In this week’s edition, we do a little bit of celebrating as it appears that the “worst of the bubble burst” may finally be over, and that the cryptosphere may have turned the corner, from red back into black. We take a look at why traditional technical analysis methods may not necessarily apply to cryptocurrency, how they still do in some cases, and explain why the state of New York is continuing its all-out assault on bitcoin.

BTC, Alts Continue Rebound, Winning Streak

The month of April continues to be kind to bitcoin and cryptocurrency in general, as the price of BTC nipped at the $9000 mark for the first time in a month, and the total market capitalization of all coins surpassed $400 billion for the first time in six weeks. Another encouraging indicator, the percentage of bitcoin dominance of the total cryptocurrency market cap also continued its decline – for the third week in a row – perhaps suggesting that investors are once again confident in a growing crypto space and on the hunt for the next big altcoin.

all top ten coins by market cap ended significantly up for the week

Even traditional market analysts at the likes of mega-sized financial media outlets such as CNBC are now proclaiming that bitcoin is “flashing a rare buy signal,” expressing more confidence than usual in their seemingly haphazard, “coin toss”-like methodology of issuing buy or sell recommendations to their well-funded herd of an audience.

Technical Analysis in Traditional vs. Crypto Markets

Though price prediction through the art of technical analysis (TA) has never been scientifically confirmed as a consistently reliable method of trading (even in traditional commodity and stock markets), its disciples continue to find ways to apply it to cryptocurrency. This is regardless of the fact that the fundamentals, or intrinsic value of a cryptocurrency can be highly impacted by its current price and demand. This feature sets bitcoin and other cryptos apart from classical commodities, such as gold, which as an element and basic building block of the universe, is by nature incapable of fundamental change through eons of time. The software that governs the Bitcoin Network (also known as Bitcoin Core), on the other hand, is frequently subject to updates, as it attempts to make improvements upon itself or fix pre-existing problems residing in its codebase.

examples of price prediction based on technical analysis

While the fundamentals of a stock are capable of change relative to the financial health and success of the company or corporation backing its shares, the fee associated with trading them on an open market does not fluctuate based on the current price of the share, or the volume of shares currently being traded. This renders the fee structure of stock exchange-traded equities unlike the fee structure that governs the overwhelming majority of cryptocurrency exchanges. For instance, most non-institutional stock traders pay a flat fee of $5 – $15 per trade to a brokerage, irrespective of the number of shares being bought or sold. Cryptocurrency trades, on the other hand, are usually subject to fees based on a percentage of the total amount of coins being traded, and thus their trading fees fluctuate in terms of dollar amount, dependent on the current dollar cost of the coin and the amount of coins being traded.

On top of this is the fact that transaction fees themselves for cryptocurrency are ever-changing and do not remain static, like stock brokerage trading fees. Even with a coin like Dogecoin (DOGE), which has had a median transaction fee of 1 DOGE for years, this amount in terms of dollar value still fluctuates comparatively significantly over any given period of time. As was experienced last December, when bitcoin approached $20,000 in price and transaction fees averaged an astounding and impractical $28 per transaction, BTC quickly became the subject of ridicule by many financial experts, as it was largely considered no longer a viable option as a currency.

Because cryptocurrencies are largely decentralized, autonomous networks of software, they do not have CEOs, boards of directors or even a physical presence in reality. They are programs designed to serve a function as a currency, or at the very least, as a “store of value.” Their purely digital manifestation and lack of centralized governance renders them a completely distinct species of investment vehicle, unlike anything to precede it in traditional markets. Ergo, it would stand to reason that cryptocurrencies may not necessarily be subject to the same “rules” of TA that can be fruitfully applied when certain market conditions are met, although the human psychology that governs their trading activity is comprised of the same species of brain that governs traditional market trading.

Even when just acting as a “self-fulfilling prophecy” – similar to those who amplify traits in themselves after being told those traits are associated with their particular Zodiac sign – adherents to TA trading can have a very real effect on cryptocurrency price movement. In this case, the positive reading of metaphorical tarot cards by financial gurus, when broadcast via mainstream media outlets, is most certainly welcome news to cryptocurrency holders, and indeed April has been cast as a month of fortune by many respected “financial psychics.”

Other Factors Buoying the Market

So, what is potentially helping the price of BTC to climb back out of the blues this time (besides shouts of “buy” from CNBC)? Per usual, there are a number of factors at work, including the likelihood that BTC had been oversold through most of February and March of this year, meaning that prices were perhaps unrepresentative of bitcoin’s full fundamental value as a commodity. The closure of tax season in America is also frequently cited as a rationale for why money is flowing back into the crypto markets.

Christine Lagarde

Also helping the case is an informal, subdued endorsement by head of the International Monetary Fund (IMF), Christine Lagarde, who had only weeks prior written a blog post addressing the “dark side of the crypto world.” In the post, Lagarde warned that the nature of cryptocurrency made it perfect as a “vehicle for money laundering and the financing of terrorism.” In her latest post, however, Lagarde seems to have turned an about-face in her approach to the new technology, stating that “crypto assets that survive could have a significant impact on how we save, invest and pay our bills.”

Incoming N.Y. Fed Chairman Decidedly Anti-Bitcoin

Bitcoin’s upward trajectory flies in the face of recent announcements made of incoming New York Federal Reserve Chairman John Williams, who stated last week his belief that cryptocurrencies don’t “pass the test of what a currency should be.” Williams also commented that bitcoin would never replace the dollar in an apparent commitment to further reduce bitcoin’s ability to compete with Wall Street, stock indices and brokerages (which all reside in the state and account for an astoundingly over-adequate portion of the world’s GDP).

For years, the state of New York has been largely unfriendly to bitcoin, implementing some of the first legislation to prohibit cryptocurrency exchanges from servicing customers within their borders. Anti-crypto enactments by the N.Y. Federal Reserve and state government lend credence to the idea that the Old Guard of finance (often referred to un-ironically as the “Masters of the Universe”) truly consider cryptocurrency to be a threat to their long and carefully-established means of hoarding obscene amounts of wealth, basically keeping 80-90% of the world in a state of poverty.

A spearhead of the New Guard, Twitter CEO Jack Dorsey, disagrees entirely with the incoming fed chairman, stating his belief that one day cryptocurrency might even surpass the value of all world, state-backed currencies combined. The idea of a truly decentralized system of finance and economy could of course truly re-empower the average citizen, no longer leaving them beholden to unfavorable rules and terms set by the mega-banking corporations that rose to prominence in the 20th and 21st centuries.

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