Updated - December 28th
The new year is sure to bring new dynamics. It always does. Our 2017 environment was dominated by three trends: rising bitcoin, low volatility and rising oil. Even with last weeks profit taking in bitcoin, $BTC is still higher than it was at the beginning of December.
For some perspective, it’s +50% month over month. Think about that for a moment. Verge another cryptocurrency shot up more than 5000% in less than a month from a low of $.005 cents to a high of $.30 cents. People are now freaking out that verge is near $.15 cents. This is utterly and completely normal when an asset class runs up so much to retrace a giant portion of the rally back up to 50% retracement or lower....
In other words....If a stock/coin runs up from $100 to $200, it's not uncommon to see that stock retrace and give back a portion of that rally back along it's uptrend. The most common retracement levels is something here at BotTrigger we've coined the term of "FRZ" which stands for Fibonacci Retracement Zone. See they don't always pull back to some magical exact level...instead it's always best discussed from the context of a "zone" area that is a stock/coin is likely to pullback to. The most common levels in Fibonacci analysis are the 38.2% retracement level, 50%, 61.8% & 78.6% retracement level.
NOTE* A 50% retracemet does not mean a "-50% pullback." They are different. We've covered this in several previous posts but I'm going to bring it up here for new members. Please distinguish when we say "pullback" vs "retracement"...they are different. A retracement is based on Fibonacci analysis
Those values I just shared above are classic axiom of technical analysis for FIBONACCI RETRACEMENT LEVELS. They are a function of math, science and probability. They happen without exception in nearly every bull run on pretty much any asset class....you can always expect a retracement to occur, and you will find more often than not, that they retrace to those levels. And we see this happen over and over again, they tend to bounce off of one of those levels while in their temporary downtrend. Sometimes those downtrends are either short term tops, or intermediate term tops, or a final top in the larger primary term trend. Here at BotTrigger, we're pretty strong at distinguishing when a hard top is definitively in or it's just a near term pullback along the larger uptrend.
Back to the example of VERGE, ticker symbol $XVG, this privacy coin just shot up more than 5000% in less than a month. It has since pulled back -60% from peak to trough. Now that's just the pullback force. When we apply a fibnoacci analysis to Verge it's retraced
Moving on, a quick note about the recent Bitcoin Segwit2x Fork:
There's been a lot of FUD over this latest Bitcoin fork of Segwit2x. The general consensus is that there have been too many forks; it confuses people as to which is the real Bitcoin, & devalues Bitcoin itself...that's the fud talk - not our talk. Let me clear this up around the Forking subject: This is good for Bitcoin & the Blockchain at large. This is Blockchain's way of:
1) Finding market & economic efficiency
2) Evolving the codebase whether directly via Bitcoin or indirectly through the market that votes for which Coin has the most value. The market decides....you and me...and everyone else using said coin, decide.
2) Enacting DIVIDENDS for Bitcoin holders - which have the convenient effect of indirectly competing with Stocks yield....this only makes Bitcoin more attractive to investors. If they held 10 Bitcoins then they would consequently get airdropped 10 duplicate forked coins thats value is ultimately decided by the community / miners that set the market voting price thereof upon trading.
How is that a bad thing? When we were holding out Bitcoins during the August 1st fork, we were automatically air-dropped the same ammount of Bitcoin Cash coins in our account. Trading opened around $300 area and we later sold those coins as high as the $800 area back in August ...since then Bitcoin Cash ultimately reached a high of $4,104 in the following months.
Too bad we didn't do our selling up in that area! Point is, that was a huge dividend payout for simply holding Bitcoin during the fork. Almost all the forks have been the same story, just none have traded as high as Bitcoin Cash in actual value. Point is, don't be frustrated by the Forks. Welcome them. Honor them as a necessary function for Bitcoin to evolve into a more efficient store of value for quicker & cheaper transactions.
However, Bitcoin was suppose to be the digital currency freedom-fighter to bank the unbanked and provided quick and cheap transactions for all....to redefine freedom of expression around how value can be used at will. And it certainly is all that...but on the flip side it's also had some glaring issues holding it back. And so with each of these forks is an attempt to evolve and expand the code base to support scalability solutions to create an attractive & competitive field for the utility of Bitcoin's store of value. levels & superior to proprietary monetary systems such as fiat currencies.
Due to the accelerated adoption of Bitcoin, Bitcoin wallet growth, Transaction growth, etc ...this has all created massive congestion and caused record extreme degradation of transaction speed whilst fees to send Bitcoin have been rising to exorbitant & economically stunting levels. For example, if you wanted to send $20 of Bitcoin it might cost you $20 in fees alone during peak congestion times....and so what good is that to anyone? ZILCH. Notice the total growth in Bitcoin Transactions and now compare that to the chart below which shows the average cost per Bitcoin transaction. It's absolutely unsustainable at that kind of cost per transaction reaching as high as $55/transaction very briefly on December 22.
Btw, note that on the day when Bitcoin transactions reached around $55/transaction was December 22, which is the pullback plummet when Bitcoin tagged the $10,000 area before bouncing back above $14,000 on the day. I assure you that plunge was a classic case of extreme capitulation as all the Coinbase newbies who just bought in near the highs...that was back around when Bitcoin had achieved peak media coverage & was the most talked about asset class on all the major media outlets...when the Coinbase app was among the top downloaded apps on both the Android & Apple store. Point is, there was a lot of new Frontier 49ers money coming from all over the world for the Crypto gold rush at Blockchain Sutters Mill. They came for riches & Crypto fortunes and instead found coals as Bitcoin plunged. They were totally unaware of the harsh realities of crypto volatility and un-accustomed to seeing their portfolio value get cut nearly in half.
I assure you that there were TOO MANY poor souls that sold their Bitcoin around the $10500 area bottom that took place on December 22nd.
Now let's really quick acknowledge where Bitcoin is at the moment. There are 3 core time frames we always look at. Near Term, Intermediate Term, & Primary Term trends. What's absolutely imperative is that you judge technical action within a framework of sufficient data markers. And so here we are on Bitcoin at the moment:
→ Near Term Trend (hours to days out): BEARISH
→ Intermediate Term Trend (days to weeks of data): NEUTRAL
→ Primary Term Trend (weeks to months of data foreasted out: BULLISH
It's not fair to judge any asset class for that matter on a single hour, day, or even weeks for that matter. What looks bearish on the hourly or daily chart doesn't means it's bearish on the weekly or monthly chart. I'm keenly aware of the horror posts flooding the TA outlets showcasing how Bitcoin is about to crash & is heading here and there etc. Let's really quick acknowledge the stats thus far on Bitcoin: Betting on head & shoulder formations & other bearish patterns has been a costly errand when it comes to Bitcoin. As the saying goes...every dog has it's day. Well every bear out there has their time to shine. But they are short-lived, and most rarely come to fruition for the bears. Bitcoin has gotten really good and psyching Technicians out & bear theorists out more often than not when it comes to apocalyptic scenarios All these bearish head & shoulder formations that tend to show up...nearly all of the never play out to the downside.
So we are bearish only on the near term trend at the moment. As of now, the benefit of the doubt continues to go to the buyers of this market, not the sellers!
If there is any point in this crypto bull market to pop...this is not the place and time...simply put: there is no catalyst for a pop. Every pop is associated with a fundamental catalyst that breaks down...like Lehman brothers of the financial crisis for example that resulted in a lockup of bank capital. The technicals paint the narrative on the chart along the way. If anything, Bitcoin & Crypto is gearing up for trillion dollar market cap flirt at minimum. Like 2018 will only be the year at minimum that a $1 trillion market cap was flirted with. There is actually far more evidence to suggest why crypto will effortlessly eclipse the 1 trillion level if not exceed it by 2x ....then there is evidence that that the cryptocurrency market cap will stay below $1 trillion in 2018.
As we deepen our understanding of status quo economics, it will help us to better understand what comes next. Here’s the latest:
1- Bitcoin. The innovation behind bitcoin’s rise is well summarized by a man named Andreas Antonopoulos. His collection of speeches and writings reveal the following themes in favor of bitcoin sustainability:
-Bitcoin is the first global, borderless, decentralized and open form of money. Individual nations cannot stop it.
-Banks irresponsibly invest deposits into risk assets, they charge high fees, and can freeze and even seize our money in a crisis situation. Millennials who entered the workplace during the 2008 financial crisis learned this lesson early on. Children born today will likely never open a bank account. Instead, digital currency will be managed in a digital wallet that enables complete transparency and control over 100% of funds. Bitcoin isn’t about banking the unbanked, it’s about unbanking all of us.
-The ‘full faith and credit’ of national fiat currency is what supports the current monetary system. This phrase no longer has merit in places like India, Venezuela, Zimbabwe, Greece, Brazil, Spain, Argentina, Turkey, Pakistan and Ukraine. Chinese debt could be next to experience a crisis of faith. A diminishing petrodollar could impact the full faith and credit of the United States. $225 trillion of global debt says the ‘full faith and credit’ argument is ringing hollow. Bitcoin is already doing something very dangerous...it’s encouraging people to put their savings outside the system. A crisis of faith is coming.
-Proof-of-work is a brilliant system that enables bitcoin to be audited and secure as a public ledger, built upon the extrinsic asset of electricity. Bitcoin uses mathematics to create unalterable, predictable outcomes into the payment system. Authority is being replaced by autonomy. Market based autonomy will delivery order in ways that centralized authority has not.
-The current state of bitcoin utility is lagging because of scaling issues. The network is too slow and transaction costs are too high. This will change with the pending release of the Lightning Network that enables instant transactions at a cost of $0.01. The time dimension of money is about to change. For example, rather than an employee getting paid once or twice a month, bitcoin enables the continuous ‘streaming of money’ in micro installment smart contracts similar to what we’ve experienced with streaming movies. The speed of transactions will occur in milliseconds at no cost. This is what can happen when you get rid of archaic banks. Bitcoin will evolve into a system of smart contracts where trust between parties is 100% even as privacy and anonymity are increased. The nature of money will change as the Lightning Network turns it into a real-time asset of continuous flow. This innovation will alter everything we’ve come to expect from a financial system.
2-Low volatility. The central bank shift from quantitative easing to quantitative tightening had no negative impact on stock market action in 2017. Since February 11, 2016 when they rescued oil, central banks have been getting more bang for their buck by direct investment into futures markets. Banks such as the Swiss National Bank are doing a great job of propping equities via helicopter money. Plunge Protection Teams throughout the world are committed to stability and liquidity in a show of unprecedented strength. Establishment institutions are obviously committed to protecting the fiat system.
3-Oil. OPEC has been able to coordinate a series of production cuts with Russia to push oil from $26 into the $50 range ahead of the Saudi Aramco IPO. Saudi is pushing for sanctions against Iran that could further boost prices. The pending release of petro-yuan contracts to diversify away from the petrodollar could be massively disruptive in 2018. Will this development in the oil market decrease demand for U.S. dollars at the same time bitcoin has emerged to become a reliable alternative?
There you have it. So there's plenty to strategically coordinate for as we head into 2018 on both the Stocks & Crypto scape. One opportunity that we have yet to discuss is the potential to short bank stocks from record highs. Low market volatility hurts trading revenues. A rotation from fiat to crypto could devastate lending. $XLF (Financials ETF) is trading near an all-time high at $28. If and when the market eventually experiences a correction, banks will likely act as a forward looking barometer. We're adding $XLF option puts to the watch list.
We're tightening the momentum sell point on Overstock from $49 to $65 as a way to protect profits in case the tZERO ICO underwhelmed. Today, the stock traded briefly below $65 (however closed at $65.85.... not because of tZERO but because of the broad crypto correction. Nevertheless, we must always respect technical action. As bitcoin finds a bottom, we will then add exposure back into OSTK. Same is true of GBTC at the $1,500 momentum sell level. Expect fluid trading in both positions. If we can get lower entry points, we'll take it.
December 27th Post -
CNBC’s Art Cashin is still living in the old world. He’s reporting that ‘Apple’s iPhone X appears to have cast a shadow over everything.’ Not only did Apple cut its quarterly sales forecast for the iPhone X to 30 million units but Tim Cook is under fire for failing to disclose that operating system updates would slow down older versions of iPhone in an attempt to spur sales of new models. Cashin is correct in his assessment that such developments are negative; in the old days this sort of news would have caused a 20% correction in AAPL from $175 to $140 and it would have ‘cast a shadow over everything.’ Not anymore. AAPL dropped modestly from $175 to $170 and its impact didn’t touch the Dow or the VIX. We’re living in a completely different environment than what we experienced in 2005, 2010 or even 2015. The central bank bailout of oil on February 11, 2016 was a pivotal point that unleashed new levels of market manipulation in futures and equities. It was in that same first quarter of 2016 that Warren Buffett started purchasing shares of Apple. Why would anybody start buying Apple at the end of its growth cycle? You wouldn’t have done that with Microsoft. Wouldn’t have done it with GE. The truth is that Buffett didn’t buy Apple because of its fundamentals. He was simply investing alongside the Swiss National Bank and other central banks from around the world who were beginning an unannounced program of stock market stimulus financed by unlimited amounts of helicopter money. This is the new world. Should we follow Cashin and abandon positions in QQQ calls? No. UVXY now trades below $10 and is well on its way towards a momentum purchase point below $9...we'll be forced to chase these puts if we see a close under $9. We simply haven't had any meaningful volatility to catch these higher. $UVXY puts are the investment vehicle of choice in the new world.
For further evidence consider a recent report published by Deutsche Bank that asks ‘if any humans still trade stocks in Japan?’ Conclusions from their analysis of correlations between USDJPY, VIX, and the S&P 500 reveal that surprises in earnings, regulations, and geopolitical events show no indication of active change in allocations. The power of pricing decisions has shifted from humans to machines. ‘If the price formation based on this model is prolonged, the gap between price and fundamentals will be wider.’ So where have the humans gone? They’re jumping to the free market of cryptocurrency. In October and November, 40% of cryptocurrency trading was yen-denominated. This trend in Japan is spreading to the rest of the world. Perhaps stock and bond markets no longer need the capital of individual investors? As individual money rotates from stocks into crypto it is seamlessly being replaced with central bank helicopter funds. This is why Apple weakness no longer impacts the market. This is why the emergence of cryptocurrency hasn’t impacted the market. Seeing the market’s non-response to Apple strengthens our conviction in $UVXY puts potentially being a top portfolio play for the BotTrigger Stocks portfolio into 2018 right alongside, $OSTK, $MGTI, $NVDA, $AAPL & $UVXY puts. Low volatility might be around for a while.
Soon we'll be modeling out a buy initiative around Tesla call-spread / call options / or purchase of the common stock. Whatever we model out will be friendly to buy in the common...if anything the most conservative options to consider. We watch it every trading day and are waiting for some more data points to come in to suggest that the next bull run on Tesla is very near. We'll discuss this more in another post.
Also for Crypto Members, we have a massive piece of research that will be published regarding our Top 5 Sleeping Giants of 2018 that are setting up to Moon higher. You all got our latest crypto alert on ICON $ICX which is already up about 70% since out buy entry in less than a week. Spoiler alert, ICON is on that list of the Top 5. The Top 5 List will incorporate 3 core conservative positions that are handedly 10x type plays....if the crypto market is anything even close to what 2017 just showed, then our core 3 of the 5 are almost guaranteed to 10x from their current values. In the same accord our other 2 on the list are our spec (speculation) plays with higher risk/volatility and the 2 we'll be covering are conservatively targeted for around 100x in gains from their current values...again based on the premise that 2018 will look similar if not eclipse 2017 gains....then we can easily see 100x gains in the 2 spec plays on this publication. Even though our 2 spec plays are categorically in the more speculative areana...they were very thoughtfully chosen with hard research, technicals, social stature, fundamentals, team, white paper dissection & comparative assessments made within their respective sectors that we are clear are thriving sectors...So a slab of data is considered in this publication as the Top 5 Sleeping Giants of 2018. More on all that in a bit.