Market report

WELCOME TO THE FIRST DIP OF 2018!

London Block Exchange

17th January 2017

Cryptomarkets tumbled 15% to 30% — but is it important to ask why?

WELCOME TO THE FIRST DIP OF 2018!

Cryptomarkets tumbled 15% to 30% — but is it important to ask why?

With the alts party losing steam over the past week, bitcoin failed to maintain the sideways trading action of the past month and dropped around 18% over the day. It pushed the entire market down 30% at one point, but the losses are now back at 20%.

There are two ways to approach such swings — focus on market trends and learn from the past. What’s key is to only invest what you can afford to lose — this is never reinforced enough. Be safe!

Now let’s go through these two important lenses of analysis, make sense of what happened and better prepare for the future. If you zoom out you will quickly notice that a retracement of the same proportions occurred exactly 4 times in 2017.

As a well known meme jokingly remarks, if you can’t handle the 20% drops you don’t deserve 600% gains. So, firstly, ignore the news and focus on price action. Even if the markets are not 100% efficient, on average all news is already priced in.

You can’t change facts, so there’s a low chance of success in fighting the trend or trying to call market bottoms and tops. Let others catch the falling knives for you. If you look back it’s easy to see reversals, but you are just one buyer or one seller among many.

Even if you have privileged access to information, it’s likely other investors will outplay you most of the time. After all, there’s a reason why from 2006 to 2016 99% of actively managed US equity funds underperformed compared to the market!

Bitcoin’s trend hadn’t been positive for a month and, until that changed, any bullish move would be riskier. The altcoin mania was a nice silver lining, but if you don’t take profits they will never materialize. Guess who took profits?

AS USUAL, YOU CAN BLAME ASIA!

They took profits. Like they do every year. And that’s okay.

On to the second part — learning from the past. Yesterday, as we were writing our daily report, markets seemed stable and in a nice consolidation pattern, with bitcoin sitting at £9,500 ($13,200). Then, within the next three hours it dropped 19%!

But even if markets had started dipping earlier — and if the reasons for such a decline were clear — how would you process that information? How would you act on it? Some reacted, for example, by saying that the wider China ban we reported yesterday was to blame.

However, it seems the ban doesn’t even cover over-the-counter or peer-to-peer trading. The markets are extremely complex and subject to chaotic influence from many events.

Still, we are prone to look out for patterns and to find meaning in places it might not exist. This skill can be helpful if we derive lessons from such analysis that can be applied in the future and it seems that one of these major patterns actually is to blame!

The Lunar New Year is a central part of Asian culture and this year it will be on February 16th. China, Korea and other countries (but not Japan) take holidays and celebrate this occasion with their families akin to how Christmas is celebrated in the West.

There’s also a significant gifting culture that some say was the leading dip catalyst, not just for this dip but for the similar plunges over the past few years in crypto! Check this overview of this trend since 2014 and always think for yourself. It’s the dark side of the moon!

WHAT TO LOOK OUT FOR TODAY

To prepare for tomorrow!

Check out what countries, other than Korea and China, are showing major trading volume for bitcoin. It might help you understand the impact of future patterns!

Others are also blaming bitcoin futures for the dip. There’s always a different justification one can use for what’s difficult to understand, but it’s still an interesting read!

Remember the Crypto Finance Conference in Switzerland is starting today. Follow the action on Twitter and get your news earlier than anyone else!

ARTICLES OF THE DAY

An insight a day keeps the red candles away

Out of the top 100 cryptoassets, only one was in the green — a small project at number 66. CNBC, however, decided that USD Tether was also a cryptocurrency — check it out here!

If you want to recover some faith in the cryptomarkets, read these other ten predictions for 2018. We like number 10 — “a year of growing crypto resilience”!

With more teasers about Bitcoin’s lightning network being published, read all about the “Sidechains Breakthrough Almost Everyone in Bitcoin Missed”!

  • bitcoin
  • Lunar New Year
  • China Ban
  • Cryptomarkets