Mid-day Update… And Bitcoin thoughts.

Backwards day: Cryptos are jealous of stocks.

Neither bias signal was touched as this afternoon triggered no-bias. Remember that this is Friday afternoon, ahead of a three-day holiday weekend. No matter the attraction(s) below and rejection of the overnight rally; no matter the attraction above and the inability to decline; Friday afternoons are historically vulnerable — if not likely — to fluctuate narrowly into the close. This morning’s choppy open does keep open the door to more volatility than normal, but that would be more of an exception.

Bitcoin and other Cryptocurrency holders are jealous.

Bitcoin’s plunge today is a not-unique reminder that the ultimate scalability is irrelevant compared to the pace of each interim adoptive leg. Organic checks-and-balances within a system are entirely capable of containing growth’s pace, rewarding earlier adopters, punishing late believers, and finding the lower price that can start the next cycle toward scale. The third element has been proved repeatedly by past Bitcoin “crashes.”

BTC rallied sharply during the 1-2 weeks preceding CBOE futures launch two weeks ago. Anticipation was more reserved as it ranged sideways since CME futures launched this week. I had already posed the question whether the next significant upleg would be delayed until the pre-launch surge is corrected. This morning’s plunge seems to be the answer.

Before either futures contract launched, I had also noted that they would enhance price discovery. Also that the discovery could limit the upside. In fact, other observations during the past two weeks included alternative Crypocurrencies extending their own rallies. My preferences were Litecoin and Ethereum, but those became overshadowed by late-gainers like Monero, Iota and Ripple. For now, these were the biggest beneficiaries of Bitcoin and its futures.

They’re all down sharply, so divergence is flooded by the one tide, which is either rising or falling. The tide was rolled this week by Litcoin’s founder selling out, and tax treatment clarification in the tax reform bill. I’ve previously described the futures hedge that larger holders might be using to delay their taxable gain — we’ll see what happens at midnight January 1st.

Meanwhile, this current downleg originates from a retest of the recent high, which had preceded futures launch. Dipping back down to their interim low was only noise. The actual correction began under the interim low — that’s barely 24 hours old. Could another downleg be lying dead ahead? And if that’s a low, or even the low, another unbridled upleg isn’t likely. This pattern often leaves a supply overhang.

This morning’s plunge bottomed soon after futures were halted. My pre-open Market Tour had pointed to a 10,000-handle for a low, and its eventual test has reacted up to attack 14,000. Clearly the futures halt was a catalyst. So, what happens this weekend when futures don’t trade, but Bitcoin does? If the correction isn’t already done, and no halt is impending, another downleg could easily test 8,000 – 9,000.

I’ve added daily coverage of Cryptocurrencies to my daily Market Tour and Market Wrap recordings, as well as reviewing interesting action intraday in the chaRTroom. That coverage will be expanded in 2018… Enjoy!