: BITFINEX’s excellent demo platform).

Have fun, trade responsibly, and come back frequently as The View from LaSalle Street keeps tabs on the universe of cryptocurrency trading as it travels the tortuous road to mainstream investing.

Next up: more market talk with my LinkedIn network of Cryptomaniacs, and how the derivatives market has utterly transformed their marketplace, and most don’t even know it yet     Stay tuned friends

Bill Hoerter

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