Margin call – the cash trap

March 10, 2020

During the last two week all major indices like S&P 500, Dow Jones, NASDAQ, DAX and others dropped by more than 10% in what is considered one of the worst weeks in trading. This Monday morning the bloodbath continues. But why did gold and Bitcoin also drop? Aren’t they usually considered as a hedge against the former? Amidst uncertainty, smart money turns to safer options, like gold. However, despite reaching a seven-year high on Monday the 24th of February, gold also plunged later on. Let’s look underneath gold’s hood to find out what really happened. Gold reached its highest point since January 2013 at US$1,690 per ounce. It plummeted along with the stock market due to corona virus pressure. As gold dropped 7.5% down to US$1,563 per ounce, who was doing the selling? Margin Call – the cash trap.

 

Most notably, it was action that came from the futures market. Margin calls were and are the real reason why gold plunged. In other equity markets peoples margins got called in and they may have sold whatever assets they had, including gold, to receive the cash to cover their margin calls.

 

Perhaps bitcoin’s recent price drop this week could also be attributed to the need to cover margin calls in comparable markets such as equities and futures.
 
Bitcoin Daily Chart, Head And Shoulder Formations:

 

BTCUSDT daily chart as of March 4th, 2020 b

 

Five days ago we published a warning of bitcoin possibly declining further with this chart as an illustration (see above).

 

We quoted: “The true question now, with prices residing in the middle of this years range, is if possible negative news would drive prices even lower.”

 

Unfortunately this has been the case. May be even more so with the absence of news. Meaning printing money might not be the solution to a pandemic outbreak risk. Also being hush hush about solutions in the news in the US, might have not been the most beneficial to the markets behavior.

 

Bitcoin Daily Chart, Breaking Below US$7,700:

 

BTCUSDT daily chart as of March 9th, 2020

 

We keep track of the market in real time to inform our telegram channel members without delay. The daily chart above shows at the time of writing this chartbook a break of the US$7,700 price levels. In only three trading sessions the Bitcoin market lost over 15% of its value. This is significant since the total loss in less than four weeks amounts to nearly 27 percent.

 

Bitcoin Daily Chart, Possible Bounce After Four Legs?:

 

BTCUSD daily chart as of March 9th, 2020

 

With four legs down and a Fibonacci retracement of 0.786 we are imminent for a possible temporary bounce. That does not necessarily mean though, that the larger time frame turning point has been already reached at these levels.

 

Margin call – the cash trap
 

As we have done in previous recent publications, we advise to be very conservative with ones market participation.

 

On a bullish note, despite gold selling off at the rate of most index funds during the last financial crisis in 2008 from the month of March through October, when central banks started printing money, known as quantitative easing, later that year, gold really came into its own. Backed with bullish trending conditions prices moved above US$1,900/Oz within three years after 2008. We imagine a similar bullish scenario for the Bitcoin market with a slight time delay to the gold market.

 

Join our free Telegram Group :https://t.me/joinchat/HGe22hDDEEl0LvFGAgEZ9g

 

 

All published information represents the opinion and analysis of Mr Korbinian Koller & his partners, based on data available to him, at the time of writing. Mr. Koller’s opinions are his own and are not a recommendation or an offer to buy or sell securities. Mr. Koller is an independent analyst who receives no compensation of any kind from any groups, individuals or corporations. As trading and investing in any financial markets may involve serious risk of loss, Mr. Koller recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction and do your own due diligence and research when making any kind of a transaction with financial ramifications.

 

 

 

Although a qualified and experienced stock market analyst, Korbinian Koller is not a Registered Securities Advisor. Therefore Mr. Koller’s opinions on the market and stocks can only be construed as a solicitation to buy and sell securities when they are subject to the prior approval and endorsement of a Registered Securities Advisor operating in accordance with the appropriate regulations in your area of jurisdiction. Past results are not necessarily indicative of future results. The passing on and reproduction of this report, analysis or information within the membership area is only legal with a written permission of the author.

 

 

Important Trading Risks and Earnings Disclaimers - Terms of Use

 

RISK DISCLAIMER: All forms of trading carry a high level of risk so you should only speculate with money you can afford to lose. You can lose more than your initial deposit and stake. Please ensure your chosen method matches your investment objectives, familiarize yourself with the risks involved and if necessary seek independent advice.

 

 

U.S. Government Required Disclaimer - Commodity Futures Trading Commission. Trading financial instruments of any kind including options, futures and securities have large potential rewards, but also large potential risk. You must be aware of the risks and be willing to accept them in order to invest in the options, futures and stock markets. Don't trade with money you can't afford to lose.

 

NFA and CTFC Required Disclaimers: Trading in the Foreign Exchange market is a challenging opportunity where above average returns are available for educated and experienced investors who are willing to take above average risk. However, before deciding to participate in Foreign Exchange (FX) trading, you should carefully consider your investment objectives, level of experience and risk appetite. Do not invest money you cannot afford to lose.

 

EARNINGS DISCLAIMER: EVERY EFFORT HAS BEEN MADE TO ACCURATELY REPRESENT THIS PRODUCT AND ITS POTENTIAL. THERE IS NO GUARANTEE THAT YOU WILL EARN ANY MONEY USING THE TECHNIQUES, IDEAS OR PRODUCTS PRESENTED. EXAMPLES PRESENTED ARE NOT TO BE INTERPRETED AS A PROMISE OR GUARANTEE OF EARNINGS.

 

CFTC RULE 4.41 - HYPOTHETICAL OR SIMULATED PERFORMANCE RESULTS HAVE CERTAIN LIMITATIONS. UNLIKE AN ACTUAL PERFORMANCE RECORD, SIMULATED RESULTS DO NOT REPRESENT ACTUAL TRADING. ALSO, SINCE THE TRADES HAVE NOT BEEN EXECUTED, THE RESULTS MAY HAVE UNDER-OR-OVER COMPENSATED FOR THE IMPACT, IF ANY, OF CERTAIN MARKET FACTORS, SUCH AS LACK OF LIQUIDITY. SIMULATED TRADING PROGRAMS IN GENERAL ARE ALSO SUBJECT TO THE FACT THAT THEY ARE DESIGNED WITH THE BENEFIT OF HINDSIGHT. NO REPRESENTATION IS BEING MADE THAN ANY ACCOUNT WILL OR IS LIKELY TO ACHIEVE PROFIT OR LOSSES SIMILAR TO THOSE SHOWN.

 

 

All information presented or any product purchased from this website is for educational and research purposes only and is not intended to provide financial advice. Any statement about profits or income, expressed or implied, does not represent a guarantee. This presentation is neither a solicitation nor an offer to Buy/Sell options, futures stocks or securities. No representation is being made that any information you receive will or is likely to achieve profits or losses similar to those discussed on this website. The past performance of any trading system or methodology is not necessarily indicative of future results. Please use common sense. Get the advice of a competent financial advisor before investing your money in any financial instrument.

 

Terms of Use: Your use of this educational website indicates your acceptance of these disclaimers. In addition, you agree to hold harmless the publisher and instructors personally and collectively for any losses of capital, if any, that may result from the use of the information. In other words, you must make your own decisions, be responsible for your own decisions and trade at your own risk.

 

Tags:

Please reload

Recent Posts

July 9, 2020

June 30, 2020

June 26, 2020

June 18, 2020

Please reload

Stay Up-To-Date with New Posts

Search By Tags

Please reload

join my free

telegram Group

Mentorship

packages

download my

free book