This report is also available in PDF-format.
Key Economic Events
Oil troubles
The last few weeks have been filled with economic and social uncertainty. Undoubtedly, one of the major stories of the last couple of weeks, was WTI (West Texas Institute) oil futures hitting a negative figure for the first time in history. This was driven by exceptionally low demand and a severe lack of storage space. It left those with futures contracts panicking.
The panic was because when the contract is settled, whoever owns the contract must receive the oil, and as there was no space, investors were paying others to take their oil contracts off them.
The crashing of oil prices, and lack of demand for ´black gold´, has hit oil companies hard. British Petroleum (BP) announced that they had profits down 66% in Q1 due to COVID19. Whilst Shell announced a cut in dividends by 65% due to such uncertainty in the oil markets. These are troubling times for the oil industry, and the many countries that are dependent on oil for their economy. One of the hardest hit countries so far has been Norway; this has been seen with their SWF losing around $100 billion USD in value.
Aviation destruction
Another industry with a dire outlook is the aviation industry. One company which is in desperate need is Virgin Atlantic, the travel company owned by the under fire, Richard Branson. With nearly all flights around the world grounded, airlines have seen themselves placed under huge pressures. Richard Branson has asked for a government bailout in order to ensure the survival of Virgin Atlantic. Branson has requested £500m GBP from the UK government – this has led to some major disputes within the airline industry. Some people point to Branson’s personal wealth as a reason for no bailout. Boeing and Rolls Royce have said that if Virgin Atlantic goes under, they may follow. Norwegian Air is also looking for a bailout from their government. With most of Norwegian Air’s fleet appearing to be grounded until 2021, if the airline goes under this will increase pressure on Boeing. This is because Norwegian has an order for 110 of the problematic Boeing 737 Max. Qatar Airways have said that the crisis will lead to survival of the fittest. The airline travel industry is a notoriously cut throat business – low profit margins, recent rapid fleet expansion and near zero demand has led to airlines already asking governments for bailouts to ensure their survival.
Other economic news
In other general global economic events, India has seen power demand fall by over 25% due to COVID19. India’s government, like others around the world, has been forced to place India under a nationwide lockdown. This has caused a mass slowdown of nationwide production, massively reducing electricity demand. Whilst in the USA, the democratic socialist, Bernie Sanders has dropped out of the US presidential race. Markets reacted positively to his dropout, with NASDAQ up 2.6% and the S&P 500 up 3.4%. In the UK, Amazon is starting to make moves into the food and delivery sector. This has been seen by substantial investments into JustEat – the investment was cleared by the UK competition watchdog.
Cryptocurrency market events
Bitcoin Halving
The cryptocurrency world is moving at an unprecedented rate. The biggest news recently has undoubtedly been the much-anticipated Bitcoin halving. When a Bitcoin halving occurs the mining reward per block mined is halved. The current reward per block is currently 12.5 Bitcoin after the event, which is set to occur within the next two weeks, the reward will then become 6.25 Bitcoin per block. This has people excited because of the simple supply/demand law. With less new Bitcoin released into the market, Bitcoin will become increasingly scarce, thus increasing the price (if the demand for Bitcoin remains the same). Bitcoin Cash (BCH) and Bitcoin Satoshi’s Vision (BSV) had their halvings in April just before BTC.
Learn more about the upcoming crypto halvings.
AAX IEO / AAB
AAX completed their IEO (Initial Exchange Offering) for their coin AAB. AAB was created in order to create a bridge between digital and traditional assets. AAB is becoming an integral part of the AAX platform and global expansion. The IEO was extremely successful with the hard cap being hit. The coin uses an aggressive burn strategy in order to prevent deflation of the coin; so far 22,811 coins have been burned since the coin was launched. The price of AAB has since risen substantially since the IEO, although more on the price action later in the article.
Other news
Ripple has filed a lawsuit against YouTube regarding spam / fraudulent XRP giveaways. David Schwartz, Ripple CTO, has had his YouTube account suspended over impersonation, adding fuel to the XRP / YouTube firepit. Meanwhile BTC’s rapid price increase last week saw the Coinbase exchange temporarily crash, this was due to huge demand / traffic. In Singapore, an exchange which is currently suffering problems is Kucoin. The popular cryptocurrency exchange is facing legal troubles. Kucoin’s web domain was subsequently locked by GoDaddy, the situation is ongoing. Over in the US, Facebook’s Libra has been forced to adapt their whitepaper last month. This is in order to comply with US regulatory standards.
Positive cryptocurrency news
Some positive news within the cryptocurrency world is the manner in which the community has come together to fight COVID19. Major donations in cryptocurrencies have flooded in from exchanges, communities and popular cryptocurrency figures. While some cryptocurrencies have proved their use case / value such as Golem and IOTA. Golem has donated computing power to help fight the pandemic, while a team in Madrid have built a COVID19 tracking app on IOTA’s tangle.
Cryptocurrency market outlook
Market correlation
Many cryptocurrencies hold a close correlation to Bitcoin. In order to understand the overall market outlook, Bitcoin is the most reliable cryptocurrency for judging the direction of the market. Here are a few examples according to market data of Bitcoin correlation. The score ranges from -1 to 1.
1 shows absolute correlation, 0 means no correlation at all, and -1 means there is a negative correlation.
- Ethereum (ETH) holds a 0.68/1 price correlation
- Bitcoin Cash has a 0.86/1 price correlation
- Neo has a 0.77/1 price correlation
- IOTA has a 0.84/1 price correlation
Therefore, by analysing Bitcoin it allows us to see the overall market movement.
Bitcoin smashing through resistance, the market carried with it.
This week, Bitcoin smashed through the 0.618 Fibonacci retracement resistance level from 2017. Bitcoin has seen a 16.6% increase in value since its opening price of $7705 on April 27th. This huge weekly rise has also carried many altcoins in the market, although BTC is currently holding the reins of the market with the highest weekly gains out of all top 10 cryptocurrencies (by market capitalisation). The key 0.618 level and has provided support and resistance over recent years – as indicated by the red arrows above.
Long term BTC price scenarios
Long term Bitcoin scenario 1 – Bullish price action
Bitcoin has seen huge gains over the last month, this move could be impulsive and see Bitcoin rise even further before the much-anticipated halving.
Firstly, let’s look at the Bitcoin MACD weekly view. The charting tools used for BTC are integrated TradingView tools found on the AAX exchange.
On the weekly MACD, we have the two EMAs crossovers. The crossover of the two EMAs provide highly reliable signals towards the movement of BTC. If the 12 EMA crosses over the 26 EMA, below the 0 centre line, this is usually a signal towards a move higher. In this chart, we can see that Bitcoin has had a positive crossover underneath the centreline. This is displayed in the histogram which is now positive.
Due to the MACD having a positive crossover, as seen in 1 & 2, this could indicate that prices will rise further in 3.
As seen in the two previous examples, the MACD displays its reliability; although it was considerably more accurate in example one than example two. In the case for the current price action care should be taken, this is due to current volatility and the MACD being a lagging indicator.
With the MACD providing data for a positive move up, as seen with historical data, BTC is currently trading within a multi – year trading pattern.
Bitcoin is currently trading within a long term symmetrical triangle. If next week’s candle closes above the $8500USD zone, then the 0.382 Fibonacci resistance would have been successfully broken.
If this is broken, then the next resistance level is the 0.236. If 0.236 is met, it would see BTC broken out of the symmetrical triangle formation. If this breakout does occur, the first resistance level is at $10,500 USD. In this scenario, the triangle is broken out of. This could see Bitcoin potentially reach the $20,000USD mark by the EOY.
Long term BTC price scenario 2 – Bearish price action
The bearish scenario will occur if Bitcoin fails to break the multi-year symmetrical triangle mentioned in the bullish scenario.
A bearish scenario may occur if Bitcoin fails to close above the 0.382 resistance level on the weekly candle, as indicated with the yellow square. This would likely see Bitcoin fall to the 0.236 level; which would represent a 22% decrease in price from our current position. If this were to occur, Bitcoin could then react similarly to December 2019, using the 0.236 as a final resistance level before pushing higher – rather than touching the bottom of the triangle as seen in January 2019 and March 2020.
Conclusion – long term price action
Both long term views offer trading potential on the AAX exchange, with both long and short positions possible on the futures platform (leverage possible); significant price movements appear to be at the ready. There does not seem to be a consolidation period awaiting. If Bitcoin breaks out of the triangle, then all-time highs could be seen by the end of the year. Whereas, if Bitcoin fails to break out of the formation, we could see those who have accumulated BTC during the pre 2020 halving, sell their crypto in the coming weeks. This could see the market drop back to the 0.236 Fibonacci retracement level, or touch the bottom of the symmetrical triangle.
Short term BTC price scenarios
Bitcoin short term scenario 1 – Bullish
On the daily chart, BTC broke the ascending triangle. There was then a slight pullback, seen with the small green channel. BTC was unable to break below the 0.382 Fibonacci retracement level. BTC then proceeded to break the $7400 USD resistance level invalidating the descending triangle and a further move down. It has since ploughed through the 0.618 level and is now testing the 0.768 Fibonacci resistance.
As seen with the SAR, Bitcoin has momentum. Therefore, if the bullish scenario plays out, BTC will likely rise above the 0.786 Fibonacci retracement level. If this happened, BTC could test the $10,000 USD mark. In order for this to happen, BTC must have a daily close above the 0.786 mark.
Bitcoin short term scenario 2 – Bearish
Bitcoin’s bearish scenario, like the bullish scenario, is heavily dependent on Bitcoin’s ability to break the 0.786 Fibonacci resistance.
Bitcoin currently has a weak trendline, pushing the cryptocurrency up to the 0.786 resistance level. In the bearish scenario, BTC fails to break the 0.786 Fibonacci level. After Bitcoin has failed to break the 0.786, the cryptocurrency will likely fall into the lower regions of the Bollinger Bands. From there, until BTC breaks into the upper regions of the Bollinger Bands, downwards price movement will occur. If this scenario occurs, then the next level of resistance is the 0.618 Fibonacci retracement level.
However, we may see resistance before the 0.618 level, from a pitchfork formation, as demonstrated below.
The pitchfork has already provided multiple support and resistance levels since mid-March, as represented by the red arrows above. There is a high possibility that if BTC fails to break above the 0.786 Fibonacci level, before we hit the 0.618 of the bearish scenario, the lower green level of the pitchfork could act as resistance – there could also be resistance seen at the $8450 USD level.
Conclusion – short term
Bitcoin’s future price movement in the short term depends on the 0.786 Fibonacci retracement level. Both scenarios appear possible. If Bitcoin can generate further gains, then this would likely confirm that the move since the March 2020 lows has been impulsive. Although if key levels are not broken, then a roll-over to the downside, could occur.
AAB
AAX have recently finished their IEO for its native exchange token, AAB. During the AAX IEO, the cryptocurrency met its hard cap of 9,250,000 USDT, showing high levels of interest in the cryptocurrency. AAB is an ERC-20 token on the Ethereum blockchain and has a total supply of 50,000,000 AAB. The token has many features, such as discounted trading fees. When trading fees are settled in AAB, users receive a 20% discount (it is not compulsory to use AAB when settling trading fees).
AAB burn
A big part of the AAB cryptocurrency is its burn feature. AAB was built for aggressive price action. With AAB, all trading fees earned by AAX on the exchange’s futures markets are used to buy back AAB. Once they are bought back they are subsequently burned. By burning the cryptocurrency it is permanently destroyed. AAX is buying back AAB until 50% of the coins supply has been burned. This aggressive burning strategy offers the users of AAX the opportunity to grow with the AAX platform and the token.
AAX are aiming to become leaders in the cryptocurrency market, wanting to create a bridge between global finance and crypto.
To find out more about the AAB cryptocurrency and AAX, read the Black Paper.
AAB price action
AAB has had an incredibly successful IEO, fulfilling its hard cap. The cryptocurrency has seen positive gains, increasing in price by more than 30% since its launch onto the AAX platform. So far, the AAB cryptocurrency has been moving in three stages:
The three stages have shown major price spikes, with an overall increase in price from the stage before. In stage one and two, the cryptocurrency worked alongside the Fibonacci resistance levels.
In the chart below, we can see how once the 0.786 Fibonacci retracement has been met the cryptocurrency has reacted very strongly, seeing a price surge:
Each time the cryptocurrency has hit this level it has then proceeded to move to ATHs. Over the next couple of weeks, if history repeats itself and AAB hits the 0.786 level, the coin should proceed to hit ATHs.
If AAB were to fall back down to the 0.786 resistance level this would see AAB hit $1.15 USD; this would still be a 15% gain from AAB initial price. The management of the lockup period, and burning of the AAB coin, has so far ensured that the cryptocurrency has not fallen below the initial trading price. However, due to the increasing price movements seen in stage three compared to stage two, the 0.786 Fibonacci resistance level may not be met. There is also a clear resistance line at $1.33USD which has so far offered firm support.
MACD with AAB
A good indicator, so far, for the price movements of AAB is the MACD. When crossovers have occurred on the MACD, it has provided accurate signals of when to sell and buy the cryptocurrency as demonstrated below:
Due to the recent negative crossover on the MACD, we may see some negative price movements before a positive crossover in the coming days. This could coincide with the 0.786 Fibonacci level being met, after which the price of AAB could substantially increase.
What price could AAB hit within the coming weeks?
If we use a Fibonacci extension from period 1, the area between the two vertical lines drawn on the chart, we can see that the AAB coin perfectly hit the 4.236 extension resistance level:
As shown in the chart above, the 4.236 level was hit from the Fibonacci extension of stage 1. If the Fibonacci extension of stage 2 hits the level of 4.236, we could expect to see the price rise to just over $1.7 USD, as demonstrated below:
AAB Price Conclusion
We could see further positive price action with AAB, with the cryptocurrency potentially reaching the $1.7 USD zone. This potential price movement to $1.7USD may include a retracement back down to the 1.15 USD region.
This external intelligence report was written by Oliver Page, and commissioned by AAX, for marketing and educational purposes only. The views, analyses and projections are based on the author’s independent research. The report should not be taken as a form of investment advice.
