It could be said that one of the main drivers of the crypto-currency market is the available liquidity... or lack thereof.
If everybody is buying an asset and nobody is out there selling, the price of the asset will invariably and sometimes exponentially rise as the few who are selling demand an ever higher price on the dwindling supply.
At the risk of spreading FUD, I'd like to remind everyone that thin liquidity also has the ability to affect prices negatively. For example, IF a motivated seller did come to one of the major exchanges and dump a significant amount of coins, they could potentially take out the entire buy side of the exchange causing what's known as a flash crash.
Such an incident happened in October 2014, when a bear-whale sold 30,000 BTC at $300 each when the market was trading at $320. As you can see, the market did recover pretty quickly and those that did buy the dip are well in the green by now, with more than 18% of the total bitcoin supply being held by the top 100 wallets, it pays to be cautious.
Crypto trading is extremely risky, but then again you can't see percentage gains in the quadruple digits without significant risk. Always diversify your investment!!
Today's Highlights
Taxes Good; Globalism Bad
South African Surge
Ethereum Breakout
Please note: All data, figures & graphs are valid as of December 19th. All trading carries risk. Only risk capital you're prepared to lose.
Market Overview
Santa Clause did indeed visit Wall Street yesterday and in his bag of gifts, he carried the promise of lower taxes for rich Americans. The Dow Jones marked its 70th record close this year.
The Nasdaq came close to crossing 7000 points and I may end up owing one of our clients in Holland a beer on a bet we had earlier this year. :/
President Trump's America First speech was largely ignored and stock markets around the world are rising.
Fresh Leadership
I would like to congratulate the country of South Africa on their political victory yesterday. The ruling ANC party has picked a new head named Cyril Ramaphosa who has been campaigning on the notion of political reform and purging corruption.
His main rival was one of the wifes of the current ruler Jacob Zuma and a lady who was one time the backer of a cure for AIDS which was made primarily of alcoholic beverages, garlic, and beetroot. Though he may not know how to count that high, Jacob Zuma's days as President are now numbered. Sill, he will serve as the president until after the next election in 2019.
Ramaphosa's victory will hopefully be a huge step forward for the country and we can see the overwhelming reaction in the South African Rand, which is now trading at it's strongest levels since March and just a few hundred pips away from its 2 year highs.
Ethereum Breakout
As of this writing, Digital Oil is trading as high as $875 a coin. We saw a strong breakout above the psychological resistance of $750 yesterday afternoon and if this current leg is as strong as the last one, we could easily end up near $1,000 before seeing further resistance.
At the moment, Bitcoin is consolidating and trying to build up enough strength to surpass $20,000. This deliberation is having a positive effect on some of the other cryptocurrencies.
Money is still pouring into this market and we can see thousands upon thousands of new digital currency investors/adopters every day. The overall value of all coins in circulation has risen 173% over the past 30 days and now stands at $642 Billion. Though I realize this is a lousy metric to monitor it's the best one we have at the moment.
One good thing is that as the prices rise and more people enter the market as traders, and especially with the addition of the futures markets on Wall Street who are only getting started, the liquidity of the market will gradually rise, which will in turn drastically reduce the risks of any liquidity crunch.
As always, please feel free to contact me with any comments, questions or feedback. I'm always happy to hear it. :D
Have a fantastic day ahead!
eToro, Senior Market Analyst
Disclosure: This content is for information and educational purposes only and should not be considered investment advice or an investment recommendation. Past performance is not an indication of future results. All trading carries risk. Only risk capital you're prepared to lose.