• RiveX

The Market Threesome — BTC, DJIA, and GOLD

THIS IS NOT FINANCIAL ADVICE!


Dear Rivexians!


As you may know, the wild fluctuations of the markets have been challenging for every investor that seeks stability and growth. The sudden attack of this Covid-19 virus has caused tremendous effects on the world of investments from crypto investors to conventional equities as well.


Due to the sudden parabolic downfall of the Dow Jones Industrial Average (DJIA), as much as 30%, it has led to a flight of logic for all investors in every spectrum. Safe havens are no longer safe havens as everyone has fled to holding USD, BTC, and Gold. These have been regarded as safe havens and have continued their wild volatility as the negative correlations have all turned positive trailing every movement of the US economy.


DJIA vs BTC vs GOLD chart

(in the chart above we can see all 3 have hit their previous lows during the March 14th crash, followed by progressive rebounds. The only commodity to stay true to their negative correlation would be GOLD, BTC on the other hand still trails DJIA very closely and maintains a positive correlation)


As a subset of a cryptocurrency, we crave stability and since we have established the positive correlation of the conventional markets with crypto, we turned to using the Volatility Index (VIX). VIX measures the overall volatility movements of the markets in US equities. The bigger the VIX movements the more volatile the markets will be, and this is a weakness to listing during a period whereby VIX has erratic movements.


Volatility Index (VIX)

(Through VIX, there is an obvious down trend line which means volatility is decreasing in the market or in layman terms no sudden spikes. However, this parabolic is yet to test their strong support and a breakout of this parabolic will most likely welcome wild movements again.)


As shown in the chart, the green rectangle highlighted area represents the stability of the volatility index, which would be ideal in the event of listing tokens. No big sudden movements, no reversal of 50–60% in a single day. Which gives us the ability to allow the token to breathe and grow at its generic pace. The red area, however, shows the wild spike in VIX which wiped out billions, if not trillions in all asset classes. During this moment of volatility, even tokens with good fundamentals are not exempted from the brutal and panic waves of the market.


Economical impact of the Virus

The illogical panic selling of these markets has already been done, and the next wave of concern would be the aftershocks that affect the economy as a whole. Why do we bring in factors such as these? Its because it will be the key in determining future market movements as the Federal Reserve and the rest of central banks around the world inflating their already alarming current debt level, there will be consequences to this. How long will the virus linger until a vaccination is ready and the economy can be normalized? How big of an economical dent will it have on the economy? These are the mysteries that loom on every asset that seeks returns.


Bull Trap?

After a sharp parabolic drop, the natural movements from a technical perspective would be a sharp rise before an eventual continuation of its true trend. For the US markets and crypto as well, 16th March until now, we experienced a sharp rise in pricing and erratic movements as well.


BTC chart

But as we can see history always has a method of communicating with us, in examples of crisis that fundamentally affects the economy, in 2008 (housing bubble) and 2000 (tech bubble). Each technical rebound lasts usually in between 20+ days, to 20% of upside from the lows before unmasking the ugly nature of its true trend.


Bull Trap 2008 chart

(as shown, through a weekly chart of S&P500, the bull lasted 20 weekly bars with gains of 14%, that’s 139 days before re-testing the trendline and revealing its ugly truth which is shown in the next chart)


(after the bull trap, followed by 55% down , that lasted 50 weekly bars, and approximately 350 days)


Bull Trap 2000 chart

(once trendlines are broken as repeated, the eventual rebound was 14 weekly bars, 98 days, with a 22% upside)


(after technical rebound happened, followed by 74 weekly bars, and a 42% downside)


So how we prepare ourselves for the Bull Trap of 2020 if there were to be any, by applying historical lessons to this. All major rebounds repeated themselves CONSISTENTLY that was short-lived with limited upside and a whole lot of downside once the bears reveal their strengths. What we can do now is not hope, but mentally prepare ourselves and project scenarios on when the most suitable timing for an alternate token with great fundamental values to be listed at a time that is the least minimized by impacts of the invisible hand of the market.


However, our job at RiveX is not to consistently speculate on prices, but if this hard empirical evidence shows us that it will affect the prices of ALL markets, be it US equities or Cryptocurrencies, in the near term. Along with our usage of VIX and other more sophisticated quant models, that would indicate a more stable market (be it up or down), we would do what we can to give our valued investors the best market environment that we can list on that reflects the most upside.


Market timing is the fine line between holding a winner and holding a loser.


Remember, THIS IS NOT FINANCIAL ADVICE.

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