Bitcoin (BTCUSD) is trying to resume its massive rally but remains vulnerable to a deeper slide this week with the weekly RSI and Stochastics overbought, and the daily MACD hinting at a negative crossover attempt. On the weekly chart, BTCUSD is above former upchannel resistance, with BTCUSD attempting to trade within a larger range defined by a newly drawn upchannel.  Nevertheless, a break back below the prior upchannel could see BTCUSD quickly slide back towards upchannel support near the psychologically key whole figure level of 10k. Any reversal this week back to 10k will likely be interpreted as consolidation within the major uptrend still intact as suggested by the upsloping weekly MACD.

Bitcoin Fundamentals

BTCUSD bulls are anticipating the third Bitcoin block reward halving (which will reduce the amount of new BTC supply) May 2020 but which has historically (for the 2 other halving events) seen bull runs begin roughly 1 year in advance of the halving date. The Bitcoin blockchain itself continues to benefit from Lightning Network-related scalability improvements.

Industry Fundamentals

The Facebook Libra stablecoin whitepaper release (targeting a launch the first half of 2020) continued this week to fuel mainstream media coverage, and robust pushback from regulators, central banks and politicians. Crypto purists are critical of Libra’s centralized nature, which paves the way for censorship and potential abuse of user information. Problematic for Facebook is that much of the unbanked resides in countries where either Facebook or crypto is currently banned. Key investors like Visa, Mastercard, Paypal and Uber have injected USD 10M each to become members of the Libra Association and to manage their own node. The objective is to have 100 investors (from a variety of industries, including telecom, media and e-commerce) with 27 names already on the list.  Banks have passed on the project so far.

Fidelity’s institutional crypto trading offering is currently available (or in testing) for select clients, with retail brokerage giants Etrade and TD Ameritrade also preparing to launch trading in a few top coins. Longer term industry bulls are increasingly buying on dips as the sector overall gains interest from IBM’s use of the Stellar blockchain for its payment network – the World Wire. Banks will be able to launch stablecoins on World Wire, or to use Stellar Lumens directly as a bridge currency between different fiat currencies. Ongoing anticipation is building for the coins being developed by other leading messenger apps (i.e. Line, Kakao) and banks (i.e. JP Morgan, Mizuho, Bank of Tokyo-Mitsubishi UFJ). The launch of BAKKT has been delayed multiple times with no announced target go live date. A race continues to launch STO exchanges and consultancies ahead of increasing regulatory clarity on STOs.

The market is increasingly shrugging off the fears around Bitfinex covering up losses with funds earmarked for backing Tether (USDT), especially as it has apparently already received commitments for USD 1B in its current raise to offset funds frozen by US, Polish and Portuguese authorities. With liquidity on USDT significantly higher than newer, competing USD-backed, audited stable coins due not in small part to USDT enjoying first mover advantage and the network effects from having the longest established history, the market appears to be largely sticking with using USDT which is listed on more crypto exchanges and offers superior liquidity. 

Check out more about today’s fundamental analysis recap on the crypto industry, as well as technical and fundamental analysis on Ethereum and Bitcoin here

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Darren Chu, CFA
Darren Chu, CFA, is the Founder of Tradable Patterns. As seen on Bloomberg, Refinitiv (Thomson Reuters), Factset, Interactive Brokers, Inside Futures, Amazon, Liquid (Quoine), EXMO and Zerohedge. Tradable Patterns was launched to demonstrate that the patterns recurring in liquid futures, spot FX and cryptocurrency markets can be analyzed to enhance trading performance. Tradable Patterns’ daily newsletter provides technical analysis on a subset of three CME/ICE futures (commodities, equity indices) and spot FX markets, which it considers worth monitoring for the day/week for trend reversal or continuation. Crypto Weekly Outlook offers technical analysis on Bitcoin (BTCUSD), Ethereum (ETHUSD) and Ripple (XRPUSD or XRPJPY) and attempts to provide clues as to what might happen in the coming week. For less experienced traders, tutorials and workshops are offered online and throughout Southeast Asia. Tradable Patterns content does not constitute an advisory and does not make recommendations, but can supplement your own analysis. Please do your own due diligence ahead of any trades.