Bitcoin continues to trend downwards as it fails to overcome resistance above $9,000. Hopes of a bottoming in cryptocurrency prices has yet to materialise and low trading volumes are not helping.
Fears of the dreaded “death cross” in which the 50-day moving average falls below the 200-day average is still in play. Bitcoin has seen 50% of its value evaporate this year and is currently trading at $7,496, according to the CoinDesk bitcoin price index.
However, it might not be a good idea to place too much store in technical analysis of bitcoin, given the paucity of historical data. Nevertheless, technical analyst Paul Day, head of futures and options at Market Securities Dubai, expects a 76% drop in bitcoin from its February highs, if the death cross event occurs.
The last time a death cross pattern emerged was in 2015.
With major web platforms seeming to turn their backs on crypto and regulators closing in all around, it is difficult to see a recovery in prices soon, despite optimistic tones from the likes of Tom Lee at Fundstrat Global Advisors, who was eyeing a floor just last week.
That position seems to have been revised somewhat, with Lee, former chief equity strategist at JP Morgan Chase, urging patience. “Market timing is generally discouraged in traditional equity investing” and so it should be with crypto Lee argued in a note to clients on Wednesday. “The overhang from regulatory risk is generally keeping investors side-lined,” he added. “We see positive catalysts for bitcoin later in 2018, including the clarification of regulatory hurdles.”
Naeem Aslam, the chief market analyst at broker TF Global Markets, is another analyst not too hopeful about bulls coming out to play any time soon. “Bitcoin is under selling pressure again and chances of its recovery are looking slim.”
G20 finance ministers will be meeting again in July to bring forward proposals on coordinated international regulation of cryptocurrencies. China’s central bank, the People’s Bank of China (PBOC), in an announcement today said that cryptocurrencies surveillance and regulation was one of its priorities for 2018 in mitigating risk to the national currency, the yuan, saying it would work internally and with external partners to regulate the crypto space.
In a more upbeat remark for crypto generally, deputy governor Fan Yifei trumpeted the progress the PBOC has made in central bank digital currency research in its ongoing pilots and other development work.
Is Tokyo Whale to blame?
Another bearish variable to consider, the impact of which is disputed, is seen in the selling from the so-called Tokyo Whale Nobuaki Kobayashi, the bankruptcy trustee of the shuttered Mt.Gox exchange.
Kobayashi disclosed in early March that he had sold $400 million worth of bitcoin and Bitcoin Cash in September last year.
Mt.Gox, based in Japan, was once the largest crypto exchange in the world, by some estimates accounting for as much as 80% of all trading volume. In 2014 it suffered a catastrophic hack resulting in the “loss” of 850,000 coins, 200,000 of which were later found.
Kobayashi says he tries to get “as high a price as possible,” but it is not known what determines when he decides to sell. The trustee has around $1.9 billion to sell. However, on 17 March he disclosed that he consults “cryptocurrency experts” before offloading. He has also claimed that he did not sell on ordinary exchanges, to avoid affecting the market price.
On 5 February Kobayashi sold 18,000 coins. Despite claims on Twitter, there does not appear to have been any recent transactions from the wallet addresses held by the trustee, according to the various sites set up to monitor them ( https://www.cryptoground.com/mtgox-cold-wallet-monitor/ ).
Jordan Hiscott, chief trader at ayondo markets sees validity in the Tokyo Whale thesis. “Certainly the halcyon days of performance gains from 2017 seem long gone, and in my view, this could be the situation for at least six months. My theory is based around the situation regarding the liquidation of the Mt.Gox Exchange, and the appointed trustee to handle the bankruptcy. Colloquially, this individual is known at the Tokyo Whale, and he has already sold around $400 million worth of both Bitcoin and Bitcoin Cash, and is likely the main catalyst for this year’s move down.”
“Interestingly, there is still around three times this amount of bitcoin to potentially to hit the market. With this kind of volume yet to surface, in my view, prices on bitcoin will remain depressed until this situation has been resolved.”
Nevertheless, the fears about the Tokyo Whale’s activities pushing down the price of bitcoin are yet another consideration weighing on the market.
Regulators on the prowl
In other Japanese news, according to a Nikkei report two Japanese exchanges, Tokyo GateWay and Mr. Exchange, have withdrawn their applications for Financial Services Agency licences and will be closing after returning funds to clients.
Last week the popular Binance exchange was ordered to register with Japanese authorities or face closure according to the same news outlet. Following those reports the exchange announced it would be setting up operations in Malta. The Mediterranean island is a member of the European Union and has been positioning itself as a crypto-friendly jurisdiction; so too have Gibraltar and the Isle of Man.
Other negativity for crypto came from Twitter, which started rolling out the ban on cryptocurrencies advertising from Tuesday. The micro-blogging platform’s new policy targets initial coin offerings, which has seen much nefarious activity. Twitter said it was acting now to stop token sale advertisers “engaging with others in a deceptive manner”. Facebook and Google have also banned crypto ads.
The European Securities Markets Authority (ESMA) threw a spanner in the works for crypto traders when it introduced regulations forcing contract for difference (CFD) brokers to reduce the margins they allow to clients trading on crypto markets. CFDs are used to provide exposure to an underlying asset class without owning it directly and CFD brokers provide margin trading at levels of up to 130x or more in some cases, with 30x being common. The ESMA has now reduced that leverage to a ratio of just 2:1, although it has not banned CFD brokers from offering crypto markets.
Litecoin setback, Reddit dumps bitcoin, LBX adds Ripple
On Monday Litecoin, one upon a time considered to be the silver to bitcoin gold and for a long time the only other crypto apart from bitcoin (not including Ripple), took a hit when the Litecoin Foundation announced that the LitePay initiative aimed at encouraging take-up of the coin by consumers, had folded.
A statement from the foundation said: “Litecoin Foundation was contacted by Kenneth Asare, CEO of LitePay, informing us that he has ceased all operations and is preparing to sell the company.”
At a recent ask me anything (AMA) on Reddit, the news aggregator and discussion website, Asare had asked for more funds from the Litecoin Foundation. Citing Asare’s lack of transparency about the company’s operations and what the money was to be used for, the request was turned down. “The foundation refused any further funding as he was unable to provide a satisfactory picture of where the money had been spent and refused to go into exact details about the company and show objective evidence to back up his statements.”
If that wasn’t enough bad news for the sector, Reddit unplugged bitcoin payments for its premium users last week. A Reddit administrator said problems with the Coinbase Commerce platform had led to the ending of the service. Coinbase Commerce was set-up by US exchange CoInbase to enable merchants to accept bitcoin payments.
In other exchange news, the London Block Exchange, or LBX, which describes itself as “the UK’s only dedicated multi-cryptocurrency exchange” because it offers GBP/crypto trading pairs, has added Ripple to its trading menu and says it will be adding a new coin every week.
Chief executive Benjamin Dives, said: “As we open our doors to UK crypto enthusiasts, we’re listening and acting on what the community wants, and that’s an array of good-quality coin options to trade, all backed by a reliable, comprehensive and user-friendly service that they can trust.”
LBX started offering over-the-counter trading in crypto in November and claims to be the only UK exchange that provides customers with “on-shore banking”, although Coinbase announced recently that it has secured the banking services of Barclays. LBX’s service includes the Faster Payments Service (FPS), which means bank transfers take hours and not days as with BACS.
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