The cryptocurrency made its appearance in 2008, with the conception of Bitcoin, the first digital currency. Today this market is going through a period of recession.
More information with Ayoub Arbi, expert in crypto and blockchain technology
Do you believe the cryptocurrency market will disappear in the long run?
The golden rule to be successful in any financial market is to accept that no one knows the truth about the direction of a financial instrument, especially when it comes to the short and medium term. The cryptocurrency market, being one of the financial markets, perfectly obeys this rule, especially with the fluctuations that occur overnight. The fundamental prospects, on the other hand, give us a negative situation for this market, given the political, economic and health reasons.
Why is this market in a recession?
At the moment, the cryptocurrency market is in a recession as it has experienced a drop of more than 70% from the highs of November 2021 and a free fall of 50% since March of this year. Especially since we have been in a row and monotony of prices since the summer in which the price of bitcoin varies between 18 and 25 thousand US dollars.
How to trade in a row on future markets?
Most of the cryptocurrency and web 3.0 community hates fighting especially when it comes to cutting prices. On the other hand, only one segment prefers this type of range to exercise quick profits in a short time, as it could buy at least around 18 thousand and sell at 25 thousand. Having said that, this type of operation remains dangerous, especially for novice traders, as unexpected events can occur and cause them to lose a lot of money. My advice for investors is mainly to wait for the right moment, which is the moment when the trend is clear (either bullish or bearish). A break of this range can go in two directions, either down to the $ 10 to $ 12,000 area or up to $ 30,000 which is the average price for many financial institutions or whales (none physical or moral that owns more than 1,000 bitcoins). My preference is always to have liquidity to be ready for all situations, so I find it wise to split our money into different price points. I’ll give you some examples to better illustrate the situation; 25% for the bitcoin price at 19 thousand USD, 25% when the bitcoin price reaches 15 thousand USD and 50% when the bitcoin price reaches 10 thousand USD. In this way we can limit our exposure to risk, this is just a simple example and I recommend that we further divide our portfolio across different cryptocurrencies which have really solid plans to maximize our earnings.
What informants should be applied to identify a range in the financial markets?
From a technical point of view, it is quite easy to identify a range in the financial markets. We need to use the Japanese candlestick chart available for example on “Tradingview”.
In a range we will have: relatively small, tailless candles, which indicate a small price fluctuation. A zone that the price cannot exceed, on the rise, which is called “resistance” and a zone, on the downside, which is called “support”. And low transaction volumes.
How to create “day trading” on the markets?
“Trading” in a general sense means to exchange, that is, to buy and sell. Currently, people use exchanges or “brokers” to perform this type of transaction. The “Trading” can be classified according to the type of market used by the “trader”.
First there are the primary markets through centralized exchanges such as “Binance”, the “Kucoin” or “ByBit” platform which offer a primary market called “spot”. There it is possible to buy and sell cryptocurrencies at their current price and the amount of money the person has in their possession. The same is possible on decentralized exchanges such as “Pancakeswap”, “Uniswap”, “Sushiswap” …
There are many secondary markets, but the most used on centralized exchanges are futures and margin. Margin trading is a method of trading assets using funds provided by third parties. Compared to regular “trading” accounts, margin accounts offer traders access to larger amounts, allowing them to leverage their positions. Essentially, trading on margin amplifies trading results, so traders are able to make bigger profits on successful trades. This ability to amplify profits makes margin trading especially popular in low volatility markets, including the international Forex market. However, margin “trading” is also used in the commodity and cryptocurrency equity markets.
In traditional markets, borrowed funds are usually provided by an investment broker. In cryptocurrency trading, however, funds are often provided by other traders, who earn interest based on market demand for margin funds. While less common, some cryptocurrency exchanges also provide margin funds to their users.
Crypto-futures are contracts that represent the value of a specific “cryptocurrency”. You don’t own the underlying cryptocurrency when you buy a futures contract. Instead, you have a contract where you have agreed to buy or sell a specific cryptocurrency at a later time. Additionally, traders will use leverage to amplify their positions in order to maximize gains.
We can also divide the traders according to the time period in which they operate. Scalpers are a group of people who generally rely on short lead times of no more than four hours to get in and out of a location. They use technical analysis and sometimes economic news.
Investors choose a more passive method where they rely on the core part of the projects and rarely on technical analysis. They are on the market for a long duration that exceeds one year.
By associating the technical analysis part with the seasonality of the markets, we have a “bear market”. But how do you make money when prices go down?
A “bear market” is a prolonged and often volatile period of decline in the price of almost any asset. The general definition of a bear market in traditional financial markets is when asset prices fall 20% or more from recent highs due to negative sentiment regarding the price outlook. On the other hand, a cryptocurrency “bear market”, widely known as a “cryptocurrency winter,” is a similar decline in the price of cryptocurrency market assets that often causes certain market projects to fail as they struggle to raise funds and meet expectations. expectations of users and investors.
A bear market in cryptocurrencies begins with a supply / demand imbalance that sees most market participants on the selling side. Fear and uncertainty begin to creep in frothy market conditions, and sales begin to outstrip demand, causing steep declines that fail to recover quickly. From a technical standpoint, this translates into a series of lower lows and highs on a longer-term chart such as the weekly and daily chart.
Stablecoins have lost faith with the fall of the Terra Luna ecosystem and the destruction it has caused in the cryptocurrency market. It should be understood that only one type of these stable coins can really cause problems if there are some flaws in the construction of the ecosystem, these are the algorithmic stable coins. These assets have staking protocols in which they offer extraordinary returns but the risk is very high with this type of investment. There are others such as “stablecoins” attached to commodities, such as gold for example, or those attached to currencies such as the euro or the dollar and which are used to reserve liquidity in cryptocurrencies and carry out various transactions without having to resort to a bank .
Was the Covid-19 pandemic a brutal trauma for the cryptocurrency market?
The Covid-19 pandemic crisis has caused enormous changes around the world and fortunately we have managed to escape it. However, the healing was so rapid that it was destructive. The US caused massive inflation through its 2021 incentive package by printing more than 25% of its historic US dollar reserves in less than eight months. All currencies, in fact, are collapsing against the dollar: the euro, the Australian dollar, the pound, the yen, the Turkish lira, the Swiss franc.
It must be understood that bonds are securities issued by states but also by companies. Generally, when we issue bonds, we promise a certain interest rate, of which a concrete example: the price of the security is 100, we offer you an interest rate of 1%.
Today we are in a situation where interest is increasing by 5%. Can we expect a rate of 10% or 15%? It is not impossible. The person who bought a bond with 1% interest then suffered a price reduction, but will receive the nominal. If you don’t hit the latter, you can get it back at the end of the period. Bonds are currently collapsing because no one wants them. This is an unprecedented situation because all assets are falling and there is only one asset that is growing, the dollar.
Currently, all central banks are aiming for a rise in interest rates. What will it entail?
This situation will result in a recession. Because when we have very high interest rates, it will slow down the economy and therefore companies will have to pay more. Companies that have a lot of debt are in trouble. Real estate around the world is problematic. Rising interest rates will lead to lower demand, falling prices, people unable to repay their credit, defaults and provisions on bank balance sheets because there will be loans that will not be repaid.
At the moment, we need peace. What we are going through is a delusional situation. Not only Russia and Ukraine are involved, but the whole world. We can expect a new paradigm especially with the alliance of China, Russia and India on the one hand, and the huge economic crisis in Europe. The most important thing for investors is that there are extraordinary things to do, because the downside is part of the financial markets.