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Bitcoin Price Drop May Be a Bear Trap, Options Market Suggests

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  • Bitcoin’s options market suggests Monday’s price drop could be short-lived.
  • However, the cryptocurrency remains vulnerable to a sell-off in stocks and increased miner hoarding is a sign the market lacks strength.

Bitcoin is feeling the pull of gravity on Monday alongside losses in the traditional markets. 

At press time, bitcoin is changing hands near $9,080, representing a 2.7% decline on the day. Prices hit a three-week low of $8,910 during the early European trading hours, according to CoinDesk’s Bitcoin Price Index

Meanwhile, futures tied to the S&P 500 are down over 2.5% and major Asian and European equity market indices are in the red red, apparently over fears of a second wave of coronavirus infections in China. 

The decline in bitcoin prices, however, could be short-lived, options market data suggests. 

While bitcoin looks to be tracking equities lower, the top cryptocurrency’s put-call volume ratio has risen to three-month highs. At 1.79, the ratio currently stands at the highest value since the markets crash on March 12, according to data provided by crypto derivatives research firm Skew

The put-call volume ratio is an indicator of relative trading volumes of put options (bearish bets) to call options (bullish bets). To put it another way, trading volume in put options has been significantly higher than that in calls. 

“A put-call ratio above 1 is considered to be an indicator of a selloff while a put-call ratio below 1 is an opportunity to buy,” as per Investopedia

However, when the ratio gets too high (extreme bearishness), the market is considered to be ready for a reversal higher, and when the ratio is too low, the market is considered close to topping out. 

skew_btc_putcall_ratios-3
Put-call volume ratio

In bitcoin’s case, a reading above 1.7 could be considered too high. In the past, the ratio has breached that level only two times. Further, on both occasions, prices bottomed out on the same day or the following day. 

The put-call volume ratio rose to a high of 1.89 on March 12, when the cryptocurrency fell by nearly 40%. On the following day, prices bottomed out at $3,867. 

Similarly, the cryptocurrency bottomed out near $6,500 in mid-December with the put-call ratio rising to levels around 2.00.

As such, the latest reading of 1.79 could be considered an advance warning of an impending bear trap – more so, as the put-call open interest ratio, which measures the number of open put options relative to open call options, recently hit a 14-month low of 0.40. 

skew_btc_putcall_ratios-4
Put-call open interest ratio

“The divergence between the put-call volume and the decreasing put-call open interest implies that a lot of the put positions have been closed out on profit-taking,” according to Chris Thomas, head of digital assets at Swissquote Bank.

Validating Thomas’ argument is the recent decline in the one-month put-call skew from 9.4% to 6.3%. The put-call skew measures the price of puts relative to that of calls. The decline, therefore, represents a recovery in demand for (bullish) call options. 

skew_btc_25d_skew-8

Meanwhile, the three-and six-month skews are also hovering in the negative territory, implying stronger demand for call options expiring in the September and December expiry contracts. 

That said, options market positioning is known to change quickly and the cryptocurrency remains vulnerable to potential deeper sell-off in the equity markets.

“The key thing to watch over the next few weeks is the Covid related equities sell off. If markets react very negatively towards the increased Covid cases, we may see more panic which could also pull bitcoin lower,” said Thomas. 

In addition, bitcoin’s network statistics are painting a bearish picture and the cryptocurrency’s “fair value” looks to be below $7,000, according to Atlantic House fund manager and ByteTree founder Charlie Morris.

bytetree

Miners, in particular, have accumulated inventory over the past seven days, selling less coins than they generated.

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Miners’ Rolling Inventory (MRI)
Source: ByteTree

Miners often hoard coins when they feel the market lacks the strength to absorb further sales, as discussed earlier this month.

Disclosure: The author holds no cryptocurrency at the time of writing.

Disclosure

The leader in blockchain news, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups.

Source: https://www.coindesk.com/bitcoin-price-drop-bear-trap-options-crypto

Blockchain News

Mastercard and GrainChain Bring Blockchain Provenance to Commodity Supply Chain in Americas

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Payments giant Mastercard has announced a partnership with GrainChain, a blockchain-based supply chain management firm to enhance visibility for producers and consumers in the commodity supply chain in Latin America and North America.

According to the media release shared with Blockchain.news on October 29, 2020, the partnership is aimed at empowering suppliers and farmers to protect their brand reputation through adherence to supply chain standards in a bid to create trust with the final consumers.

The supply chain management will be provided by the Mastercard Provenance Solution, and together with GrainChain, trusted end-to-end visibility will be given to products, ranging from coffee to sorghum, from the farmers or producers to the final consumers. This visibility will afford everyone in the supply chain to track each product and authenticate its origin, thus providing room for trust in the industry.

Deborah Barta, Senior Vice President of Innovation and Startup Engagement said:

“The traceability market is a global industry, and the digital identity of products and goods is even more critical today as consumers, brands, and governments demand to know where products and services are from […] With Mastercard Provenance Solution, we’re focused on helping parties benefit from reliable data, which brings efficiencies throughout supply chains, ultimately helping to protect consumers.”

Mastercard’s Provenance Solution is Expanding its Reach in Food and Commodity Tracking

The reach of Mastercard’s blockchain-based Provenance Solution for supply chain management has seen increased use in recent times. Besides its current deployment to track products as a GrainChain partner, the financial giant’s Provenance solution has also been deployed to track the origin of food products for America’s largest food group, in partnership with Envisible.

While Blockchain-based supply chain tools are becoming commonplace in the tracking of products including luxury items as offered by Reebonz, Mastercard hopes its Provenance Solution will find an increased use for other commodities including cosmetics, electronics, logistics, and retail as the firm confirmed in the shared media release. 

Image source: Shutterstock Source: https://Blockchain.News/news/mastercard-and-grainchain-bring-blockchain-provenance-to-american-commodity-supply-chain

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AR/VR

Warhammer Age of Sigmar: Tempestfall Announced for PC VR & Oculus Quest, Arrives 2021

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More and more franchises are making their way in the virtual reality (VR) space like Star Wars, The Walking Dead and Game Workshop’s Warhammer. The latter entered the field with Warhammer: Vermintide VR and The Horus Heresy: Betrayal at Calth, and now Carbon Studio has announced Warhammer Age of Sigmar: Tempestfall for next year.

Warhammer Age of Sigmar: Tempestfall

The Warhammer universe has a rich lore for Carbon Studio to take from with the synopsis detailing: “Set in the Age of Sigmar universe, Tempestfall begins following the Necroquake. From the domain of Nagash and across all the Realms, Nighthaunt forces are rising. A specially assembled retinue of Stormcast Eternals embarks on a quest to investigate a new threat to the Mortal Realms. Side by side with these elite soldiers, you must explore the dread-filled realm of Shyish and battle your way through the Nighthaunt in a quest to protect the Forces of Order from a sinister plot.”

With a brief teaser trailer showcasing a couple of locales and one enemy, the studio has said Warhammer Age of Sigmar: Tempestfall will mix melee combat with powerful, motion-based spellcasting, utilising the team’s experience developing The Wizards, which had gesture-based speels.

The world of Tempestfall will take players through cities, prisons, swamps and catacombs, an adventure full of Warhammer lore and secrets, reportedly over seven hours in length. Players will be faced with wraiths, revenants and other dangers in what could be Carbon Studio’s biggest project to date.

Warhammer Age of Sigmar: Tempestfall

You can wishlist Warhammer Age of Sigmar: Tempestfall over on Steam where there’s also a chance to win a T-shirt and poster, with 10 winners being selected.

This isn’t the only Warhammer videogame on the way as Pixel Toys previously unveiled Warhammer 40,000: Battle Sister for Oculus Quest, due before the end of the year.

Warhammer Age of Sigmar: Tempestfall is currently slated for a 2021 launch across PC VR headsets and the Oculus Quest platform. As further details including gameplay, visuals and launch date are released, VRFocus will let you know.

Source: https://www.vrfocus.com/2020/10/warhammer-age-of-sigmar-tempestfall-announced-for-pc-vr-oculus-quest-arrives-2021/

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Crowdfunding

I Dare You to Ignore This Trend

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As I told you on Tuesday, I like to set goals in life. Big and crazy ones.

For example, a few weeks ago, I set the goal to run every street in downtown Nashville and Davidson County, Tennessee.

That’s 2,957.06 miles of running. (Told you I’m crazy.)

Why am I bringing this up now?

Well, as you’ll see in a moment, it has to do with the latest emerging market trend…

And it has to do with your investment goals.

So let’s get to it…

A Journey of a (Few) Thousand Miles

Perhaps you’ve heard the Chinese proverb, “A journey of a thousand miles begins with a single step.”

The same thing goes for my running journey of a few thousand miles.

But to be honest, it’s hard for me to picture reaching my goal. Especially when I look at a map and count up what it’s going to take.

All the red in this chart shows every road I still have to run.

And the tiny handful of green spots represent the roads I’ve run so far.

(Full disclosure: I decided to run every street before I knew how many miles it would entail. So consider me not just crazy, but a little impulsive! But I digress.)

I’m barely 1% of the way to my goal. But I’m not going to quit.

And based on all the emails my readers shared with me over the past week or so, when it comes to reaching your investment and retirement goals, you’re not going to quit either…

Keeping At It

I get it. You feel like you still have so far to go.

Plus, the clock is ticking, so it can feel like the pressure is on.

But you know that you can’t quit. Which brings me to today…

Remember, every big accomplishment starts with taking a small step.

And the fact that you took action — including deciding to read Trend Trader Daily — is a small but meaningful step!

If you keep at it, I know you can accomplish your investment goals, and even exceed them.

Especially if you focus on the right trends.

Like semiconductors…

Down, Down, Everywhere — Except…

Yesterday, the markets suffered their single biggest drop in four months, as coronavirus cases spiked globally, and hopes for additional stimulus evaporated.

Against such a backdrop, most investors forget about seeking opportunity. Instead, they seek shelter.

But don’t join them! Why? Because when a similar type of fear and paranoia gripped the markets in March and April, my fearless readers were presented with a major investment opportunity…

An opportunity to leapfrog closer to their investing goals by almost doubling their money.

And all they had to do was invest in semiconductor stocks.

Keep in mind: I’m not sharing this now to rub it in your face.

To the contrary, I’m sharing it because, today, the investment set-up is even better.

Let me explain…

Buy the Chip Dip (Again)

As I wrote earlier this year, without semiconductors, the most important tech innovations of the future literally can’t happen.

I’m talking about major trends like:

  • Artificial Intelligence, which is expected to be worth almost $120 billion by 2025.
  • The Internet of Things, which is already a $200 billion industry.
  • Driverless cars… 5G networks… and the list goes on and on.

Long story short — because of these trends, annual semiconductor sales are expected to top one trillion units, year-in and year-out.

That’s how I know the slowdown in March promised to be a blip in the long-term growth trend.

Or as I wrote back then, “Covid-19 might impact how we work and live in the future… But one thing it won’t change is our demand for chips.”

As such, this presented a tremendous buying opportunity.

And not just based on the price performance of the iShares PHLX Semiconductor ETF (SOXX) that you saw above…

But based on actual market fundamentals…

I Dare You to Ignore This Trend

To understand what I mean, consider the latest analysis from chip-market insiders:

  • The pure-play foundry market, which makes up to 90% of integrated chips, is on pace for its strongest growth since 2014, according to IC Insights.
  • And global silicon wafer shipments, which are the fundamental building material for chips, are on track for recovery this year and a record high in 2022, according to SEMI.

Here’s the key: it turns out that Covid-19 is actually boosting demand for chips.

Tomorrow, I’ll share more details on why this is so, and more importantly, I’ll share the single market indicator that reveals which specific chip stocks are all but guaranteed to blast off.

And that’s regardless of who wins this election, or how bad the third wave of Covid-19 gets.

I dare you to ignore this trend.

Don’t miss out on the profit opportunity this time!

Keep an eye on your inbox.

Ahead of the tape,
Lou Basenese
Lou Basenese

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Source: http://www.crowdability.com/article/i-dare-you-to-ignore-this-trend-2

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