Most central banks and governments are determined to regulate cryptocurrencies since they have been unable to stop them. The latest in the list is the U.S. Commodity Futures Trading Commission (CFTC), which said in a report on Tuesday that derivative contracts of Bitcoin will fall under its oversight.
Any talk of a regulation of cryptocurrencies is not taken lightly by the markets, because the whole motive of a decentralized currency will be impaired when governments and central banks enter into the game.
So, is this drop a good buying opportunity or can it go still further? Let’s analyze.
Our decision to sell our entire remaining position at $5650 was correct. Bitcoin has started its much-awaited correction. Let’s identify the important levels on the downside that can prove to be a good entry point for the traders.
During the two previous occasions, whenever the cryptocurrency failed to break out of the resistance line of the ascending channel, it fell back to the trendline support of the channel. But, before we start discounting a fall to $4000, let’s look at the other important levels in between that will attract buying.
In an uptrend, the 20-day exponential moving average (EMA) usually acts as a strong support. This average is currently placed at $4994 levels. Close to this is the psychological level of $5000. Additionally, the uptrend line support also lies around the $4980 mark.
As there is a confluence of three important supports, we expect this level to hold. However, instead of jumping and buying at $5000, we shall wait for the cryptocurrency to stop falling and show some signs of stabilization, because if $5000 level breaks, the digital currency can fall to $4400 levels.
We would prefer to buy a little higher, rather than catch a falling knife. Hence, we are not recommending any trade on Bitcoin, however, we shall keenly watch the $5000 levels as a possible support.
We were expecting the volatility to reduce in Ethereum after its fork, however, we were proven wrong. There is no respite in its volatility.
The cryptocurrency broke below the support level of $314 and fell close to critical support at $279. Though the bulls used the opportunity to buy near the support, the cryptocurrency is still not out of the woods.
We shall turn positive on Ethereum after it sustains above $315 levels for a day. Until then, we shall remain on the sidelines because a fall below $279 will sink it to $250 levels.
Bitcoin Cash moved according to our expectations. First, its volatility increased and second it faced selling just above the 20-day EMA and the downtrend line. What’s the way forward from here?
The bulls broke above the downtrend line and the 20-day EMA, however, they faced selling close to the $400 levels. The fall was equally sharp as the rise.
During its fall, the cryptocurrency has trapped the aggressive bulls, who will be forced to liquidate below $282. Therefore, we expect a dip below $282 within the next few days.
However, if Bitcoin Cash proves us wrong and finds support at $282, it will signal a range bound action between $282 and $400.
Presently, we don’t find any buy set up on Bitcoin Cash, hence, we are not recommending any trade on it.
We were lucky to have sold 30% of our long positions at a small profit at $0.29 on October 16. As we had raised the stop loss on the remaining 70% position to break-even, it got hit on October 16.
Ripple is currently trading at the 50-day simple moving average, which is likely to act as a support.
If this support breaks, the currency can fall to the next support zone of $0.188 and $0.200. The digital currency looks to have formed a large range between $0.15 and $0.30. We shall buy on a rebound off the lows and sell at the overhead resistance.
Presently, we don’t find any trades on Ripple either, therefore, we have no recommendations on it.
The fall in Litecoin hit our stop loss at $61 and $58. Both the positions have been closed at breakeven.
Litecoin has again fallen back into the range of $44 to $57.7. We were expecting it to at least hold the $58 levels, but the selling was too strong. Now, the cryptocurrency can extend its fall to $50 and below that to $44 levels.
Our bearish view will be invalidated once the digital currency sustains above $58. However, as Litecoin is currently falling, we shall not buy it.