Litecoin’s halving on Aug. 5 reduced the network’s mining difficulty and hashing power by almost 30 percent. The difficulty dropped from just under 16 million a day before the halving to 11.40 million on Aug. 22, raising questions about security and fee markets on the network.
The world’s fifth-largest cryptocurrency by market cap, Litecoin, had its second-ever halving on Aug. 5 and it seems the network hash rate isn’t responding well. The halving is the process of reducing mining rewards that happens roughly every four years, or every 840,000 blocks.
The Aug. 5 halving reduced the reward for mining each block on the Litecoin network from 25 LTC to 12.5 LTC. And while network managed to hold on pretty well for a couple of days after the halving, it took quite a heavy hit this past week.
Data from mining pool operator BTC.com showed that the mining difficulty on the Litecoin network dropped from 15.93 million on Aug. 4, a day before the having, to 11.40 million on Aug. 22. The 28 percent drop was immediately followed by an equal reduction in hashing power.
This is the lowest difficulty the network has seen since the end of April when it hovered around 12 million. According to some estimates, the current difficulty will continue to decline in the next three days, when the next adjustment date is due.
For clarification, in order to keep block-producing intervals every 2.5 minutes, the network’s difficulty automatically adjusts roughly every 4 days or every 2,016 blocks.
Decreased profitability pushes miners out of the network
A reduction in hash rate is followed by a reduction in mining difficulty. As miners leave the network to mine other coins, the average hashing power on the Litecoin network declined from 456 TH/s on Aug. 4 to 326 TH/s on Aug. 22.
This is a clear sign that most miners are struggling with profitability. Data from F2Pool showed that InnoSilicon and FusionSilicon X6, two of the most profitable Litecoin miners, operated with a profit margin between 55 and 60 percent before the halving.
However, the halving brought down their profitability down to just 10 to 20 percent. Some calculations found that with an average power of electricity of $0.04 per kWh, the devices would make less than $0.50 per day.
Smaller miners are expected to leave in even larger numbers, as most of the network hashrate share is held by two large mining pools. Poolin and F2Pool account for 23.64 and 18.54 percent of the network hashrate, respectively.
The reduction in mining hash rate once again emphasizes the importance of a robust fee market on a coin. As mining rewards are reduced over time it’s critical that there are sufficient fees on a network to maintain a high hash rate. Otherwise, these networks run the risk of malicious mining attacks.
OFAC and FinCEN announced a coordinated effort to sanction three Chinese nationals for an international drug trafficking operation with profits laundered via Bitcoin and Litecoin.
The culprits, identified as Xiaobing Yan, Fujing Zheng, and Guanghua Zheng, were accused of manufacturing and distributing lethal narcotics. These drugs contributed directly to the opioid crisis in the United States, said Sigal Mandelker, under secretary for the Terrorism and Financial Intelligence division.
The Financial Crimes Enforcement Network (FinCEN) ordered a freeze on any property belonging to the criminal organization as well as blacklisting 12 different Bitcoin and Litecoin addresses. The traffickers were also added to the Specially Designated Nationals (SDN) list per the Foreign Narcotics Kingpin Designation Act, giving the U.S. Treasury broad powers to sanction the individuals.
As part of the sanctions, an advisory alert was issued to financial institutions around the globe to help detect and report criminal activity in the future. Here, the United States and the Department of Treasury can leverage their broad powers over the global financial system.
“We are making the financial sector aware of tactics and typologies behind illicit schemes to launder the proceeds of these fatal drug sales, including transactions using digital currency and foreign bank accounts,” said FinCEN director Kenneth Blanco.
“Financial institutions must be on alert to red flags and other indicators of the complex schemes [drug] traffickers are employing so that financial institutions can report and share relevant information with law enforcement, and ultimately help save lives,” he continued.
This is not the first time the Office of Foreign Assets Controls (OFAC) added cryptocurrency addresses to its sanctions list. The agency took action against two Iran-based individuals, who helped exchange Bitcoin ransom payments into Iranian rial, back in November 2018. The Office of Foreign Assets Control blacklisted two Bitcoin addresses that had processed over 7,000 transactions, worth millions of dollars.
Governments will implement greater controls on BTC as concern around cryptocurrency’s use for illicit activity intensifies. As exemplified by Treasury Secretary Steven Mnuchin, the department will police Bitcoin and other coins with “very, very strong” regulations. As summarized in an interview on CNBC’s “Squawk Box, Mnuchin asserted:
“We’re going to make sure that Bitcoin does not become the equivalent of Swiss-numbered bank accounts, which were obviously a risk to the financial system.”
Charlie Lee announced that Litecoin controls 98 percent of the hash rate for its “Scrypt” mining algorithm. This dominance is critical for the security of LTC. Meanwhile, other coins which have minority control over their algorithm, such as Bitcoin Cash and Bitcoin SV, remain at high risk of malicious attack.
On Aug. 12, Litecoin creator Charlie Lee announced that his coin had over 98 percent of the market share of its unique ASIC-dominated mining algorithm ‘Scrypt.’
Here’s the current state of Scrypt mining after the Litecoin halving.
Litecoin still dominates the Scrypt mining scene with 98.57% of all Scrypt hashrate pointed at mining Litecoin. 👍
Hash rate majority over Scrypt, or any mining algorithm, plays an important role in maintaining the security of the network against hostile mining attacks meant to pillage a cryptocurrency.
Hostile mining attacks
Game theory plays an important role in well-designed cryptocurrencies. Unlike its technological predecessors, crypto leverages economic incentives to ensure participants are honest and that networks are salient against bad actors. When these incentives are misaligned the system breaks.
One poorly understood aspect of proof-of-work cryptocurrencies is the importance of hash rate dominance within a particular mining algorithm. If a miner is able to achieve majority hash power (51 percent hash rate) in a particular coin, then there are several hostile attacks that they could perform on a network.
One obvious attack is rejecting blocks from everyone else, allowing a miner to take every block reward. Other more complex attacks include denying transactions and attempting to conduct double-spends, as described in an essay by renowned Bitcoin developer and evangelist Jimmy Song.
Another more exotic attack described by Ethereum co-founder Vitalik Buterin is described as “selfish mining,” where a miner with less than 25 percent or less of the network hash rate can coerce other miners into cartelization by manipulating how blocks are found.
For smaller coins these attacks are even easier because a large miner on a dominant coin can easily control more than 50 percent of a smaller coin’s hash power. For more information on the anatomy of 51% attacks read here.
Incentives usually align between network and miners
That said, even if a miner had majority control of a coin’s hash power, there are concrete reasons why they are still incentivized to behave honestly. Hostile miners take on lots of risk, as described in a highly cited essay by David Vorick, the co-founder of Sia and Obelisk.
Other stakeholders in a network can limit the damage done by a hostile miner. For example, in Bitcoin full node operators could reject blocks from hostile miners, says Vorick.
The value of the cryptocurrency the miner is attacking would also likely plummet, decreasing the long-term profitability of that miner’s highly specialized mining equipment (for ASICs). This is in addition to the reputational damage a miner would face.
As said by David Vorick:
“To put it simply, this attack really doesn’t make much sense from an economic perspective because there is simply not enough upside for the attacker.”
ASICs as bonds
In a sense, ASICs behave like a security bond between a miner and the cryptocurrency network they support. Assuming the coin has a dominant position for its mining algorithm, if a miner were to conduct an attack it would damage the value of the cryptocurrency they are mining. This would reduce the value of subsequent block rewards and as a result, reduce the long term revenues—and value—of that miner’s ASICs, assuming they couldn’t switch to another coin.
Proof-of-stake algorithms attempt to mimic this dynamic through the use of stake slashing, where stakers put down collateral in the form of more coins that can be redistributed.
In aggregate, the short-term revenue from double-spends, block reward hoarding, and transaction denial would need to outweigh both the risk of failure and the long-term damage to revenue.
Pillaging attacks on minority coins
That said, there are key circumstances where the economics actually encourage hostile attacks on a cryptocurrency—specifically in cases where a coin has the minority share of a particular mining algorithm.
When two or more cryptocurrencies use the same mining algorithm seldom do they have a similar proportion of the total hash rate. Bitcoin, for example, has a 90 percent dominance over SHA-256 while Bitcoin Cash, Bitcoin SV, and all other forks control less than 10 percent. Another drastic example is Zcash, which maintains a 98 percent share of Equihash while coins like Horizen (formerly Zen) and Hush control the remainder.
In these scenarios, it makes sense for a miner to switch from mining a dominant coin, such as Bitcoin, to a secondary coin, like Bitcoin Cash, to conduct an attack.
Hash rate privateers
The reasoning: there are fewer economic penalties for this behavior. As mentioned above, hostile attacks usually reduce long term miner revenues. When a miner attacks a minority coin the reduction in long term revenue may be negligible.
These attacks aren’t just a concern for ASICs but also for general purpose hardware. CPUs and GPUs have healthy secondary resale markets. Many coins are also designing their mining algorithms to compete for these devices. As a result, miners can attack and switch with impunity.
In these scenarios a miner can switch to a secondary coin and ransack the cryptocurrency. After flooding the market with illicit coins the miner can then return to safely mining the dominant coin while reaping a tidy profit.
Not just theory
These attacks aren’t just theoretical. Both Ethereum Classic and Zen (which rebranded to Horizen to mitigate reputational damage) suffered 51% attacks because of the phenomenon described above. Bitcoin Cash and Bitcoin SV also suffered similar attacks during their split and their ensuing hash war.
These considerations are important to keep in mind for those looking to hold cryptocurrency, especially altcoins, as investments. Evaluating whether a coin is at risk of mining attacks, or relatively safe like Litecoin, has meaningful implications for long term returns.
Bitcoin is in the spotlight once again after Bakkt was granted the first approval from the CFTC for physically-settled Bitcoin futures. As the pioneer cryptocurrency takes the attention from the market, most of the altcoins have been left behind even plummeting to new yearly lows. The following technical analysis will explore how Ethereum, XRP, and Litecoin could perform in the short term future now that they have recently taken a nosedive.
Ethereum retracted more than 50 percent over the last few weeks to reach a low of $174, for the first time since mid-May. The correction comes after ETH peaked at $366 on June 26. This is the steepest pullback that Ethereum has had since the bull run started in December 15, 2018. As a matter of fact, throughout the year every time this cryptocurrency reached a new yearly high, it retraced 28.40 percent on average.
By measuring the Fibonacci retracement indicator from the low of $80.70 on December 15 to the high of $366 on June 26, it appears that Ethereum retraced to the 61.8 to 65 percent Fibonacci retracement zone. This Fibonacci retracement area is considered by many traders as the ‘golden’ retracement zone due to the high probability of a rebound.
If Ethereum is indeed likely to rebound from the current price level, it could find resistance on its way up around the 50 and 38.2 percent Fibonacci retracement levels, which are sitting at $223 and $256, respectively. However, a break below the 65 percent Fibonacci retracement level could take it down to $143, where the 78.6 percent Fibonacci retracement level sits at.
Based on the 1-day chart, Ethereum recently broke out of an ascending triangle. As a result, this cryptocurrency went down to $174 to reach the target given by the bearish formation. Now that the ascending triangle can be considered complete, the TD sequential indicator is giving two different buy signals.
The first one is an aggressive thirteen that formed on August 15. The second one is a red nine candlestick that predicts a one-to-four day upswing or the beginning of a new upward countdown. These bullish signals align with the potential rebound that the Fibonacci retracement indicator presents on the 3-day chart. Therefore, there is a high probability for a rebound that could take Ethereum to the 50 percent Fibonacci retracement level.
After going through a consolidation period that lasted more than a month, XRP broke below the $0.30 support level for the first time since October 2018. The result was a 21 percent plunge that took this cryptocurrency to reach a new yearly low of $0.24. This price level represents a pivotal point for XRP’s trend, according to 40-year trading veteran Peter Brandt.
The author of Diary of a Professional Commodity Trader believes that if the $0.24 support level is not able to hold the price of XRP, then this cryptocurrency could be bound for a major drop that takes its market valuation to around $0.021, representing a 90 percent retracement from current levels.
Will Ripple be able to manipulate the market to keep $XRP above .2400? A serious breakdown at this level, and .020725 is in the cards. pic.twitter.com/QAyfMcwaZd
Fundamentally, such a steep decline could occur if the complaint filed against Ripple—arguing that the startup illegally sold unregistered securities—is pursued by the U.S. Securities and Exchange Commission. If the motion is taken into consideration by the regulatory agency, XRP’s market valuation could suffer severe consequences. The recent legal actions taken by the SEC against Veritaseum, which took its price down more than 60 percent within a few hours, could be taken as an example of the impact that such news could pose for XRP.
In the meantime, while the SEC responds to the recent complaint filed against Ripple it will be wiser to remain out of XRP. Based on the 1-week chart, this cryptocurrency could soon drop down to the next level of support that sits around $0.19 if the selling pressure behind it increases.
Based on the Fibonacci retracement indicator (which is composed of horizontal lines that refer to areas of support and resistance associated with a percentage based on how much of a prior move the price has retraced) Litecoin spent over a month consolidating between the 38.2 and 50 percent Fibonacci retracement area.
Since the consolidation phase took place after a 48 percent pullback that took this cryptocurrency from $147 to $76, a bear pennant developed on the 3-day chart. This is considered a continuation pattern that leads to a breakout in the same direction as the initial movement. As a result, this bearish formation forecasts a 25 percent drop to around $66, which is taken by measuring the height of the flagpole.
So far, Litecoin dropped 22 percent to reach the 61.8 percent Fibonacci retracement zone, which can be taken as a completion of the bear pennant. Now that LTC is trading around the 61.8 percent Fibonacci retracement level, it could be bound to rebound since this area is considered as the ‘golden’ retracement zone.
If Litecoin indeed rebounds from the current price levels, it could find some level of resistance around $85, which is where the 50 percent Fibonacci retracement zone is at. However, a break below the 61.8 percent Fibonacci retracement level is a strong signal of a trend reversal from bullish to bearish.
The 12-hour chart indicates that the ‘golden’ retracement zone will indeed allow LTC to rebound. Under this time frame, a bullish divergence between the relative strength index (RSI) and the price of LTC can be seen forming.
Divergences occur when an oscillator such as the RSI disagrees with the actual price movement. Thus, an RSI making a series of higher lows while prices are declining is indicative of an improving trend and the probability for a trend change increases.
In addition, the TD sequential indicator could soon give a buy signal in the form of a red nine. If validated, this bullish signal forecasts a twelve to forty-eight hours upswing or the beginning of a new upward countdown. An increase in the buying pressure behind this cryptocurrency could validate all the bullish signals previously mentioned taking it up to the 50 or even the 38.2 percent Fibonacci retracement, as seen on the 3-day chart.
Despite the recent correction seen across the entire cryptocurrency market, it seems that Ethereum and Litecoin could soon resume their bullish trend. As a matter of fact, the Crypto Fear and Greed Index (CFGI) hit its highest levels of pessimism since December 2018, which is a strong bullish sign.
The last time this technical index reached the “extremely fear” level was in mid-December 2018 and was succeeded by a 35 percent upswing in the market cap on the entire cryptocurrency market. Although the GFGI only analyses the daily emotions and sentiments around Bitcoin, it serves to determine the direction of the industry as a whole.
On the other hand, due to the regulatory uncertainty that surrounds XRP investors should remain cautious on whether the U.S. Securities and Exchange Commission will classify this cryptocurrency as an unregistered security or not. Until then, it will be wiser to stay out of it.
Litecoin users on Binance fell victim to a large scale dust attack earlier this week, alarming the crypto community about this new type of malicious attack. While they’re not nearly as dangerous as phishing, knowing what dust attacks are can help people protect themselves and their crypto assets from danger.
Crypto exchanges see dust attacks rise
The crypto industry has never been a stranger to malicious attacks. Hacks, thefts, phishing, cryptojacking, ransomware, etc. are all types of malicious attacks crypto users have already become accustomed to. However, as the industry matures, new, more advanced types of attacks begin to pop up.
That is the case with dust or dusting attacks. These types of attacks are a relatively new kind of malicious activity that aims to deanonymize the privacy of cryptocurrency users. According to Binance Academy, attackers send tiny amounts of tokens, or dust, to dozens, or even hundreds of users. These amounts are usually so small that end users usually don’t notice them.
Scammers “dust” a large number of crypto addresses, which they later analyze them in order to determine which ones belong to the same wallet. The ultimate goal of this analysis is to link the dusted addresses to their owners and then use that information to extort them.
While dusting attacks were originally focused only on Bitcoin addresses, Litecoin users on Binance have also fallen victim to this type of attack.
How to protect yourself from dusting attacks
The attackers that dust large numbers of crypto addresses hope that the tiny amounts, usually not larger than a few satoshis, or 0.000000001 BTC, get mixed together with an unspent transaction output. If that happens, the dust can then be spent as an input in a new transaction, which can be tracked.
While dusting attacks shouldn’t be shrugged off, they aren’t that big of a danger. If a user doesn’t move the small amount of dust he receives, then the whole attack is useless. Nonetheless, users keeping their funds in hot storage should take steps to protect themselves from dusting, as the relatively innocuous attack could potentially do a lot of damage if unnoticed.
Ilir Gashi, a community manager at the Litecoin Foundation, suggested using different addresses each time a user transacts on the blockchain. This, he said, will confuse blockchain surveillance and make tracking your transactions “very difficult.”
Apart from that, users could also implement other privacy-enhancing techniques. In a Medium post, Gashi suggested methods such as shuffling coins, using Tor or any other VPN to re-route their IP addresses, and even completely avoiding reusing addresses.
For Litecoin users, he recommended using applications such as Lightning Network or CoinJoin on top of the Litecoin blockchain. They would be able to provide better privacy than transactions that are purely on-chain.
Any coins kept in hot storage are at risk from dusting, as only users that hold their funds in offline wallets can be sure that they’re completely dust-free. Users that believe they have been dusted could convert all of the coins in the affected address to another cryptocurrency by using a service such as Ellipal or Changelly.
Charlie Lee asserted Litecoin development is alive and well. Meanwhile, reports based on the project’s GitHub numbers suggest it is “being abandoned.”
GitHub numbers suggest Litecoin is being abandoned?
Litecoin has continued to receive scrutiny for its perceived lack of new code development. Electric Capital said Litecoin was “being abandoned,” with the project experiencing a precipitous drop in development activity.
In the venture fund’s March 2019 report, Electric Capital cross-analyzed top cryptocurrency projects and concluded Litecoin was “being abandoned.” The study cited figures showing a precipitous drop in the project’s GitHub commits alongside monthly active developers falling from 40 developers to 3 within 2019.
Charlie Lee directly refutes this supposed lack of development activity. Lee claims Litecoin’s GitHub numbers are do not accurately represent the work the team has done for Litecoin in 2019.
Numbers don’t tell the whole story
Litecoin has a small group of core developers. Include Lee, the team has six developers who consistently work on the project’s codebase.
Litecoin’s code is “kept very close” to Bitcoin’s. This means upgrades from Bitcoin are systematically integrated into Litecoin’s. As a result, only one lead developer needs to merge new code into the project’s code base while the rest of the team performs supporting roles, said Lee.
Another factor that negatively affects Litecoin’s appearance is how GitHub assigns dates for new contributions. Much of the project’s recent code was “mostly written in 2018,” even though the work was modified and incorporated in 2019. GitHub marks the work as if it was done in 2018. Consequently, for those unaware, it would appear “Litecoin developers took the year off,” but this is untrue asserted Lee.
Another factor working against Litecoin’s appearances is how the team manages updates to the master branch—the main version—of the project. For high-stakes software like a cryptocurrency, it’s important to ensure new code is battle-tested to minimize potential damage to stakeholders.
As a result, Charlie Lee and his team don’t tend to work on the master branch of the project. Instead, the team is working on Litecoin Core release 0.18.1 on a personal branch of one of the devs. When the version is merged into the master branch then GitHub will suddenly register all of the development done in 2019.
Just looking at the numbers it’s not unreasonable to assume the project is inactive. However, with awareness of Litecoin’s development process it’s clear the project is far from “being abandoned.”
10/ This is how Litecoin Core development has functioned for years. We even had the same FUD last year! Someone looked at our master branch last year and claimed that Litecoin stopped developing in 2018. And I bet even after this explanation, we will have people confused in 2020.
GitHub commits are easily gameable, meaning ranking services like CryptoMiso do not accurately measure a project’s developer activity. Software developers have been highly critical of these metrics as it doesn’t accurately represent the work done on a project. Projects like TRON are criticized for their (allegedly artificially) inflated commits, with allegations that developers are making trivial changes to the codebase to manipulate the vanity metric.
In contrast, Litecoin is one of the projects that is inaccurately represented by its commits, implied Lee. Instead for those aware of LTC’s development practices it would seem Litecoin is alive and well.
The 2019 Litecoin halving has concluded. The halving is a fixed event that occurs every four years after 840,000 blocks are mined, reducing block rewards by 50 percent. As the time approaches, many investors wonder what would happen to LTC’s price. This technical analysis intends to determine the direction that Litecoin will take in the short-term.
Litecoin Technical Analysis
Following the recent 48 percent correction that Litecoin went through that took its price from a yearly high of to $147 to $76, an Adam and Eve double bottom pattern seems to be developing on the 1-day chart. This is considered a bullish reversal formation that occurred after the price of LTC dropped to form a V-shaped valley, rose, and then pulled back again to form the current wider and more rounded valley near the price of the first one.
If volume starts picking up and Litecoin is able to break above $102, it could be an indication that the Adam and Eve double bottom pattern has been validated and LTC could be targeting $120. However, a drop below $83 will invalidate this pattern and could be taken as a sign that LTC is poised to make lower lows.
As a result, the Bollinger bands on the 12-hour chart could help identify whether LTC will be able to break above $102 to validate the Adam and Eve double bottom pattern or if it will drop below $83 to invalidate it. This technical index appears to be squeezing under indicating that LTC has entered a consolidation phase, so the trading range between $101 and $86 could be taken as a “no-trade” zone. Breaking out of this trading range will determine where this cryptocurrency is heading next, given that squeezes are typically followed by periods of high volatility.
A move above $101 will increase the probability for an impulse that takes LTC up to $120, validating the Adam and Eve double bottom pattern seen on the 1-day chart. Nonetheless, if LTC breaks below $86 it could signal a continuation of the bearish trend that began June 22 after it reached a yearly high of $147.
The 4-hour chart tells a similar story—basically, warning that the wiser thing to do at the moment is to wait for confirmation before entering a bullish or bearish trade. Under this time frame, Litecoin is trading above the 100 and 50-four-hour moving average, which could both act as support containing the price of this cryptocurrency from a further drop. On the other hand, the 200-four-hour moving average could act as resistance preventing the LTC from a higher impulse. Thus, a break below or above these moving averages that are acting as support and resistance will confirm the direction of the trend.
It is worth noting that the moving average convergence divergence (MACD), which is commonly used to follow the path of a trend and calculate its momentum, could be about to experience a bullish cross between the 12-four-hour exponential moving average and the 26-four-hour exponential moving average indicating that an upward move is likely to come.
The last time the 12-four-hour EMA moved above the 26-four-hour was at around July 28, which resulted in a 21 percent upswing that lasted 4 days.
The Litecoin halving reduces the reward to miners from 25 to 12.5 LTC. Based on this event, a spike in volatility could be expected to occur within the next few hours. Thus, it will be wiser to wait for confirmation before entering any trade having in mind that a break above $101 could take LTC up to $120 while a move below $86 could signal lower lows.
Litecoin inventor Charlie Lee remarked in a tweet that since the halving, 12 blocks have been found in 17 minutes, implying that miners are not shutting off their hashrate.
Since the halving, 12 blocks have been found in 17 minutes.
Seems like miners have not shut off their hashrate at all. Instead, we are mining at a rate of a block every 1.4 minutes on average, which is much faster than the expected 2.5 minutes.
After the recent correction, a significant reduction in volume has tamed volatility in the crypto markets. Most coins appear staggered with limited action, but this could be build up to a major move. This technical analysis will evaluate where Ethereum, XRP, and Litecoin could be headed.
Over two weeks ago, Ethereum broke below the 7-week moving average followed by a significant correction down to the 50-week moving average sitting around $190. It appears the 50-week moving average is now acting as support, preventing the price of ETH from a further drop. Watching whether this support holds or breaks will be critical.
Based on the 1-week chart, a move above the 7-week moving average could signal a continuation of the bullish trend. But, a move below the 50 and 30-week moving average would indicate a further decline.
On the 1-day chart, it is clear that after reaching a high of $363.30 on June 26, Ethereum has gone down to its 61.8 percent Fibonacci retracement level—which is considered the ‘golden’ retracement area.
This Fibonacci retracement level represent a pivotal point for ETH’s trend. Usually, a pullback to this zone is an indication of an exhaustion point. A correction, like the one just experienced, to these levels suggests a rebound. However, a break below the golden retracement level is a signal of trend reversal from bullish to bearish, once again.
The Bollinger bands on the 12-hour chart could help clarify what will happen next. Under this timeframe, the Bollinger bands are squeezing which indicates Ethereum has entered a consolidation phase. Squeezes are typically followed by periods of high volatility. The longer the squeeze the higher the probability of a strong breakout. Thus, the range between $199 and $235 is a reasonable no-trade zone.
A break above $235 could lead to an upswing to the 38.2 percent Fibonacci retracement level. Meanwhile, a break below $199 could take ETH to retest the support given by the 61.8 percent Fibonacci retracement level. If that support fails the crypto could fall to the 78.6 percent Fibonacci retracement level.
XRP has been limping. The majority Ripple–owned cryptocurrency has experienced weak price action compared to the other top five cryptocurrencies. While Bitcoin rose 326 percent since mid-December 2018, XRP only went up 77 percent. Recently, the crypto even dropped back to $0.30, which is the same price price it was trading at from the end of last year.
According to Ripple’s quarterly report, XRP’s global trading volume dropped 28 percent from $595 million to $429.5 million since Q1. This could be one of the reasons XRP’s volatility has been low: lack of trading volume.
Despite the lackluster YTD price movement XRP, it’s reasonable to expect that a breakout will happen. Based on the 1-week chart, a triple bottom might be the right signal.
According to Investopedia, this is a bullish technical formation that indicates that there is strong support around the $0.30 level and bears may capitulate when the price breaks through the $0.38 and $0.47 resistance levels, usually resulting in eye-catching gains from liquidated shorts.
Nonetheless, different technical analysts, such as Tone Vays, tend to see triple bottoms as a bearish formations. They believe that the more times a support level is tested the weaker it becomes, and the higher the probability that it will break.
Now that XRP has tested the $0.30 support level for the third time, it could actually be a sign that it will soon break below it and reach $0.16, as 40-years trading veteran Peter Brandt pointed out. It would be wise to remain out of XRP until it has broken above resistance or below support.
Litecoin’s market valuation plummeted nearly 50 percent from its high of $147 on June 22. It then rebounded quickly to find support around $93.5. Notably, it seems like the $93.5 support level has been holding the price of LTC from a further decline for the last 3 weeks. It remains to be seen if it will continue to do so.
Levels on the 1-week chart show that there are price points acting as barriers to LTC price movement. If this cryptocurrency continues declining it will find support around $70, $57, or $47.5. If volume starts picking up and the bullish trend resumes then Litecoin could find resistance around $115, $145, or $173.
For additional clues for where Litecoin is heading, we take a look at the 3-day chart.
Recently, the TD Sequential Indicator presented a bullish signal in the form of a red nine, indicating that the bullish trend could resume. And now, there is a green one candlestick. The bullish signal will be confirmed if the next candlestick is a green two candlestick trading above current green one, which could have the potential to take LTC up to test the resistance levels previously mentioned.
The bullish signal given by the TD Sequential Indicator will be invalidated if a candlestick closes and another opens below $87, which would signal a continuation of the correction.
Breaking below $87 will signal a retest of the 200-day moving average on the 1-day chart, which would align with what happened in 2015 after the first Litecoin halving (a fixed event that occurs every four years after 840,000 blocks are mined, which reduces the mining reward by 50 percent). At the moment, it seems like history is repeating itself because LTC seems to be mimicking its behavior from 2015, so a break below the $87 may happen again (which was previously followed by a long consolidation period).
Currently, it seems like all the cryptocurrencies analyzed are consolidating after the recent correction. Most of these coins are sitting in no-trade zones with no clear indication of whether support or resistance will break first.
Although most of the cryptocurrencies in the market look bullish based on the 1-month charts, Peter Brandt warned of a possible 80 percent doomsday correction to the total market capitalization, mainly impact altcoins.
While the parabola in BTC was subject to different renderings, the parabola in the total market cap chart was loud and clear. Total cap should correct 80%. Most of the damage of decline will occur to altcoins. pic.twitter.com/DssCIL4H0R
If such a scenario where to occur, the losses would be catastrophic for altcoin holders. Although most traders are not that pessimistic, with such high levels of uncertainty in the market,waiting for confirmation with a clear break of the trend seems to be the best course of action.
People crave cause and effect relationships. The crypto markets are the opposite of what people want—a near perfect machine of randomness and volatility. Nonetheless, people’s desire for cause-and-effect cause the mainstream media to build narratives around likely arbitrary price changes.
“Bitcoin prices recover after tumbling on Libra hearings,” wrote Forbes. A “mystery order” triggered the beginning of the 2019 bull market, reported Reuters. Tether issuances are the underlying factor behind Bitcoin’s recent resurgence, suggested QZ.
Yet, even phenomenon with basis in logic may be susceptible to the search for cause and effect. One widespread belief among cryptocurrency enthusiasts is that the halving of block rewards causes prices to increase. And, the logic is sound. If miners earn fewer coins then sell-side pressure should decrease. Reductions in supply, consequently, should cause an associated increase in prices.
Litecoin has more recently brought this narrative to mainstream attention. From a December 2018 low of $22, LTC surged 480 percent to new highs of $130 by July—becoming one of the few assets to outperform Bitcoin during its bull run. Publications, including CryptoSlate, pinned the price increase on the upcoming halving. The data suggests we were wrong.
Research on the price impact of halvings
Research conducted by Nico Cordeiro and Ava Masucci from Strix Leviathan, a Seattle-based startup that specializes in engineering and operating trading algorithms for the cryptocurrency markets, challenge the belief halvings materially impact coin prices.
The researchers analyzed 32 halvings across 24 cryptocurrencies and compared these to an overall market benchmark. Performance of each coin was evaluated six months before and after each halving and compared against cryptocurrencies not going through a halving event in the same timeframe.
“The divergence and seemingly random results before and following a halving suggests that the underlying factors driving price is not a shift in supply and demand dynamics.”
Then, Strix Leviathan compared halving coins against themselves. Historically, variations in price should increase during a halving period. Yet, the researchers found that coins undergoing a halving event did not experience outsized volatility, or returns, before or after a halving.
“What we find is that the return distribution of an asset’s halving periods versus the return distribution outside of its halving periods reveals that they are statistically the same at a 99 percent confidence level. In other words, we did not find evidence that a halving event results in abnormal pricing action and we are dealing with a circumstantial illusion.”
In summation, the researchers concluded:
“We found no evidence that cryptocurrency assets experiencing a halving event outperform the broader market in the months leading up to and following a reduction in miner rewards.”
“While the narrative is certainly feasible as a logical theory, it is equally possible that we are dealing with an illusion of validity and previous bull runs were the result of nothing more than increasing levels of speculation within the asset class.”
Surviving in a world of noise
Ultimately, the cryptocurrency markets are dominated by people attempting to force cause-and-effect on largely random market movements. “The world of financial markets is filled with tens of thousands of logical and thoughtfully conceived theories that don’t turn out to be true in practice,” Cordeiro and Masucci said succinctly.
Those invested in Bitcoin and other cryptocurrencies need to be wary of this bias. ‘Top’ crypto traders could be in their position not because of their skill but out of sheer luck. Many market movements supposedly caused by large news events could be mere randomness. Conspiracy theories, such as Tether price manipulation moving the $150+ billion Bitcoin market, could be falsely drawing on cause and effect to prove the theory.
In a world of noise it is important to be skeptical. But, if you believe that Bitcoin (and other cryptocurrencies) will continue trending up, then perhaps the most reasonable strategy is dollar-cost or value-cost averaging into the market over a long period of time, ignoring the noise and taking advantage of the long-term trend.
In May 2016, Charlie Lee and Jared Tate, the creators of Litecoin and DigiByte, cryptographically proved they were the creators of their blockchain platforms in less than a minute. If Craig Wright is truly Satoshi Nakamoto as he claims, why doesn’t he do the same on the Bitcoin blockchain?
A single signature could end the Craig Wright saga once and for all
It has been more than three years since Craig Wright became the main focus of the crypto world by declaring he is Satoshi Nakamoto, the true creator of Bitcoin. And while the Australian programmer certainly wanted to make a big entrance, the community reaction has been less than welcoming, to say the least.
Some, of course, believed Wright and the vague and mostly circumstantial evidence he has so far provided is sufficient to back his claims. And, a small group of people, oftentimes supporters of Bitcoin SV, do indeed believe these claims.
The majority, however, found Wright’s claims to be nothing short of absurd. Of course, that didn’t stop Wright from making dozens of public appearances, giving countless interviews, and authoring numerous blog posts where he elaborated about his involvement in the creation of Bitcoin.
All of that could have been avoided, though, if Wright just used the key of Bitcoin’s Genesis Block to sign a message. The genesis block is the first block of the blockchain—with block height 0. By signing a message using the keys of the Genesis Block, Craig could once and for all prove he possesses the key which only Satoshi has access to.
Actual blockchain creators showed Wright how to prove he invented Bitcoin
This was something Charlie Lee and Jared Tate, the respective creators of Litecoin and DigiBytes, knew even back in 2016. More than three years ago, Lee tried to put an end to Wright’s ludicrous claims by showing him how a blockchain creator can prove his identity.
On May 2, 2016, Lee used the key of Litecoin’s original block to sign a message saying “I, Charlie Lee, am the creator of Bitcoin.”
Here’s my proof. Simple. No need to have a proof ceremony and a long blog post.//t.co/icmGGTKPsZ
Tate, the founder and CTO of DigiByte, soon followed suit by signing his own message. The message, where he stated he was the creator of the DigiByte blockchain, was sent from an address from the network’s first block, created on Jan. 10, 2014.
Wright seems to have been aware of this when he provided the list of Bitcoin addresses as part of a court proceeding. Wright claimed that he did not remember the specific addresses that would prove he mined the first blocks on the Bitcoin blockchain, but said that he could just look up addresses from the block rewards on the blockchain.
However, researchers quickly found that Wright just scraped the blockchain for early block reward beneficiaries and claimed those as his own addresses. The list of the first 70 block reward addresses, not including the Genesis block, line up perfectly with the redacted list Wright filed in court.