Month: January 2024

Introduction

Cryptocurrencies and crypto assets have gained immense popularity over the past decade, and, in the last few years, even Institutions and Smart Money around the globe seem to have taken a keen interest. But, whilst many people buy and hold crypto assets as an investment and diversification, trading directly in the crypto market may not be everyone’s cup of tea. After all, the events of the last few years have taught us all that the entire crypto ecosystem can be highly volatile, highly unregulated, highly unpredictable, and, of course, highly risky.

In this article, we’ll discuss the reasons why so many people expect a new “Crypto Summer” to occur in 2024 and we’ll find out what are 5 of the Cryptocurrency stocks that could benefit the most.

Here’s why a Crypto bull run in 2024 is a strong possibility

There are different reasons why many Crypto assets experts are predicting a bull run this coming year. The most important is the convergence of three fundamental events occurring within the same year.

The first one – and possibly the biggest in order of magnitude, is:

The possibility of the FED pivoting on the interest rate

Despite the American economy and labor market showing great resilience against the latest bout of FED’s quantitative tightening (QT), the drastic reduction in inflation has been enough to persuade the FED to refrain from further hikes since July 2023 and the market seems pretty confident that the FED might pivot as early as spring/summer 2024.

Of course, nothing is ever certain in the financial markets but, if that were the case, an interest rate reduction, however small, would have an immediate impact on market sentiment and prices.
A lighter debt burden and cheaper credit could also very possibly ignite the bulls in pretty much all markets – including crypto.

The second fundamental event likely to occur in 2024 is:

Black Rock’s Bitcoin ETF

So far the SEC has only ever authorized the creation of crypto assets ETFs that track Future Contracts or the stocks of companies with an exposure to crypto assets – but it has never authorized a crypto spot crypto ETF. However, In a few months, the SEC is expected to express its judgment on Black Rock’s BTC spot ETF and, for some reason, some experts seem to be optimistic and think it might be finally given the go-ahead.

In that case, the impact the SEC acceptance would have on the crypto market could be huge. Other than increasing enormously BTC buying pressure and price, Black Rock would help, at least in part, to legitimize crypto assets somewhat and help bring them closer to mainstream adoption.

And the third relevant event due in 2024 is:

The Bitcoin Halving

Bitcoin halving is an event that occurs around every four years in the Bitcoin network. An automated process reduces the rewards given to Bitcoin miners by half. Its purpose is to control the rate at which new Bitcoin is mined and maintain scarcity. The result of course is an increase in price and perceived value. Since its creation in 2009, there have been four Bitcoin Halvings with the last two – in 2016 and 2020 – followed by what people call a Crypto Summer. Both times, Bitcoin’s price increased exponentially bringing the entire Crypto market “to the moon”  with it.

Although the effects of the halvings on crypto-assets price is not always immediate,  it is considered by many to be the spark that can start it all.
The next Bitcoin halving is expected to take place in mid-April 2024 making it the third of these three major events.

The possibility of all three events occurring in 2024 (or even the expectation alone) and the potential impact that this might have on the crypto market could be behind the sudden uptrend and unbelievable gains that crypto assets have already been experiencing in the last few weeks.

What does all this have to do with the stock market?
Enter the Cryptocurrency Stocks.

As many stock traders know, several publicly traded companies are deeply tied, in one way or another, to the crypto market.

From companies involved in crypto brokerage or mining to those who manufacture or design tools and apps for the crypto ecosystem, they are all – at least in part – linked and exposed to the crypto market in one measure or another. These are often called “Cryptocurrency Stocks”
Cryptocurrency stocks offer traders the chance to trade in the environment most comfortable to them, in the safety of the most regulated market in the world whilst still gaining exposure to the crypto market.

The beauty of this all is that, historically, Crypto Summers have been known to last several months virtually uninterrupted so…. If a Crypto Summer were to actually begin in 2024, it could well mean a long period of “just go long” and exponentially growing gains for cryptocurrency stocks too.

6 of the best cryptocurrency stocks that could take off during a crypto bull run

Here are six stocks with the capacity to gain immensely from a Crypto bull run in 2024.
Amongst others, these could gift Stock traders with a strong lasting bullish bias and potential double-digit percentage gains.
During the last few weeks, helped by a new bullish trend in the crypto market, all of these stocks have already shown incredible gains.

1. Coinbase Global Inc. (COIN)

   Coinbase runs one of the largest crypto exchanges in the U.S. It was the first crypto exchange to go public on Wall Street and it did so In April 2021 right in the middle of the last crypto bull run.
   As an exchange, Coinbase holds a vast quantity of crypto assets which, obviously would increase in value in the eventuality of a crypto bull run. Furthermore, whilst volume and number of transactions grow exponentially during bull runs, Coinbase would also earn a very healthy commission from every transaction made in its exchange.

2. Nvidia Corp. (NVDA)

   Nvidia is arguably the best known for producing high-quality graphics cards for computer gaming and the huge part it played in the AI environment but recently, it has expanded its operations to also include cryptocurrency mining.

3. MicroStrategy Inc. (MSTR)

   MicroStrategy is an analytics software company with a huge reserve of BTC which amounted to 158,245 last September.
   MicroStrategy’s stocks are a great way to gain exposure directly to Bitcoin without the need to buy any.

4. Bloc Inc. (SQ)

   Bloc (ex Square) is a financial services and payment processing company. Many of its operations are related to both Bitcoin and blockchain technology in general. Blocalso runs Cash App which allows customers to invest in both stocks and BTC.
   In 2013, Bloc already owned BTC worth around 300 million at the time.

5. PayPal Holding Inc. (PYPL)

   PayPal is a well-known technology company that has long been focused on digital payments — a key area of development in cryptocurrency. PayPal has added crypto payment and investing tools to its PayPal and Venmo apps in recent years.

6. Hut 8 Mining (HUT)

   A well-known Bitcoin mining company, Hut 8 Mining has a large stake in the Bitcoin network and is one of the most popular landers of BTC which (compared to selling BTc), helps the company maximize profits with compounded returns.

Cryptocurrency Stocks Conclusion

Trading cryptocurrency stocks without buying or trading crypto directly could allow you to gain a share of the crazy returns Crypto Summers are known for whilst avoiding the risks associated with the unregulated crypto market.

Naturally, there are many more cryptocurrency stocks with great potential. The important thing, as usual, is to do appropriate research and an accurate use of both technical and fundamental analysis tools.

Traders, I hope this helps.

Introduction

Markets, as well as charts, are not always easy to read. Traders have to constantly keep gaining experience and knowledge to benefit from the profits the market has to offer by making trading decisions as well-informed as possible. Amongst other things, they must prepare themselves to be surprised by the market twists and turns,  and learn how to react to any new unexpected obstacle the market can throw on their chart.

In this article, we are going to discuss one of such “obstacles”: the Bear Trap.

What is a Bear Trap?

Bear traps are situations that usually occur in two stages.

The first stage sees a price reversal from a bullish trend accompanied by bearish results by either fundamental indicators, technical, or both. The reversal, for instance, could follow a negative public announcement (such as a bad earnings report) that causes the stock to be considered overvalued whilst, on the technical side, RSI and Stochastics may both be indicating “overbought stock”.

During this first stage of the Bear Trap, conditions seem to be ideal for opening short positions, and, each time, many traders go ahead and do just that. This process increases the selling pressure and, at least temporarily, pushes price somewhat further down.

The second stage of a Bear Trap starts with another reversal. This time, it’s a bullish move that interrupts the downtrend and triggers short sellers’ stop-loss orders or forces them to manually close their positions to limit their losses. Because short-sellers have to re-buy stock at a higher price than they have sold it for, they end up creating more pressure on the market than they did when opening those same short positions. Clearly, this time the pressure is on the buying side making it easier for price to rise even further.

Needless to say, the two reversals that characterize a Bear Trap, result, more often than not, in significant losses for any short trader who falls into the bear trap.

It needs to be noted that Bull Traps can and do also happen; they work in the exact same way but, obviously, in the opposite direction.

What factors can create or contribute to a Bear Trap?

Excessive fear and excessive greed

The most common contributors to Bear Traps are the emotions-based actions taken by traders whilst experiencing excessive greed or excessive fear.

Sometimes, during the first stage of a Bear Trap, excessive greed can cause traders to make rushed decisions and open short positions to take advantage of what seems like a new trend and, at the same time, cause traders with long positions to close them prematurely.

Market Manipulation

Only a small part of all the Bear Traps are thought to be the result of manipulation, yet market manipulators are known to take advantage of – and sometimes create – Bear Traps to induce panic among traders, creating selling pressure and, ideally, benefiting from lower prices.

Manipulation of this kind often includes spreading “fake news” and manipulating order books through high-frequency trading algorithms.

Technical Analysis Misinterpretation

Bear traps can be the result of traders being misled by misunderstood technical indicators and pattern formation. The extreme greed and fear we spoke about earlier, play an important role in making it easier for traders to “see what they want to see” rather than what they actually have in front of them.

Even common indicators, such as moving averages, support and resistance levels, and trend lines, can sometimes provide false or dubious signals when market conditions are volatile or seem to have no clear trend..

Macro Events

Bear Traps can also be triggered by fundamental factors such as companies’ reports and announcements as well as unforeseen macroeconomic events, such as sudden policy changes, geopolitical conflicts, or economic crises. These events can introduce uncertainty and increase market volatility, leading to false trends and trapping traders with incorrect positions.

What can you do to try and avoid a Bear Trap?

Bear Traps can be hard and challenging to avoid completely but there are strategies that traders often employ to reduce their exposure and mitigate risks.
Here are a few strategies you can start utilizing yourself:

1. Technical Analysis:

   Moving Averages: Examine longer-period moving averages to confirm the trend. If the price moves up but the long-term moving average is still downward, it might be a trap.

   Volume Analysis: A genuine upward trend is typically supported by increased volume. If the price is increasing but the volume is declining or not increasing significantly, be cautious.

   Support and Resistance Levels: Identify key support levels. A bear trap may occur just below a support level.

2. Fundamental Analysis:

   Company News: Stay informed about the company’s financial health and recent news. Sometimes the price can start to increase on rumors rather than substantial changes in the company’s fundamentals.

   Economic Indicators: Pay attention to economic reports and indicators that could affect market trends. If the macroeconomic situation doesn’t support the uptrend, it might be a trap.

3. Market Sentiment Analysis:

   Investor Sentiment Indicators: Watch for signs of overly pessimistic or overly optimistic sentiment. If investors are extremely bearish, any slight uptick might cause a wave of buying that doesn’t last.

   Contrarian Indicators: Sometimes it is valuable to look at what the majority of traders are doing and consider the opposite. If everyone is expecting the market to rise, it might be time to be cautious.

4. Patience and Confirmation:

   Wait for Confirmation: Before making a trade based on a potential reversal, wait for additional confirmation from subsequent price movements or indicators.

   Consider Multiple Time Frames: Look at charts across several time frames to get a bigger picture view.

5. Risk Management:

   Stop-Loss Orders: Always have a stop-loss in place to limit potential losses in case the market moves against your position.

   Position Sizing: Don’t put too much capital into one trade, no matter how confident you are in the trend reversal.

Remember

Remember that even the most experienced traders can occasionally get caught in market traps. Constant learning, discipline, and adherence to a well-thought-out trading strategy are key to avoiding Bear Traps.

As always, I hope this helps!