Mine Digital Newsletter - Market Update
February 4, 2020
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Mine Digital Newsletter – Market Update

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Thomas Kuhn, CFA

Operations and Trading Manager

Tuesday, 4th February

Tuesday, 4th February 2020

It’s been a strong start to Bitcoin for 2020, and the first mild sign of bearishness has snuck in on the false-break rejection of the high, which had been attempted after a false-break rejection of the low. The general sentiment has been quite bullish and leverage has picked up dramatically, with over a billion dollars open interest in BitMEX and OKEx, and another billion between other platforms. Given the aggressiveness of these markets, a flush out of those positions for weak longs does not seem a crazy proposition.

The crypto fear and greed index is holding greedy levels unseen since August, 2019 but is also barely past a neutral reading. So while it looks like the market is fairly optimistic, this reading suggests it can go a lot further; worth considering in trading around this move.

Volatility has tightened in Bitcoin Cash and BSV, which will also be looking for some direction for their next moves. Ethereum has got up around 50% for the year now and still has a bit of movement in it.

After chaos in Asia where China injected 1.2 trillion Yuan into money markets through reverse bond repurchase agreements, the US equity markets were up overnight. China is expected to ask for flexibility in their trade agreemeent for the effects of their Coronavirus, where they have defined pledges on their part of a trade deal to purchase +76$ billion more of US goods than they did in 2017, and $123.3 billion more in the year after. Soybeans have had 9 days of declines – some medium-term options could be attractive. TSLA has been in and out of the news for its most recent news annihilating shorts; should have known it was a bad idea betting against the guy putting satellites in space at 20% of the cost of NASA. But it’s an important lesson for market participants on positioning.

In geo-politics, Russian forces are finding out early about the complexities of the Middle-East, being stuck between Turkish and Syrian/Assad offensives on each other. Oil has been very weak, partly related to Coronavirus, but if that situation develops it will show the US withdrawal to be a strong strategic decision.

Key Points

  • Bitcoin is still strong, but in no hurry here
  • Large leveraged positions across platforms
  • Bullishness has been broadly accepted

Bitcoin 4hr chart

The asset is sitting in a pocket above support levels, with some room to move before the upward trend forces a decision. The level on the other side of 10,000 is a juicy target for bulls, but with significant leverage already accumulating, a break of support levels and a flush out of longs is also possible. In any case it looks like we should expect a good move later on this week. We favour the long this time.

4 Hr BCH Chart

We can see the price tightening up in BCH

4 Hr BSV Chart

And an even more dramatic drop in volatility in BSV

Trendline Watch:

ETHBTC, a leading indicator of positive price action in the crypto space, has broken and closed above the downward trendline. Worth keeping an eye on:

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