Hong Kong Bong

October 9, 2018 / by Bill Noble

On October 8, the de-facto central bank for Hong Kong, the Hong Kong Monetary Authority (HKMA), issued a press release denying they would be buying crypto assets. Here is a link to the release.

This quote stands out: “The HKMA would like to remind the public that the HKMA has never invested and does not have any plans to invest in any crypto or related products.”

It sounds like they are denying the existence of a zombie-creating plague.

On the other side of the equation, there are the people who started the rumor. They are likely desperate crypto holders trying to get a crypto rally started. The title of the article should be “Desperation Details Denied.”

Taking a step back, both groups seem to have their judgment impaired. Whoever started the rumor is likely smoking something. It’s not 2017. Crypto is a real macro asset class, and you can’t move it will falsities.

There are trading signals that can be pulled from the behavior of both sides of this equation. People starting bullish rumors speak to the existence of crypto investors trapped longs at much higher prices.

The real smoke may be with the HKMA. Looking at a chart of Hong Kong Stocks traded in U.S. Dollars (EWH), there is a huge monthly topping formation. EWH has fallen back below its 2007 and 2015 after breaking out above it in August of 2017. This is why the offered side of BTC is so strong. Sellers might not be crushing the market, but there are enough sellers out there to stop a seasonal Q4 rally from starting.

The HKMA doesn’t want to invest in crypto. Fine. Good luck investing in your home equity market. The trade war is not going away, and U.S. equities are clearly rolling over. The U.S. stock market has the power to drag emerging markets equities down further.

Bottom Line: The people who started the HKMA crypto rumor need to stop smoking. The HKMA authorities may need to start, relax a little, and keep an open mind about the future of crypto.