Crypto Talk with Terence

CRYPTO UPDATE

The triangle we spotted on Bitcoin was very effective and broke its resistance with a nice candlestick that made it take almost 6% in one day.

The take profit target is still located at $56,000, close to an important supply area (many sell orders pending in the order book). The price is currently operating a pull back on the resistance zone it broke recently, this is perfectly normal and occurs in about 60% of cases (Chartist analysis, by Francois Barron), this could also be a very good entry for investors who missed the low of the triangle and its breakout (we can also wait for the breakout of the last high.

Investors who took position at the low or middle of the triangle currently have a nice profit (+20-10% at the time of writing, +30-20% at the high), and can expect much more, if the pattern materializes until the end. The most sensitive (and they are right) to money management have already moved their stop loss beyond their entry point, and can no longer, regardless of future developments, lose money.

It is interesting to note the high correlation between Bitcoin and other cryptos. Indeed, since the break of the triangle on Bitcoin, the main other cryptos have all experienced interesting gains this week, including Ethereum (which also broke a triangle from above), and Solana (+60% for a week). The case of Solana is very interesting because we had two chartist figures, a triangle and a triple bottom that led to this rise of 60% in 1 week and 80% since March 11.

Although probabilistic, chartist analysis remains an extremely powerful tool to evolve with more confidence in the chaotic financial markets, no matter what the detractors say, provided of course to retain this elementary but crucial rule that is missing to 90% of investors, and allowing to extend its life (in the financial markets) on the long term: to have a perfect control of its money management.

CRYPTO UPDATE

Last time we saw that BTC was oscillating within an ascending triangle. The pattern has been effective and the price has indeed touched the $45,000 mark today, which is the resistance of the triangle and an area that many economic players are positioned on.

2 scenarios seem to be taking shape:

1. The price breaks the supply zone ($45,000-$46,000) and continues its ascent to the take-profit zone that we have defined at $56,000. Nevertheless, the price has reached the triangle resistance faster than expected and if there is a breakout in the next few days it would be a bit early (generally, a triangle has a better probability of success if the breakout occurs at 2/3 of the triangle length)
2. The price bounces off the resistance and continues its advance within the chartist pattern, hitting the $40,000 area before making its final ascent.

Traders who entered on the bounce on the triangle support are in profit and can choose to close their position now, or wait for the triangle to break and strengthen their position if it does. They can also choose to raise their stop loss to break even if they don't want to take any risk in case the price bounces back as seen in point 2. For the others, it would be quite risky to go long now, as long as the supply zone has not been clearly broken. Finally, the most reckless traders (who like to play against the trend while having a good command of money management and derivatives allowing to short) can try to rebound on the supply zone with a stop loss at $46200 and a take profit at $40,000 for a reward/risk ratio of about 3/1.

BITCOIN MINING, A STEP TOWARDS ENERGY INDEPENDENCE

In the U.S., more and more political actors are promoting the creation of a clear regulatory framework for cryptocurrencies. Many of them also argue that cryptocurrency mining would be an opportunity for the development of the energy sector in the US.

Many political leaders have understood, far from the usual clichés, the huge potential that cryptocurrency mining represents. For example, the city of North Vancouver, Canada, will be the world's first Bitcoin-powered city by the end of 2022, with an innovative low-carbon heating solution. In the United States, Congressman Pete Sessions says the mining farm industry could help America achieve energy independence.

It's true, in fact, that mining already prevents the waste of excess energy from already existing structures, but beyond that, the revenue from crypto mining provides funding for future energy facilities.

Since January 18, 2022, Bitcoin has been oscillating within a clearly visible ascending triangle in daily units. According to empirical statistics gathered over time, traders have learned to view this chartist pattern as one with a higher probability of leading to an upward movement.

Currently, the price is sitting at the $41,100 mark, which corresponds to the support line of the triangle (analysis done on the Binance Futures BTCUSDT chart). By taking the distance between the highest and lowest points of the triangle, and using this distance as a profit target, we get a profit zone of around $56,300.

An aggressive trader can therefore place a buy with a take profit at $56,300, and a stop loss below the support line at $36,700. The more cautious trader can monitor the triangle daily, waiting for the resistance breakout at $45,000 before taking a position. Keeping in mind that charting is not an exact science (and this is the main reason to have an extremely strict money management) and that the markets are even more uncertain in this period with the Russian-Ukrainian conflict that causes daily repercussions on all markets.

THE HIDDEN ACCUMULATION

After declaring in 2017 that Bitcoin was most likely headed straight for $0, and currently many bankers still criticize the volatility of Bitcoin and crypto-currencies, there is much less vehemence behind the scenes. It is known, for example, that as of June 2021, Morgan Stanley Bank has "officially" begun accumulating Bitcoins.

Moreover, a recent analysis by MacroScope, a specialist in institutional trades, shows that Morgan Stanley has greatly increased, in many of its institutional funds, the number of its BTC holdings (by buying shares of Grayscale BTC). Most of these are relatively large double-digit increases (e.g. +18% for Morgan's Growth Portfolio). Thus demonstrating the appetite and desire of the American bank for this asset, and it is certainly not the only crypto it accumulates.

According to the analysis, we can see that with the frequency and volume of these purchases, the bank could become the main whale (known) of Bitcoin, and very quickly. Indeed, the CPOAX would have recently bought about $71M in BTC (or more than 1600 BTC). We can therefore understand why JP Morgan Bank, "thanks to the influx of liquidity", is very bullish and sees a BTC of $150,000 in the long term

A DECENTRALIZED PAYMENT SOLUTION

Since the beginning of the year, some very interesting projects are emerging on the Solana blockchain. Indeed, after the deployment of the king of blockchain wallet, Phantom, on iOS (thus opening to users the access to smart contracts), as well as the announcement of the future release on Android, Solana Labs has just recently launched Solana Pay, a framework allowing the deployment of a decentralized payment solution on the ultra-fast blockchain.

2 requirements: having something to sell and having a supported wallet (there will be more and more additions over time). Of course Phantom is supported, but also the FTX wallet. So we have a DeFi payment solution, allowing to trade while taking advantage of Solana's ridiculously low transaction rates (1 transaction being less than 0.001$), this through SOL or other stablecoins such as USDT or USDC. Far from wanting to compete with the whales of the centralized electronic payment market, such as Mastercard or Visa, Solana Pay intends above all to change the world of payments and to deeply democratize it (and there is no doubt that other payment solutions will follow, notably on other blockchains).

The idea is extremely noble, but let's not forget that the blockchain has had some problems of congestion lately (3 in the space of a few months). Nevertheless, according to the creator of Solana, Anatoly Yakovenko, a lot of work is being done to optimize the blockchain. There is no doubt that these kinds of applications will greatly influence the adoption of blockchain and will push more and more players into decentralized finance.

The crypto SOL, was trading today at $96, down 9% since yesterday.

VOLCANO BONDS OF EL SALVADOR

On September 07, 2021, El Salvador formalized BTC as its national currency. Since then, President Nayib Bukele has not stopped encouraging and announcing new and promising projects in the world of crypto-currencies.
One of these projects is the use of BTC to issue government bonds.

Indeed, in November 2021, the president announced the upcoming creation of a futuristic city, insisting that the financing of this structure should be done through the issuance of bonds: Volcano bonds.
According to local sources, El Salvador is almost ready to issue bonds. The Minister of Finance said that the preparation phase of the issue should be completed by March 20, 2022. When this phase is completed, the country will be fully ready to issue its bonds, which will be worth $1 billion.

It is important to point out that the big difference of these bonds is that they will be able to be purchased in BTC or other cryptocurrencies, democratizing access to all participants of the crypto ecosystem.
The bonds will also be listed on the stock exchange and accessible to anyone willing to invest a minimum of $100.

After making history as the first country in the world to nationalize BTC, El Salvador is taking another step forward by becoming the first country to issue debt via crypto-currency. Not missing thus to taunt the IMF which had tried to force the reversal of the president towards conventional currencies, but had only reinforced his desire for sovereignty for his country.

CRYPTO UPDATE

The battle between buyers and sellers is raging within the market, and currently, the sellers seem to have largely won. Indeed, against all odds, the market made a bullish jump today. Ether took +10%, SOL +9%, AVAX +11$ and BTC +9%.

BTC even had the luxury of breaking through its $40,000 resistance with a strong bullish candle, and could even close the day near $41,000. At the fundamental level, it is possible that the turnaround in Russia has reinforced asset buying.

Indeed, after the thunderous announcement by the Russian central bank to ban cryptocurrencies, many internal voices have risen up against this sanction by underlining the folly of such an action (some even see it as a new market manipulation in view of buying back the assets at lower cost). We can also underline the fact that El Salvador asserts its sovereignty and totally rejects the injunctions of the IMF warning it against its pro-Bitcoin policy.

SOLANA CONTINUES ITS DEMOCRATIZATION

Like Metamask, Phantom is a crypto wallet allowing access to Solana's tokens and nft and allowing interaction with blockchain applications.

On January 31, 2022, Phantom announced the raising of $109 million (for a current capitalization of $1.2 billion). With the goal of achieving the primary objective of the wallet, namely the propagation of the application on other blockchains to make it a multichain wallet. The same day Phantom also launched its iOS application, allowing all users of the ecosystem to benefit from the optimized wallet, as well as all its applications (smart contract, staking of SOL, seen tokens and NFTs, etc ...) Phantom's CEO Brandon Millman also plans to continue expanding its market with the launch of the Android application in the near future.

With more than 2 million active users, managing 112 million stacked SOLs and with the planned integration of the Ethereum blockchain by 2022, Phantom intends to strengthen its position as a giant, and soon become the reference in multichain wallets. The SOL cryptocurrency, on the other hand, seems to have reacted well to the news, after a good breath leading to a 30% rise to $105, following its drastic plunge to the $80 support.

ANALYSIS ON INTEREST RATES

During the last 2 years, central banks have created massive money (quantitative easing) in order to make recovery plans and avoid the impacts of the economic crisis caused by the Covid.

This injected money ended up massively in the stock markets (stocks, futures, cryptos), which contributed to give a huge boost to the different assets and to pull them higher and higher. Nevertheless, logically, this huge money creation of several trillion dollars contributed to increase inflation.
To regulate this, central banks can generally play on 2 levers:

• Stop quantitative easing.

• Raise interest rates (today between 0% - 0.25%).

The FED has chosen to raise its key rates for the first time since 2018 (which should start in March 2022), concretely, this means that borrowing money costs more and at the same time, the currency (here the US dollar) that we hold yields more interest. If the currency earns more interest, it automatically appreciates and its value on the currency market increases (you would rather keep 1 million dollars with 1% interest on it than the equivalent in euros with 0%, so you sell your euro to buy dollars).

The equity market is becoming very risky, because with the end of quantitative easing, the liquidity tap will close. As far as the market we are interested in, the crypto-currency market, is concerned, it becomes extremely interesting, because if it is true that it is an extremely volatile market and that it has also benefited greatly from quantitative easing, it is also true that many investors consider certain assets, notably Bitcoin, as a safe haven in the same way as gold and consider using it to fight this inflation. In addition, with some DeFi protocols, it is possible to earn interest passively by staking or farming on blockchain (on stablecoin in particular).

The year 2022 will be very revealing for the blockchain ecosystem, as with the exponential adoption of blockchain projects by many large investors, let's hope that crypto currencies start to de-correlate from other markets, and from each other, in order to fulfill their full potential!