We earn on the rise and fall of Bitcoin with the help of RMB
Hello, colleagues, currency and cryptocurrency speculators!
Digital assets are the youngest and most promising market, which leads to certain problems when analyzing trends. High volatility of pairs creates a lot of false signals of technical indicators, and the lack of a single trading center and the presence of a large number of trading floors lead to difference in quotes and technical analysis errors.
In today's article, we will try to figure out how to predict the course of one of the most popular crypto tools - Bitcoin - with the help of Yuan, a tricky tactic about which so far little is known.
Fundamental analytics for cryptocurrencies is just beginning to take shape, Bitcoin and altcoins react differently and often unpredictably to economic and political news, relations with the stock market and Forex currencies are so far not developing in an obvious way.
The most accurate indicator that predicts a rise in the value of digital assets is the flow of investment. Constantly observing this value, the trader will easily detect the moments of investment growth that will ensure the medium-term trend of Bitcoin for several days.
Possessing such information, it is not difficult to determine the entry point by selecting a more “distant” stop loss, the value of which can be reduced the next day right to the breakeven level. Large injections of capital into the cryptocurrency market will cause a bitcoin pump pomp on the day of the transaction.
It is impossible to obtain such information legally, for this it was necessary to obtain data on replenishment of accounts with fiat, large clients of cryptocurrency exchanges and brokers, who, according to the company’s observations, are inclined to the hold strategy, but are not engaged in active speculation. In many countries, such information is classified as a prohibited insider, not to mention that the sale of personal information is illegal in itself.
In fact, there is no need to hire hackers or bribe exchange staff; large players operate with a large amount of capital, which, due to its size, “leaves traces” sufficient for analysis. It is important to know which way and what to look at: to forecast the course, you need to monitor China and carefully monitor the fluctuations of the renminbi.
Facts and factors of China's influence on the Bitcoin exchange rate
LongHash crypto statistics research portal noted a unique feature of the digital asset market. Unlike many financial and commodity instruments, as well as Forex currencies, the most active trading period for Bitcoin falls during the opening and operation of Asian exchanges.
Pay attention to the chart, where the histogram shows hourly changes in price ranges, taken in the form of average values of trading sessions, folded over the last two years. The largest and sharpest fluctuations occur in the period from 24 to 2 UTC, which corresponds to the period from 3 to 5 hours MSC.
By this time, US exchanges are closed, although it is during the period of work of American sites that most of the Forex trends, stock indexes and commodity futures are formed. Indeed, cryptocurrencies often do not show a strong reaction to changes in the Fed interest rate, the output of developed countries' GDP, but they may overreact to Asian statistics, exceeding the yen, the leader in volatility among the major Forex currencies.
Among Asian countries, China still has the biggest impact on Bitcoin. Until 2017, the leadership of this country in cryptocurrency trading was obvious, it was enough to estimate the trading volume of national cryptocurrency exchanges.
Bitcoin mining paradox in China
Two years ago, the PRC authorities decided to ban Bitcoin and altcoins, which allow anonymous and unhindered withdrawal of funds abroad. The country totally controls, strictly regulates and restricts any external transactions and even company investments.
The ensuing secret ban led to the complete disappearance of cryptocurrency exchanges on mainland China. Companies moved their business to Hong Kong, Singapore and offshore companies, greatly reducing trading volumes. The Chinese business can no longer directly or indirectly participate in the purchase of Bitcoin due to the risk of being blacklisted and losing the possibility of banking services.
A paradoxical situation has arisen since the PRC has retained leadership in the extraction of BTC: the state accounts for 18 largest pools with a daily extraction of coins worth $ 11 million.
It is difficult to assume that none of them sells mined Bitcoin, or that a local large business with a developed network of branches and branches around the world does not invest in digital assets.
After the unspoken taboo of the authorities, investments in digital assets ceased to go directly, no one can beat the Chinese Communist Party, after which the BTC / CNY turnover almost disappeared from the exchange points. In principle, there is no data on such a pair on the World Wide Web, except in hypothetical or calculated values through the cross-rates of the Forex market.
The banks of China have a letter obliging them to identify and report about direct investments by customers of RMB into cryptocurrencies, but no one forbade the purchase of dollars. It was this asset that became the intermediary for the acquisition of Bitcoin, which is in main demand.
Chinese trace and stablecoins
It is impossible for us, like Chinese banks, to reliably track what percentage of the RMB exchange for investments in digital currencies, if not for one feature of the crypto market, by which you can find traces of these investments.
In 2016, Tether, an affiliate of the Bitfinex cryptocurrency exchange, invented a unique thing - stablecoin. This is a token issued on any reliable blockchain, the exchange of which is guaranteed by the issuer at a strict rate.
Tether exchanged fiat dollars for the USDT cryptocurrency in the 1-to-1 pegging, depositing the received cash into a security fund. On the one hand, the issue of tokens could be easily checked, since they were tied to the Bitcoin blockchain, on the other hand, they could always be changed back by receiving a fiat from the fund, also 1 to 1.
The coin first found application on cryptocurrency exchanges that did not want to mess with national currencies in order not to fall under the claims of regulators. Later, Tether gained distribution in the United States, where traders changing one crypto asset to another could not pay taxes.
The above events raised the demand for stablecoin, but as can be seen from the USDT capitalization chart, it crossed the first billion in 2018.
At this point, cryptocurrency exchanges in the United States owned a share of 39% of the token's trade turnover, and the rest of the world accounted for 48%. Crypto sites of China at maximum speed at the time of sunset (IV quarter of 2017) "consumed" only 12% of USDT.
The crypto-analytical analytical agency Weis has collected statistics on a quarterly change in the interest of Chinese traders in Tether USD. Along with the growth of stablecoin capitalization, China has captured most of the trade turnover and continues to increase it in 2019.
The 62% share figure eloquently explains why Bitcoin and altcoins are the only financial assets in the world that respond more to the events of the Asian session, and are also directly related to the statistics of the PRC and the monetary activities of Halyk Bank.
Yuan does not apply to freely convertible currencies: 2% of the Central Bank rate is the maximum allowable deviation for banks and exchanges. The trends of the USD / CNY pair are completely “man-made” and subordinate to the current tasks of the Central Bank's monetary policy.
Like any artificial formation, the RMB value curve does not fit into the "natural background" of the Forex market, so it is difficult to predict the Bitcoin exchange rate using it. Of course, cryptocurrency is growing with the weakening of the yuan, but the strengthening of the national currency will cause the exact same reaction.
Both processes are easily explained fundamentally. At first, the People’s Bank wanted to create a damper, weakening the influence of the increase in duties on the part of the United States and lowering the exchange rate, but at the moment the financial regulator wants to slow down lending activity when China's external debt doubled the value of American debt.
The USDT / CNY rate does not obey the "orders" of the Central Bank, the value of the renminbi in cryptocurrencies is determined by market trading. It was shown above that changing CNY to Tether USD, investors pursue only one goal - to invest in Bitcoin and altcoins.
Comparing the value and dynamics of two yuan to USD and USDT, we can draw unambiguous conclusions on the upcoming growth or continuation of the Bitcoin trend.
Methods for forecasting the Bitcoin exchange rate for the renminbi
The first method for predicting the future BTC trend is to constantly monitor the renminbi against the USDT in the OTC market.
The most liquid platform for buying USDT sales for CNY is the Huobi platform. By opening the information desk of the company, the first three offers provide information on the current value of the renminbi.
Compare it with Forex quotes, which can be obtained in the Metatrader 4 terminal or in any financial application, for example, Google.
A positive spread difference (CNY value per USDT) above 1% will indicate a medium-term uptrend, above 3% - a purchase hazard and a high probability of correction (overbought), equal value or a negative spread - a medium-term drop in BTC.
The measurement should be carried out after 5 am MSC on the daily value of the renminbi. It is dangerous to sell in overbought zones: during negative news, the spread can reach 10%, but the correction is flat and quickly replaced by a further increase in the value of Bitcoin.
The combination of USD / CNY and USDT / CNY charts will help to visually identify the discrepancies; the latter can be found on the GATE.IO exchange. In this case, you do not need to look at the price, only a graphical comparison of closed day candles is suitable.
Divergence should be positive, the USDT to renminbi should rise, while the USD / CNY chart to fall is a signal to buy BTC.
It is desirable that this be the first discrepancy found; if the transaction went negative and the divergence continues, it is worth holding the position for one more day, but at the same time putting the previous deal at closing at the entry price.
Reliability of the signal determines the size of the discrepancy: if candlesticks (small body and short tails) form on one of the graphs, then such patterns should not be taken into account.
Despite the fact that the GATE.IO exchange uses the services of the TraingView portal to build a chart of trading results, it cannot be opened in the service itself outside the site’s online terminal, which leads to certain inconveniences in the analysis.
The user does not have access to tools for comparing financial instruments on one chart, so he will have to combine three windows on his own: USDTCNYX of the GATE.IO website, USDTCNY and BTCUSD from the Metatrader 4 platform.
To compare tools and detect divergence:
1. Open the Gate.IO exchange website, select the CNYX market tab on the left (1) and press the USDT line (2) to get a pair chart that can be displayed in full screen mode (3).
2. In the Metatrader 4 program, find the USDTCNY and BTCUSD pairs in the symbol list by displaying their graphs.
3. Align the three windows together, manually synchronizing the day candles. Remember about the lack of trading on weekends in the USDCNY instrument - you have to skip such days.
The trader's task is to detect positive divergence (its beginning) in order to enter and hold long in Bitcoin.
The opposite (negative) discrepancy between USDTCNY and USDCNY may help in predicting a correction, but you should not open a speculative short in BTCUSD. Cryptocurrency during a long-term trend has high volatility at pivot points, which will lead to frequent triggering of stop losses.
The topic of cryptocurrencies appeared 10 years ago, exchange rules began to take shape in 2014. Each new year brings many changes and new innovative discoveries in the field of blockchain. It should be recognized that it is not possible to accurately determine the class of these instruments: they are similar to the currency, but also possess the signs of "digital gold" or stocks, if we consider the mining process as receiving dividends.
Classification amorphism and dualism lead to the fact that the price of Bitcoin can follow stock indices, can suddenly crash at the soaring value of the dollar or grow with it due to global economic problems.
All this complicates the methods of forecasting, the selection and search of analysis tools. The found options "today" can reliably predict trends, and "tomorrow" can no longer coincide with market trends.