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Bitcoin Slump - Do you Still Believe that Bitcoin is Gold?

Bitcoin Slump - Do you Still Believe that Bitcoin is Gold?

Last week Bitcoin lost over 20% in two days only, from 21000 to 15700. Other broader crypto markets were also sold off heavily: Ethereum dropped 15% touching 1330$, also Dogecoin, Cardano, Ripple which lost double digit percent. FTX’s native token, plummeted about 75% last week to record lows, as the crypto exchange faced a bank run amid increasing doubts over its finances. Binance CEO Changpeng Zhao said that the world’s largest crypto exchange signed a deal to buy FTX operations outside the U.S, only a few hours after FTX suspended client withdrawals.

FTX’s bankruptcy is the most important crash this year, because of the growing pressure from rising interest rates. The exchange follows of Celsius and Voyager Digital in suspending withdrawals due to a severe liquidity crunch.

Crypto market capitalization is situated now below 1Trilion$, from 3Trilion$ two years ago.

Why I don’t like to trade Bitcoin or Crypto right now instead of lower valuation?

  • The economic situation in the world continues to deteriorate due to the rising inflation, which involve an increase in the cost of mining equipment.
  • China economic growth, which is the second largest bitcoin mining country, is at multi-year low levels. As a result, this will lead to an accelerated decline in investment interest in high-risk assets, which include also cryptocurrencies.
  • Competition among miners is at multi-year high. Just check the chart of Total Hash rate (Th/s) below compared to BTC 
    total hash rate bitcoin price
  • Mining Hash rate is a key security metric. The more hashing (computing) power in the network, the greater its security and its overall resistance to attack. Although Bitcoin’s exact hashing power is unknown, it is possible to estimate it from the number of blocks being mined and the current block difficulty.
  • Mining Pulse (monitor activity of miners), the most important metric to predict the price of Bitcoin, is at record low levels which adds a lot of pressure for block chain stocks like RIOT or HIVE.
  • FED Interest Hike is a major negative catalyst to the price of Bitcoin and the situation will not change until the end of rate hike cycle. Maybe at the end of 2023 we will see the prices over 30K.
  • Bitcoin capitalization is too low, is under 50% from Apple Stock right now.
  • Volatility is too high for my risk appetite. High Leverage need a lot of money to trade 5 to 10 contracts to make a sound money management strategy. For small Investors, the minimum capital is 100K to trade 5 Contracts.

After the bankruptcy of FTX, many investors moved to Gold that touched to 1776 in one day, right now nobody can claim that BTC is Gold, BTC is nothing. I will start to invest in Bitcoin when all the central banks and large commercial banks will put their money into BTC. I really appreciate Block Chain technology because it will revolution many economic sectors like banking, medicine, auto but this is not enough to put your money into BTC. Maybe BTC was developed to experiment a new form of money in society and we will not be surprised to find that, in the future, FED will adopt a new money standard.

Just check Powel statement below in January:

"We look forward to engaging with the public & paper not intended to signal it will make any imminent decision about the appropriateness of issuing CBDC"

and read our article from 21 January: Russia will ban Bitcoin & FED will launch his own Crypto at https://topfxinvest.com/blog/bitcoin-crash-russia-ban

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No Place to Hide from the Financial Storm?!

No Place to Hide from the Financial Storm?!

We analyzed the last week's performance on each asset class and found that the most resilient category from year to date is Energy, REITs and precious metals (instead of the last rally down of Gold). It’s difficult to find a place to park the money 💵 in this economic and financial outlook. According to Warren Buffet, in a recession environment everyone loses, but some of the people have a small loss and others have high loss.

Even traditional safe heavens offered little protection in the first half of 2022:

  • Bonds have historically grown when stocks have plunged, but Treasuries and municipals Bonds sold off in the first six months with -7%, S&P500 Corporate Bond Index is down 15%
  • S&P500 is 19% down today, Nasdaq100 with 28% in red, Down Jones 14,5 % in red
  • Crypto Markets Bitcoin & Ethereum have lost over 70% from high
  • Commodities without energy-related doctor Copper have lost 23% and Cotton 17%
  • Precious metals are best performers today with only 3,8 % loss
  • Few REITs that have contracts related to interest rates also performed very well: VICI +8.5%, O -3.5%, UBA -0.8%
  • Dollar outperformed marked DXY with +12%

So how did we get here?

We get here because of the high Inflation, rising interest Rates, record Energy Prices, war in Ukraine, Covid 19 pandemic and FED easy money printing in this decade. Everything seems to be a bubble.

How long will it last?

Risk off mode will persist this year and also at the beginning of 2023. History of bear markets from '49 tells us that we can stay in the red between three months and 39 months.

How much will the markets drop from Here?

S&P has fallen from 30% to 60% in 13 bear markets. We are reasonable to accept a minimum of 10% draw down from here, but because of amplitudes of the factors that generate this financial cataclysm, we must see a much more loss in Equities. We must understand the psychology of markets and individuals to know how to act.

We think we are before of the Panic stage of the markets right now (see first image). What is your opinion on this current stage? Will appreciate your opinion on the TopfxInvest Facebook Page.
Many analysts that we consulted seem to indicate that a peak of inflation will determine a bottom for stocks. We don’t think that is a true scenario because of the magnitude of the factors that start this bear market. I would be extra cautious before making any big bets on stocks and I’m a big fan right now of high dividend stocks that are resilient to interest rates hikes.

How to act right now, do we have a place to invest?

We prefer to consolidate the Gold & Silver positions, also we started selling Energy & Commodities Stocks that outperformed the market (like Daco Energy DQ, CNQ). We think that Gold will rise after the FED will finish with rate hikes and the Dollar will lose some peace of growth. We also studied the history chart of EUR/USD and when the Dollar is on Parity with Euro, will have some correction on the Dollar Index.

Chuck Berry inspired this article with “No Particular Place to Go”

An interesting topic for a future article will be: How to identify fundamentals of a market bottom or how to store Gold in efficient & safe ways?

Thanks for reading, and I’m waiting your feedback for our articles on our Facebook Page.

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Rusia will ban Bitcoin & FED will launch his own crypto

Rusia will ban Bitcoin & FED will launch his own crypto

Bitcoin breaks below 40K, and we can't see any positive sign after having the Bitcoin banned by the Russia. Russia follows China’s policy; therefore, it has blocked the Bitcoin payments and also prohibited the Bitcoin mining. While a ban on trading and transacting with cryptos in the country is also on the cards, simply owning or holding Bitcoin and other tokens may be allowed: “the growth of cryptocurrencies use creates threats for Russian retail investors, financial stability and threats associated with the use of cryptocurrencies for illicit activities”, according to Bank of Russia. More here. Bitcoin transactions are very popular in Russia with volumes of approx. $5 billions / year. Russia is following China's policy because the government wants to control the money supply in the economy.

On the other meridian, FED wants to impose his own crypto and launched yesterday a new project. "This paper is the first step in a public discussion between the Federal Reserve and stakeholders about central bank digital currencies". More on this Here

Some key benefits:

"It could provide households and businesses a convenient, electronic form of central bank money, with the safety and liquidity that would entail; give entrepreneurs a platform on which to create new financial products and services; support faster and cheaper payments (including cross-border payments), and expand consumer access to the financial system".

Any CBDC would best serve US interests by being privacy-protected, intermediated, widely transferable and identity-protected.

According to Powel: "We look forward to engaging with the public & paper not intended to signal it will make any imminent decision about the appropriateness of issuing CBDC"

This new sentiment catalyst pushed Bitcoin below 40K yesterday, and according to charts, the first level of support is 30K, then 12K.

Bitcoin lower Rusia ban bitcoin 2022

What is your opinion on Crypto? How much will it go down from here Bitcoin?

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