This quote by Gordon Gekko, a fictional character in the 1987 film Wall Street, is certainly applicable to the world of crypto trading. While traditional markets take some time off over the weekend, the ticker tape does not stop ticking for crypto exchanges. The cryptocurrency market does not believe in Christmas or any other holidays, especially bank holidays. Having rallied aggressively last week, with Ethereum crossing the $150 mark and Bitcoin ticking back above the $4,000 level, the stage was set for a grand pull back on Sunday. For Ethereum, the move from mid $160s into low $140s took no more than 1 hour (see daily chart of Ethereum below). For a traditional asset, such moves would prompt either temporary trading suspension or even suspicion of insider trading. In the crypto world, however, such moves are common and, more often than not, are a result of aggressive profit taking or re-positioning by a leveraged exchange. In fact, overuse of leveraged products plays a big part in such volatile price swings.
As we head into the final days of February, XRP coin has had a below average performance, and as highlighted earlier in the month (see more here), the launch of the JPM coin has done little to bolster XRP’s case for adoption by the financial elite. While in the short-term, mean reversion crypto traders may look to take advantage of this underperformance by betting on a pull back, we can also expect further decoupling in terms of broader market correlation unless new positive news reports surface relating to XRPs platform adoption.
On the other side of the scale is Ethereum, which, despite the ongoing criticism and scepticism over the platform and scaling capability, has outperformed many of its competitors. As argued in the previous daily post, the recent recovery by Ethereum (ETH) is in part due to the collapse in its inflation rate, which itself is due to the Constantinople upgrade. Historically, the Ethereum network produced more than 20,0000 new ETH coins per day; now the figure has fallen to around 13,000. Ignoring all other factors at play, the scarcity alone is enough to push the price higher and result in an aggressive short squeeze once the price rises above significant levels.
Despite the pull back over the weekend, the move might do more positive than negative for the retail flow, as “macro” factors such as the growing indication that institutional money is increasing its participation, or at least is studying the cryptocurrency market as opposed to ignoring it, should prove to be the overriding factor in the price action going forward.
Thank you for reading,