Bitcoin Enters a New Phase of Volatility
Bitcoin finally lost the $9,000 support it held all summer...and the resulting crash has been spectacular, taking Bitcoin to the lowest it’s been in months. But that bearish downwards momentum seems to be tailing off, as volumes on Bakkt pick up and the cryptocurrency starts clawing back its gains.
How has it recovered? Of course, it’s early to call it a complete recovery, but Bitcoin grew nearly 5% this week, following a $500 rally over the course of two hours. At press time, another $400 rally will get Bitcoin back to the $9,000 resistance – a definite target for bulls.
Volumes have recovered too: Anemic trading has kept the price down, with volumes hitting a low of $5.8 billion this week. But they’ve more-than-doubled since then, with $12.4 billion of Bitcoin currently being traded – and if this keeps up, then a rally is in the cards.
Technical buy signals about to trigger: The Vera line, a technical buy signal, waits to be triggered at $9,000 – and will presumably fuel a new bull rally, possibly even back up to $10,000. But another school of thought warns if that doesn’t happen, then a retracement back to $7,000 and even $5,000 is possible.
Wut We Think: Bitcoin has reverted back to type a bit – instead of endless growth fuelled by hype, traders are taking it slow and looking for real news to inform their trades. And the price spiking just as Bakkt volumes picks up is no coincidence, just like the initial crash was informed by lackluster volume. If institutional money keeps pouring into Bakkt, then the spot price will start to accelerate rapidly.
What’s Next for Fintech?
Blockchain, crypto, and fintech are among the frontiers of technological development...and with new innovations slated to release soon, such as Telegram’s TON coin, it’s worth taking a look at the state of fintech as a whole.
Social networks are getting in on the game: It was possibly a marriage that was always meant to be – the merger of crypto and social media. Crypto’s biggest obstacle has always been a lack of adoption – but getting a hundreds-of-millions strong social media userbase would fix that. That’s the bet that Telegram is making, anyway.
Old Finance is looking into the New: One of the big reveals from the Libra debacle is the fact that central banks – the oldest and stodgiest of old finance – are looking into creating cryptocurrencies. And countries have also been jumping on the crypto bandwagon, with a number of governments issuing ‘sovereign’ crypto coins...
Custody is key: Despite crypto’s obvious uses for developing countries (a way to circumvent capital controls and resist inflation, for one), a big obstacle has still yet to be overcome – ensuring safe access to funds. Hundreds of millions of people around the world have a phone but no bank account, and whoever figures out how to store crypto safely without losing access to the coins if the phone is lost or stolen will probably drive the next wave of adoption.
Wut We Think: Far from being a dying industry, fintech and crypto are one of the most innovative industries out there. And it’s attracting some of the top minds of a generation. Bitcoin is slowly gaining institutional acceptance, Telegram is only weeks away from a possible mass-market cryptocurrency, and even central banks are lining up to play ball. And this can only be good for crypto.
Trading Spotlight: Risk/Reward
One of the key concepts for a successful trader to understand is risk and reward. An intuitive understanding of risk/reward lets a trader place the most accurate bets in accordance with their trading plan, leading to greater profitability over time. It also will help a trade mitigate losses, instead of forcing the trader to re-capitalize if things go south.
Risk/Reward: In short, risk refers to the capital invested by the trader in a given trade, while reward refers to the expected payout. Risk/reward is often expressed as a ration – for example, if you play a stop loss for an asset at $2, with a take profit at $4, then that would be a 1:2 risk/reward. For more information on what risk/reward is and how it can improve your trading style, take a look at the Monfex Trading Academy.