It has been quite a ride in the cryptocurrency markets recently. We have had the Ehthereum hard fork that happened last week on top of the Ripple conference and the ongoing struggles in the Bitcoin scaling dilemma.
This has greatly impacted on the price of these currencies and led to major swings in a sometimes hard to predict fashion. If this was anything to go by, we still have a lot more to go as the scaling debate continues and the Bitcoin (BTC) hard fork plays out.
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In this article we will run through some market analysis of the most important cryptocurrency pairs and take a look how they are likely to play out over the coming week.
By far the cryptocurrency that is getting the most press is that of Bitcoin. This is because of a number of reasons. Firstly, on Friday Bitcoin was able to break through the $6,000 level. This was a new all time high that a number of people were predicting. You can see the rapid rise in the chart below.
This was all despite the worries a month ago about moves by the Chinese regulators to outlaw cryptocurrency. We also had news out of wall street that a number of banks were considering investments in the cryptocurency. This no doubt added the belief that these cryptocurrencies had mass appeal for larger audiences.
Yet perhaps the biggest news came from the ongoing scaling debate at Bitcoin. There is a proposed hardfork of the network in the middle of November. If this goes ahead and there is disagreement then the chain will split and result in more than one Bitcoin. Obviously, this is not the ideal outcome.
However, there have been a number Bitcoin miners who have said that they will not go ahead with the proposed fork. This has meant that the fork has become that much more unlikely. This has eliminated some of the uncertainty that was present. The result was a rally in the price of Bitcoin.
However, the hardfork has not really being eliminated yet. People are still uncertain as to whether it will take place. Hence, in order to get a better sense of the likelihood of the hardfork, you should take a look at miner support for the new protocol changes called “SegWit2X”.
If the support for the protocol changes starts to fall, then you are likely to see a rally in the price. Of course, the opposite can be said if the support for the changes continues to increase.
While we are on the topic of forks, there was an important fork in the Ethereum network on Monday last week. The implementation of the Byzantium hard fork was well rolled out and there were no problems on the launch.
This was a great step for Ethereum (ETH) as the upgrade will give the cryptocurrency many more scaling options. If could reduce transaction times, decrease cost and greatly improve the security of the network.
However, even though this went through without a hitch, many market participants were surprised to see that there was relatively little reaction in the price of ETH. It seemed to have languished around the $300 zone.
It is hard to spot exactly why this was but many people are attributing it to the rise in Bitcoin. Many of the traders and holders of the currency sold their Ethereum in order to buy Bitcoin in anticipation of the rise to come. They would liquidate their Ethereum holdings to buy Bitcoin.
Hence, exactly how Ethereum will react in the coming days is difficult to say as it is dependent on what happens with the Bitcoin hardfork. Traders should be cautious before entering longs as the uncertainty around the fork continues to linger.
It was also quite a volatile week for Ripple. This was because of the conference that was going on in Toronto called “Swell”. One of the speakers was the former federal reserve chair, Ben Bernanke. The hope before this conference would be an announcement from the Ripple team about a new partner that they were working with.
The price of Ripple rallied on these rumors and people got excited about it. Essentially, to use market parlance, they bought the rumor.
However, at the end of the conference, expectations were not met and the result was a similar fall in the price of Ripple. This may have just been those speculators who were trying to make a quick buck on the rally in the price of the tokens.
Yet, this was quite irrational from a professional perspective. Ripple has an incredible use case that the other coins seem to lack. Ripple is trying to take on the established cross border payment system called “Swift” and they all the chance of replacing them. This could provide a blockchain solution for banks and help them move into decentralised technology.
For example, a payment via Swift takes about 3-4 business days if you are lucky. Ripple is able to send their tokens across the world in a manner of seconds. In fact, the Ripple protocol was designed to send about 1,500 transactions per second.
Therefore, if you are looking at the long term perspective, then Ripple is perhaps one of the better coins to invest in.
Exciting and Volatile Week
There is no doubt the crypocurrency markets are going to have a really volatile week and indeed month. There are many internal battles that are raging as well as large scale interest from your retail investors.
However, if you are able to manage your risk and trade the correlation wisely, then you can take advantage of this volatility. Just keep in mind that your trade should be made with a timeframe in mind. Some may be short term trying to make the most of news or pricing inefficiencies. The others are more long term investments that are made with a fundamental technology in mind.