The Steady Cryptomarket: Volatility Remains Low

Crypto market

Following last December’s record highs across the cryptomarket that saw Bitcoin strike an all-time high $19,891, things have not gone according to plan for the Bitcoin bulls and the broader market, with an extended bearish trend striking the markets through this year.

While bearish, with Bitcoin sliding to 2018 low $5,755 back in late June, the market was certainly energized with volumes on the higher side and news-driven moves seeing $1,000 swings in a matter of hours not weeks.

The volatility seen through the much of the year contributed to the uptick in volumes as investors and traders from other asset classes were drawn in to trade the daily swings that were sizeable when comparing to even the more exotic currencies and the global equity markets.

Key to the volatility was the news and investor reaction to chatter from both governments and regulators on the cryptomarket and the need for greater oversight and there are the hacks to fuel government desire for greater control.

China was banning just about everything, while Japan and South Korea introduced more stringent measures to address money laundering and worse. In spite of the shift in the regulatory landscape, volumes continued to hold steady as did the volatility, until October at least.

Few will argue that Bitcoin and the broader market need to go through a number of key events to draw in a wider investor group and, more importantly, the institutional money.

When looking at the global equity markets, by comparison, the Dow Jones is comprised of approximately 80% institutional investor money and 20% retail. For the Chinese equity markets, we’re looking at the reverse, 80% retail and just 20% institutional. There are hopes that this will change as the larger Chinese stocks become included into the MSCI Emerging Markets Index, a process ongoing at present.

Until this process is complete, however, and the stickier institutional money enters the market, the wild swings will continue, with even the Chinese government unable to halt the sell-offs we’ve seen in recent years.

While the good news for Bitcoin is that there are the Bitcoin whales, who continue to hold onto their sizeable number of Bitcoins and hefty returns, Bitcoin and the broader cryptomarket has hit a wall in recent weeks.

The slide in volumes and volatility can be attributed to two main events that have held the cryptomarket to ransom since the summer. The first is the planned rollout of unified rules and regulations for the cryptomarket by the G20, with the second being the SEC’s pending decisions on 9 Bitcoin ETF applications that had in fact been declined in the late summer, only for the decisions to be placed under review.

There may be a difference of opinion on which has had the greatest influence on the broader market and ultimately weighed on volumes and volatility, but when looking at the more mature asset classes, the introduction of institutional money can only truly materialize when there is an appropriate regulatory framework.

China’s inclusion into the MSCI’s Emerging Markets Index is a case in point, where the MSCI held back until there were the appropriate transparency and necessary access to the market.

Can the SEC give the green light for institutional money to begin flooding into Bitcoin and the broader market ahead of a unified set of rules and regulations?

Perhaps the much talked about a slide in volatility through October and the early part of November answers the question.

In the event that the SEC actually approves even one of the 9 Bitcoin ETF applications, the amount of institutional money that will likely actually enter the market, with the existing framework, is unlikely to be close to the sizes that the market has hoped for, not until the G20s rules and regulations at least and that’s been delayed until next summer.

Extensions and postponements have ultimately left sidelined investors on the sidelines and those already holding positions in a holding pattern, the lack of a catalyst creating the millpond effect that is not just evident in Bitcoin, but even with the more volatile cryptocurrencies, such as Ripple’s XRP.

Going back to the end of the 1st quarter, Bitcoin’s volatility in the month of March stood at 4.69, while in October it had fallen to 1.75 and for the current month sits at 0.85.

For Litecoin that tracks the broader market more closely, therefore a fairer comparison when looking at volatility, volatility in March stood at 4.93 before sliding to 2.93 in October and 2.89 for the current month.

Are the days of volatility and high volumes over?

Unlikely, when considering the maturity of the broader market and particularly when considering the anticipated impact of an eventual approval of cryptomarket ETFs and a more rigid regulatory framework to support the introduction of institutional money.

Which comes first remains to be seen, with investors now sitting patiently waiting for the SEC’s post 5th November decision on the 9.

EOS Daily Analysis– 13/11/18


Key Highlights

  • EOS gained 1.13% on Sunday, following a 0.44% rise in Saturday, to end the day at $5.4910.
  • EOS fell through the first major support level at $5.397 and second major support level at $5.3641 to an early afternoon intraday low $5.2920.
  • A late rally saw EOS break through the first major resistance level at $5.4658 and second major resistance level at $5.5017 to hit an intraday high $5.5221.
  • The week’s loss reaffirmed the extended bearish trend formed at the end of April’s swing hi $23.029.

EOS Price Support

EOS gained 1.13% on Sunday, following on from a 0.44% rise on Saturday, to end the week down 0.44% at $5.491.

Bearish through the first half of the day, EOS slid from a start of a day $5.4299 to an early afternoon intraday low $5.2920, the reversal seeing EOS fall through the first major support level at $5.3970 and second major support level at $5.3641 to call on support at the third major support level at $5.2953 before steadying.

A late in the day broad-based cryptomarket rally drove EOS through the day’s first major resistance level at $5.4658 and second major resistance level at $5.5017 to an intraday high $5.5221 before easing back to $5.4 levels by the day’s end.

In spite of the week’s gains, the extended bearish trend formed at late April’s swing hi $23.029 remained firmly intact, with EOS continuing to fall short of the 23.6% FIB Retracement Level of $8.6267.

At the time of writing, EOS was down 1.68% to $5.399, with Sunday’s late in the day rally hitting reverse in the early hours, EOS falling from a start of a day morning high $5.5245 to a late morning low $5.3957, the moves through the morning leaving the day’s major support and resistance levels left untested.

For the day ahead, a move back through to $5.435 by the early afternoon would support a run at the first major resistance level at $5.5781 to bring $5.6 levels into play, though with negative sentiment weighing on the broader market ahead of Thursday’s Bitcoin Cash hard fork, a run at the morning high $5.5245 may be as good as it gets for EOS in any 2nd half of a day recovery.

Failure to move back through to $5.435 by the early afternoon could see EOS come under greater pressure later in the day, with a pullback through the day’s first major support level at $5.348 likely to see EOS call on support at the second major support level at $5.2049 before any recovery.

EOS Daily Chart
EOS Daily Chart

Looking at the Technical Indicators

  • Major Support Level: $5.3480
  • Major Resistance Level: $5.5781
  • Fib 23.6% Retracement Level: $8.6267
  • Fib 38% Retracement Level: $11.3790
  • Fib 62% Retracement Level: $16.8280