Big Coins: Hedging Pressure?

April 29, 2019 / by Bill Noble

Post NY AG announcement about Tether and Bitfinex, several things seem clear. First, there will be no fresh institutional buying of crypto. If an institutional portfolio manager (PM) buys with this news out there, and Bitcoin (BTC) really drops, it could be that PM’s undoing.

Second, if there are PMs out there who do hold Bitcoin (BTC), they may have to hedge somehow. It makes sense that they would want to sell something other than Bitcoin (BTC). And they might also want to short something that would decline several orders of magnitude faster than Bitcoin (BTC).

This means that Ethereum (ETH) and Bitcoin (BCH) could all make new lows for this move as some alts already have.

One chart that stands out, in particular, is Bitcoin (BTC) Dominance. A massive breakout has occurred from a triangular formation (Figure 1). To us, this implies that literally, everything below Bitcoin (BTC) on the market cap chart could decline sharply. Bitcoin (BTC) dominance could possibly rise another ten percentage points.

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One leader on the downside could be Bitcoin Cash (BCH). We are formally reversing our positive stance on this coin and turning seriously negative. This could be a prime hedging instrument for Bitcoin (BTC) causing Bitcoin (BCH) to drop to new lows (Figure 2).

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In Ethereum (ETH), we are concerned about a developing bear flag. $133 is now support at the bottom of the flag (Figure 3). If Ethereum (ETH) broke that level, a new low below $80 would be likely.

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In the dApp space — a world where Bitcoin (BTC) and the crypto world face a complex and dangerous situation — security token offerings (STOs) and tokenization of real estate may become a 2020 phenomenon. This likely hurts Ethereum (ETH) and related coins.

Bottom Line: Prior to the NY AG announcement, big coins like Bitcoin Cash (BCH) and Ethereum (ETH) had a chance to really break out. They did not. Now, they are vulnerable to short sellers who will sell anything to hedge their Bitcoin (BTC) positions. It’s going to take a major breakout to the upside in Bitcoin (BTC) to change this scenario.

The Crypto.IQ Trading Desk has been successful getting short some of these coins even before the AG news. Clients are in the green.

Join me there.