Welcome back everyone to this week’s edition of my Bitcoin - Forex Combo Strategy. As you have probably noted, cryptocurrencies are crashing today. I have warned over the past few weeks that Bitcoin is vulnerable to a correction given the four lower highs which represented a big bearish trading signal to me. Before price action crashed Bitcoin below the $8,870 - $9,927 support area, the hash rate experienced a yet undetermined flash crash and plunged roughly 40%. You can see the plunge in data provided by Blockchain.com. The hashrate has since recovered, but Bitcoin may just get started to correct.
After the $8,870 - $9,927 support area was taken out, I am now looking towards the $6,380 - $6,550 support area. The last time I mentioned those level was two weeks ago in my update “Bitcoin - Forex Combo Strategy: FB’s Libra Seeks Payment System License”. As I pointed out during last week update “Bitcoin - Forex Combo Strategy: Ripple Rally and Rumors”, the sell-off is likely to catch many by surprise. The emergence of the hash rate crash and the sell-off in Bitcoin which pulled the entire sector down with it confirmed my warnings. As you all know, I have been shoring up my cash position in order to deploy it when markets correct. We have now arrived at that point.
Before exploring the sell-off further, let me update you on my cryptocurrency portfolio. I didn’t add to my 500 Bitcoins which carry an average entry price of $8,500 as I believe more downside will follow. I will wait for Bitcoin to move into the next support area before adding 500 more Bitcoins to my hodl stash. I did buy 20,000,000 Ripple yesterday, September 24th 2019, at $0.2270 as I think we are extremely oversold. This took my total position to 60,000,000 Ripple which carry an average entry price of $0.3015. I also bought 20,000 more Litecoin earlier today at $55.00 which took my total holdings to 40,000 with an average entry price of $66.00. The three charts below show my Bitcoin, Ripple and Litecoin holdings.
Does Bitcoin’s Price Follow it’s Hashrate?
The hashrate crash happened on September 23rd 2019 and the price crash followed. Analysts are now trying to piece together with price follows hashrate or if hashrate follows price. Digital Assets Data President Ryan Alfred stated that “While it is indeed possible that the correlation is circumstantial, we feel that the hashrate responsiveness to the pullback in BTC/USD towards the end of 2018 along with the corresponding recovery of both throughout this year may be signaling a more persistent relationship.”
He further added that “Drawing inference from the amount of data analyzed can be challenging and continued observation will be necessary for a further understanding of the true connection between hashrate and price. That said, given the more recent divergence in hashrate(all-time high) and BTC price, if the relationship does hold it is fair to expect that we may experience some mean reversion (either hashrate growth steadies/declines along with BTC price or BTC price resumes its climb alongside hashrate).”
What is Hashrate?
The Bitcoin hashrate has increased steadily which prompt some analysts to suggest that price action follows the hashrate. The hashrate recorded an all-time last week above 100 EH/s as it has enjoyed a steady increase since December of 2018. This has also coincided with a rise in the price of Bitcoin. The higher the hashrate, the more miners are contributing to the network. Most miners are located in China where the government suggested that miners should be moved out of Chinese territory, but this has not been enacted. One big mining farm going offline in China would explain the record plunge in the hashrate.
PaxForex is home to one of the fastest growing communities of profitable traders, sign-up now and trade multiple assets from one portfolio!
Bakkt Exchange Off to Slow Start
On Monday, Bakkt physically backed Bitcoin future contracts started to trade. During the first 24 hours, only 71 contracts were traded. That also marked the same day the hash rate crashed. The first time Bitcoin futures were introduced on the CME was the day Bitcoin recorded it’s all-time high from where we descended into the Crypto Winter, the CBOE launched futures a few days before the CME. This is the second time that the launch of futures trading has caused a crash in Bitcoin or its hash rate. Maybe it’s a sign that the cryptocurrency market is not ready o be a full member of the global asset class, but I think we are heading the right way.
The CEO of LevelTradingField, Lanre Sarumi, noted “I’m shocked there isn’t any volume. I absolutely thought that contract was going to fly out of the gate. Very odd.” While it appears that there may have been some Bitcoin dumping from some sector, trading of any futures contact shouldn’t be judged on its first day. Bakkt futures are physically backed which means that actual Bitcoin’s need to be purchased in order to settle the contract. The flash crash in the hashrate on the same day Bakkt futures started to trade doesn’t appear to be a coincident.
Volume in Bakkt future is very likely going to increase as brokers get ready to offer the contracts, which rarely happens on day one on a massive scale. Three Arrows Capital CEO & CIO Su Zhu commented “Bakkt will be likely first a trickle and then a flood. The reality is that most regulated futures contracts get low adoption on day1 simply b/c not all futures brokers are ready to clear it, many ppl want to wait and see, the tickers are not even populated on risk systems, etc.”
Forex Portfolio Updates
Last week I finished with only one forex position open in my portfolio. As I pointed out last week, I was ready for a price drop in the cryptocurrency market and wanted to have ample cash reserves to deploy. On September 19th 2019 I closed my 300 lots EURAUD long position at 1.6250 for a profit of 200 pips or $410,280. On September 19th 2019 I sold 300 lots in the GBPUSD at 1.2525 according to this trading recommendation “GBPUSD Fundamental Analysis – September 19th 2019”. The margin requirement was $74,269 with a pip value of $3,000. Earlier today I closed this position at 1.2375 for a profit of 150 pips or $450,000. On September 20th 2019 I sold 300 lost in the EURJPY at 119.250 for a margin requirement of $65,897 with a pip value of $2,790.67. I closed this trade today at 118.000 for a profit of 125 pips or $348,834. The trading recommendation can be found at “EURJPY Fundamental Analysis – September 20th 2019”. The three charts below show my three closed positions.
On September 23rd 2019 I sold 300 lots in the GBPAUD at 1.8400 according to this trading recommendation “GBPAUD Fundamental Analysis – September 23rd 2019”. The margin requirement was $74,269 with a pip value of $2,028.45. I closed this position today at 1.8300 for a profit of 100 pips or $202,845. I have no open forex positions in my portfolio right now as I am monitoring if Bitcoin will slide into my support area and for that I want to be armed with cash to invest. The chart below shows my closed GBPAUD trade.
Here is the summary of my Bitcoin - Forex Combo portfolio: I hodl 500 Bitcoins worth $4,118,150, 60,000,000 Ripple worth $13,860,000 and 40,000 Litecoin worth $2,160,000 plus a total cash portfolio worth $6,220,260. I currently have no open forex positions in my portfolio. My total Bitcoin - Forex Combo portfolio is worth $26,358,410, down $2,836,034 from last week’s all-time high of $29,194,444. While I will wait for price action in Bitcoin to play out over the net few days, I will keep an eye open for attractive forex trading opportunities. I would like to add 500 Bitcoins to my stash at the right price. Key is not to panic when markets sell-off, keep calm and grow your balance. Are you ready to grow your account? Take your first step now, open your own PaxForex Trading Account today and follow my Bitcoin - Forex Combo Strategy! Comment below with any questions you may have and I will be happy to help you get started!
WHY TRADE WITH PAXFOREX?
We are one of the fastest growing Forex Brokers in the Market. Trade with PaxForex to get the full Forex Trading experience which is based on...