Bitcoin Price Steady, Holding New YTD Highs

Bitcoin's (BTC) direction is currently vague, with the crypto taking a breather after another week of exceptional and erratic price pumps - and after setting in new year-to-date highs.

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A rather surprising and dramatic break up on May 3, quashing for now fears surrounding Bitfinex and Tether, was followed next day (May 4) by a violent dump down to $5,500. But this movement was quickly bought up, and a slight uptrend has resumed.

Many analysts are waiting for Bitcoin to top out its impressive run-up and correct. Although the leading crypto has so far refused to make a significant correction down, we are now closing in on the definitive knot of resistance of all of 2018: around $6,000.

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This correction may come at any time, so we might as well prepare for it. The problem with this activity is that there is not much clear price history to latch on to in the recent past, namely during the late 2018 capitulation from $6,000 to almost $3,000 - it is a bit of a “no man’s land.”

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We may use a Fibonacci retracement overlay (displayed) to try and predict a possible retracement level. But this seems vague without confluent and strong price history, and thus we might only require that a retracement stays above the critical $4,200 breakout point from April; and ideally above the 200 day moving average, currently sitting at $4,400

Most chartists of Elliot Wave theory (technical analysis can be rather tribal with respect to methodology!) definitely see a correction as necessary, within an obvious and massive impulse wave up (see pattern below).

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Putting aside grand movements, we can at least discern the market structure of the current medium term price action, by now forming a yet larger uptrend channel and exhibiting several reference points to grab ahold of. Based on this structure, we might expect a shorter term correction (within a week) to be bought up at about $5,300.

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And regarding the above chart, ignore the doom wick to the downside - as I already discussed in an article, this (seeming) anomaly occurred only on Kraken.

(The views and opinions expressed here do not reflect that of and do not constitute financial advice. Always do your own research.)

CME Looks to Double Bitcoin Futures Limit, but Is This Wise?

The Chicago Mercantile Exchange (CME) has a new request for its regulator, as it looks to double open position limits on bitcoin futures contracts in the face of significant interest.

Nasdaq reports that the CME has already petitioned its regulatory body, the Commodity Futures Trading Commission (CTFC), asking for an increase from 1000 contracts per spot month to 2000 per investor. Each contract represents five BTC, so essentially, at its peak,  a single investor's total position may edge towards a monumental 10,000 BTC.

This is in direct response to the contract's recent growth which is currently depicting record levels of activity, citing $370 million being traded per day. A spokesperson for the CME noted that the idea to increase limits was proposed on the continued maturity of the market:

Based on the significant growth and acceptance of our financially-settled CME Bitcoin futures markets, as well as our analysis of the underlying bitcoin market.

However, as Nasdaq writes the increase in the upper limit of positions is somewhat superfluous. As of July, the number of open interest contracts reached an all-time high of just 6100; given this, it seems the CME may be future-proofing.

Open to Manipulation?

However, concerns remain about the limit increase, as without them, the potential for manipulation rises; often to the detriment to the underlying asset. Although, as per the CTFC website, the threat of manipulation from bitcoin futures contracts is "low":

In general, position limits are not needed for markets where the threat of market manipulation is non-existent or very low.

Instead, Nasdaq posited that this might point to a lessening on the CTFC's strict rule of bitcoin; as well as a maturing of the market in general.

Nevertheless, some believe the CME's bitcoin futures contracts do pose a significant threat to the price of BTC; with some suggesting that blatant manipulation continues unchecked within the market.

As reported, there seems to be a correlation between the expiry dates of CME bitcoin futures contracts and a lull in the price point of BTC. In several instances, a significant drop in bitcoin's price has coincided with a closure from the CME. The most recent example of this occurred on Labor Day, September 2, when bitcoin rose an extraordinary 8% shortly after the CME shut.

Crypto analyst, Alex Kruger, highlighted this, noting the large gaps which formed on the CME chart, from the price discrepancy before and after closing.

This has become a pretty accepted practice within the market. Kruger has even gone to the lengths of compiling statistics each time this phenomenon transpired:

On these occasions, bitcoin cited an average 4.6% price discrepancy following the close of the CME.

Whether this is a coincidence or the market is indeed being actively manipulated is as yet unclear. Either way, with the increase of these limits it might be only a matter of time until we know for sure.

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