goldbug1

BTC vs ALT-Coins - Market Liquidity - Supply and Demand

COINBASE:BTCUSD   Bitcoin / U.S. Dollar
In the next few weeks we are entering an interesting period where we have two upcoming planned forks. Now the bitcoin gold fork in my opinion is negligible but the segwit2x fork is important. Why is this important, Liquidity, supply and demand .

From the chart you can see the altcoins have diverged from BTC' for the most part. Though the overall market cap has increased 17 billion dollars since the 18th, the alt coin market was only a little over 1 billion. Not only that, though the market is trading near it's all time market cap height, the entire alt-coin market is still down around 17%. So overall one coin has been responsible for the recovery and that is BTC'.

Sometimes we as TA's get caught up in the charts, and do not look at the broader market picture. We focus on them so hard that we ignore other market challenges that may effect the market. Of course we have been following closely the overall market cap and as we approach these two forks we see bitcoin diverging from the majority of altcoins. Now there are several reasons this could be, but I am going to assume it's because of the fork. So how will this effect the market overall going into the fork?

How many of you intend on pulling your BTC' off exchanges and putting them in personal wallets prior to the split? I know I am and have plans to do that today along with my other alt coins or the majority of them. The reason is simple, I want access to my forked coin as soon as possible not waiting weeks or months. In addition there is a liquidity issue that can not be ignored.

Now this is where my theory on why the fork may not happen! Let me explain.

Most altcoins trade in bitcoin for liquidity. Now there are several that trade in USD but most of the trading happens in BTC'. Well as you have seen the last few days alt coins that do not trade in USD are getting destroyed. Even the ones that do have moved lower at the same time BTC' is hitting record highs almost daily. This may be a simple supply and demand issue. If there are a limited amount of coins, and nobody wants to sell because of the fork, then the price moves up to where people go, fork the fork! But there is another issue. As people start to pull their BTC off exchanges going into the fork, coins that alt coin market could continue lower. So be careful, but there is more.

This may create a liquidity issue for exchanges that allow margin trading. Let's go back to 1987 and even 2010 where margins caused a liquidity issue with brokers were those that sold their equities prior to and during the drop did not receive their funds because quite frankly, the brokers were crushed by margin calls and did not have the funds to cover (it's more complex but this is the jest of it). Liquidity dried up and brokers could not credit their accounts until the fed came in and backed them. Margins are borrowed and if the borrower defaults, well your out of luck even if you were not trading. Why? Because these exchanges use other people's coins to margin speculators. (This is why 150 ounces of paper silver trades for every ounce available remember the Hunt's brothers?). Even in the stock market you do not own the shares, the brokerage firm does. Same with coins. Both times the FED stepped in and covered. But with cryptos who will step in?

This is why I caution those that are new to markets in general. It can and has happened, and there is no Uncle Sam to bail you out! This in itself may force the miners to delay or cancel the fork as it could lead to chaos in the markets. Now this sounds like a conspiracy theory, but the exchanges may have the final say in whether the fork happens or not and lord knows the miners nor anyone else wants a melt down regardless.

This does not mean sell everything and go to cash. What this means is insure your money is safe and do not risk what you cannot afford to lose. We may see a delay in the fork because of this.

Comments

Thank you for this information. I've been asking this question to myself from yesterday. Man Ive lost about 20% in btc value in altcoins from last night. A bitter pill to swallow... It seems to me that in the long run, altcoins will get crushed continuously by Bitcoin. It's only profitable to trade in altcoins when Bitcoin is relatively stable. Large Bitcoin corrections or pumps leave altcoins in the dust. I guess that one good thing is to have liquid money ready to enter into altcoins at bargain prices. But the question is when this will be? On Thursday after the fork? Sooner? After segwit 2? Before segwit2? I've done my honours in economics, but Bitcoin is unlike anything we have seen in the past. There are principles that can be applied (like Hunt brothers yes), but for a big part, it is shifting into another dimension of anything we have known in the past. The entire concept of money value is changing. The interesting part for me is how it seems that only the older generation is afraid of the concept of blockchain. Eg the Ripple SWELL conference. The economic leaders are too used to the concept of value attached to a tangible asset (like a shiny rock). But a digress. My concern now is when to be in cash, when to be in Bitcoin and when to start trading in altcoins again. Not even sure if a correction is coming to btc soon...
+8 Reply
goldbug1 BrettduPreez
@BrettduPreez, I appreciate the comment. I always have cash on the sidelines, even if it's 5-10% at times.
Reply
This looks like an exit ... probably.. if i am not wrong it will happen when people will stay with btc in wallets to receive their worthless coins...

I am convinced 100% about this and i know that some people doesn't believe this but in last days ... lets say at eth .. someone just buy from sell orders and fill buy orders on bitfinex (practically they lose money to fill this buy orders), price can't go up also because they put some massive sell walls after they clear a level... is was same on all coins. From 345 to 287 it was used exactly this method, then they bought from 287 to 317 by same entity and again used same method to send this coin around 294-295 ...now currently on pause at this level.
Most exchanges sync to bitfinex prices thats why you see this chaotic charts on some exchanges.
Since i started to monitor most exchanges from 2-3 months ago i suspect amount of transaction by real people to be under 5%.
This activity is generated by bots and not bots from OUTSIDE !

I just hope that i am wrong about exit!
Good luck!
+7 Reply
goldbug1 blacksea00
@blacksea00, Great comment! Thanks for sharing
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If everyone is pulling their coins off the market are people liquidating their alt coin just so they can get BTC? Wouldnt the oulling of the alt coims off the market also then drive up the price of the alt coins or is it the fact of the seeling them that is destroying them? Obviosuly there are several factors at play but am I missing soemthing. At the same time, I for one have been going against the tide on this and snatching up NEO, CVC and OMG BCH at bargain basement prices. Id rather miss the fork and "free money" if thats what it really is and wait for a better risk reward before going into BTC
+4 Reply
alexbest ediscolaw
@ediscolaw, good choise of alts. Take a close look at IOTA and VEN too. ;)
+3 Reply
goldbug1 ediscolaw
@ediscolaw, agree adding at these levels to blue chip alts!
Reply
mnwind ediscolaw
@ediscolaw, @goldbug1 ,

NEO OMG can only be bought with BTC, if BTC corrects to 3000-4000, even if OMG/BTC doubles, your overall profit in USD is still zero.

It is hard to trade this market now as Composite Man knows all the TA/FA, they know exactly how crowd retail investors think, they will plan and execute one or two steps further and continue surprising us:)

Looks best way is buy low for the coins paired with USD. Regardless how BTC doing, if support holds for some Altcoins/USD, we can profit. I bought some Bitcoin Cash, hopefully 300 can hold, waiting for other Altcoins opportunities!



+1 Reply
@mnwind, you can buy NEO ,OMG with ETH in bittrex and you can even buy with usdt !
+5 Reply
ComCvB9 goldsilver06
@goldsilver06, you are correct! The problem I have with this BTC hype is that we have other crypto with much more advanced tech and real solutions we can use in daily life. In my opinion a lot of alts are extremely undervalued. I'm not sure when, but the BTC-ALT ratio needs a big correction in favor of the Alts. When do you guys think alt season will start?
Reply
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