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.
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.