Selling Cryptocurrencies and Buying Stocks

Why do people buy cryptocurrencies?

It doesn’t make any sense to me…

Punters have lost millions from being hacked. Remember Tokyo-based Mt Gox? US$400 million worth of bitcoin were stolen in 2014.

Coincheck — another Japanese exchange — was hacked last month. US$530 million NEM coins were stolen. It was the biggest hack in history. To make matters worse, Coincheck has stopped investors from withdrawing money. noted yesterday:

Coincheck has received withdrawal requests from customers totaling about 30 billion yen ($280 million), a person with direct knowledge of the matter told Reuters last week.

Still, the exchange said it would keep restrictions on cryptocurrency withdrawals until it could guarantee the secure resumption of its operations. It did not give further details.

We don’t think Coincheck will be around for much longer. The exchange will probably see mass capital outflows soon. If you had money on an exchange that got hacked, would you want to keep it there?

I wouldn’t…

If Coincheck goes bankrupt, what will that do for investor confidence? It remains to be seen. But most institutional investors won’t be impressed. Most of them are already avoiding the crypto space.

To buy most coins, you need to use bitcoin or ethereum. That’s absurd. You should be able to buy whatever you want with cash…just like a stock.

To make matters worse, if you want to store your coins ‘offline’ in a ‘cold wallet’, you need to store your keys on a piece of paper or buy a unique USB. So, if you lose the piece of paper or your USB fails, you’re left with nothing.

Just ask the would-be crypto millionaires on the internet…

Bitcoin has been in a downtrend for months. It hit a low of US$6,000 last week and has bounced slightly. But is it just a temporary recovery following the massive fall?


Be careful.

Cryptocurrencies are a terrible investment, in my view. They are difficult to buy, attacked by governments and hackers worldwide, and in a major downtrend. So, with too many risks to worry about, I suggest sticking to the stock market. That’s where you can sleep at night, while making potentially massive gains during the day.

Is the correction over?

Business Insider reported yesterday:

US stocks extended gains from late Friday, lifting the market further away from correction territory.

The three major indexes plummeted into correction – a 10% drop from recent peaks – last week after a long, unusually stable period that helped catapult them to record highs. The 5.2% weekly decline for the S&P 500 was the worst in two years.

“You almost could hear a collective sigh of relief on Friday when the market closed higher on the day – and ahead of a weekend at that,” John Stoltzfus, the chief investment strategist at Oppenheimer Asset Management, said in a note on Monday.

“While we believe that the majority of the sell-off may be over for now, there is likely to be a continuation of recurring volatility as speculative positions are unwound by some investors and as still others ponder some of the worry-items that helped cause the market stumble.”

John Stoltzfus makes a lot of sense. There hasn’t been a 10% stock market correction since January 2016.

That’s two years ago!

It was well overdue… 

The stock market panic started when the Nunes memo was released a fortnight ago. It showed high-order collusion between the FBI, the Department of Justice and the Obama Administration.

Officials abused their power to spy on Donald Trump’s transition team.

Reports also showed that Hillary Clinton, and not Donald Trump, was connected to the Russians during the US election.

When the story broke, the stock market tanked. It was down almost 10% in a week.

The CBOE volatility index (VIX) flew higher.

Remember, the stock market went straight up for over 24 months. Banks and institutions under-priced risk for months. To account for the ‘extra’ uncertainty, they needed to sell some shares to rebalance their portfolios.

Business Insider continued yesterday:

Last week’s correction was worsened by a scramble out of exchange-traded notes that were designed to profit from calmer market activity.

After the Cboe Volatility Index, or VIX, had a record intraday rise last Monday, the VelocityShares Daily Inverse VIX Short-Term ETN and the ProShares Short VIX Short-Term Futures ETF erased an estimated $US3 billion within minutes.

The sell-off coincided with a renewed concern among investors about how the Federal Reserve would use higher interest rates to deal with inflation; the January jobs report released February 2 showed the fastest year-over-year wage growth since 2008.

A few short-VIX exchange traded notes went under last week. That caused significant turmoil across financial markets. The panic seems to be subsiding, as markets returns to calmness. Donald Trump announced a US$4 trillion budget and a US$1.5 trillion infrastructure program on Monday.

Will it be enough to end the stock market correction? Perhaps.


Take a look at the daily chart for the US Dow Jones Industrials Average:

US Dow Jones Industrials Average 14-02-2018

[Click to enlarge]

The Dow bounced off the pink support trendline at 23,360 points on Friday. The pink support trendline shows last year’s resistance, connecting the March high to the September breakout.

There’s a chance the correction low was recorded last Friday. But if the Dow closes below 23,360 points on a daily basis, we could see 23,000 points.

There’s major support around that zone.

You can see this by looking at major resistance from the 2014 high. That’s shown by the blue line. This resistance line took three years to break. It should provide a decent amount of support in the short term.

The bottom line: The correction may be over but, if the Dow closes below 23,360 points on a daily basis, we could see lower prices.


Jason Stevenson,
Editor, Gold & Commodities Stock Trader

Jason Stevenson is Markets & Money’s resource analyst. He shares over a decade’s worth of investing and trading experience across resource stocks and commodity futures and options. He originally studied accounting and finance at Curtin University, where he was awarded a first-class honours degree. His professional background stems across high-net-worth, top tier accounting (corporate finance, tax and auditing), and sell-side equities research. Before joining the team at Markets and Money, Jason worked at boutique firms which advised fund managers and high-net-worth clients on where to invest. Whether it’s gold, crude oil, copper or an obscure metal like vanadium, you can rely on an in-depth analysis in Markets and Money. Jason also brings you extensive macro, political and geopolitical analysis from around the world. He leaves no stone unturned when it comes to telling the truth. Jason is also the lead analyst of Gold Stock Trader, a premium service for investors serious about precious metal stocks. Websites and financial e-letters Jason writes for:

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