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Price Analysis: 28 Oct – 3 Nov 2019

After trading rangebound for weeks, could the crypto spring that everyone has been hoping for be happening now, just as we’re moving into winter and pumpkin spice everything abounds? Bitcoin, till now, is still the bellwether cryptocurrency and the one to watch has moved significantly over the last week, rising some 30% in a single day and the reasons offered for the rise have been as numerous as the altcoins available.

One theory is that shortists who had bet against Bitcoin following the launch of Bakkt’s physically-deliverable Bitcoin futures product were caught flatfooted when Bitcoin failed to plunge to the nether regions. To be sure, soon after the launch of Bakkt’s Bitcoin futures, Bitcoin did take a dump, falling from above US$10,000 to some US$7,900 at one point, but thereafter, short covers (particularly on BitMEX) pushed the price of Bitcoin gradually back to its original level before the rout. Since then, bulls have led bears in the aftermath of Bakkt’s launch as trading of Bitcoin futures contracts on the platform have gradually grown.

There are myriad reason for this, but for starters, there have been green shoots of institutional interest in Bitcoin trading in particular and cryptocurrencies in general. But the lack of knowledge, in particular within large swathes of the institutional investor community continues to be lamentable. At a recent investment panel discussion to consider investment trends and the global economic climate, one panelist actually questioned the viability of Bitcoin because you couldn’t bring Bitcoin to the “server” in the “Cayman Islands” and ask for it to be backed by “money.” Such lack of understanding of the very nature of cryptocurrencies, whilst not necessarily indicative of the broader institutional investment community, remains unfortunate.

Yet there are encouraging signs which suggest that investors are waking up to the need to get educated on both blockchain and cryptocurrencies with many of the largest financial institutions organizing information and learning sessions regarding the nascent technologies.

Many challenges to broader investor interest in cryptocurrencies however, remain. Price manipulation continues to be pervasive and a lack of centralized price data continue to be a bugbear for investors. And because retail investors continue to be the mainstay audience of numerous cryptocurrency exchanges and markets, they have resisted regulation or greater regulatory scrutiny, choosing instead to engage in all manner of regulatory arbitrage.

Against this backdrop, continued volatility in cryptocurrencies can continue to be expected and within the next week at least, not much is likely to change. What has made the recent run-up in Bitcoin this past week particularly interesting has been that the rise was not secular and many other cryptocurrencies rose at rates either equaling or exceeding Bitcoin’s rise – which suggests that there are traders who are starting to branch out to find value in other cryptocurrencies.
Some notable risers were of course Litecoin and Bitcoin SV which rose over 30%.

In the next week, it is likely that bulls will lead bears in a battle over the narrative of cryptocurrency, but we are unlikely to see sustained levels of interest above US$10,000 for Bitcoin in the very short term at least as that level remains a strong resistance.

Expect Bitcoin to trade range bound within US$9,000 to US$10,000. Against this backdrop, interesting long-side trades exist for other altcoins which have not gathered as much steam in last week’s rally – expect greater interest in privacy-focused protocols. But with volatility continuing to rule the day, profit opportunities exist below US$9,000 for Bitcoin and exit opportunities above US$10,000.

Good luck.

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