Best of the Week
Most Popular
1.The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - Doug_Wakefieldth
2.Tesco Meltdown Debt Default Risk Could Trigger a Financial Crisis in Early 2015 - Nadeem_Walayat
3.The Trend Every Nation on Earth Is Pouring Money Into - Keith Fitz-Gerald
4.Do Tumbling Buybacks Signal Another Stock Market Crash? - 26Mike_Whitney
5.Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - Nadeem_Walayat
6.Gold And Silver Price - Respect The Trend But Prepare For A Reversal - Michael_Noonan
7.U.S. Economy Faltering Momentum, Debt and Asset Bubbles - Lacy Hunt
8.Bullish Silver Stealth Buying - Zeal_LLC
9.Euro, USD, Gold and Stocks According to Chartology - Rambus_Chartology
10.Evidence of Another Even More Sweeping U.S. Housing Market Bust Already Starting to Appear - EWI
Last 5 days
Gold And Silver – Elite Supernova Death Dance In PMs? - 1st Nov 14
Pretium - Canadian Golden Elephant - 31st Oct 14
What USA Today Got Wrong About the Stock Market Fear Gauge - 31st Oct 14
Election Result - Labour Wins South Yorkshire Police and Crime Commissioner - 31st Oct 14
Gold Price Falls, Stocks Record Highs as Japan Goes ‘Weimar’ - 31st Oct 14
EUR/USD - Double Bottom Or New Lows? - 31st Oct 14
More Downside Ahead for Gold and Silver - 31st Oct 14
QE Is Dead, Now You Tell Me What You Know - 31st Oct 14
Welcome to the World of Volatility - 31st Oct 14
Stocks Bear Market Crash Towards New All Time Highs as QE3 End Awaits QE4 Start - 31st Oct 14
US Mortgages, Risky Bisiness "Easy Money" - 30th Oct 14
Gold, Silver and Currency Wars - 30th Oct 14
How to Recognize a Stock Market “Bear Raid” on Wall Street - 30th Oct 14
U.S. Midterm Elections: Would a Republican Win Be Bullish for the Stock Market? - 30th Oct 14
Stock Market S&P Index MAP Wave Analysis Forecast - 30th Oct 14
Gold Price Declines Once Again As Expected - 30th Oct 14
Depression and the Economy of a Country - 30th Oct 14
Fed Ends QE? Greenspan Says Gold “Measurably” “Higher” In 5 Years - 30th Oct 14
Apocalypse Now Or Nirvana Next Week? - 30th Oct 14
Understanding Gold's Massive Impact on Fed Maneuvering - 30th Oct 14
Europe: Building a Banking Union - 30th Oct 14
The Colder War: How the Global Energy Trade Slipped From America's Grasp - 30th Oct 14
Don't Get Ruined by These 10 Popular Investment Myths (Part VIII) - 29th Oct 14
Flock of Black Swans Points to Imminent Stock Market Crash - 29th Oct 14
Bank of America's Mortgage Headaches - 29th Oct 14
Risk Management - Why I Run “Ultimate Trailing Stops” on All My Investments - 29th Oct 14
As the Eurozone Economy Stalls, China Cuts the Red Tape - 29th Oct 14
Stock Market Bubble Goes Pop - 29th Oct 14
Gold's Obituary - 29th Oct 14
A Medical Breakthrough Creating Stock Profits - 29th Oct 14
Greenspan: Gold Price Will Rise - 29th Oct 14
The Most Important Stock Market Chart on the Planet - 29th Oct 14
Mysterious Death od CEO Who Went Against the Petrodollar - 29th Oct 14
Hillary Clinton Could Be One of the Best U.S. Presidents Ever - 29th Oct 14
The Worst Advice Wall Street Ever Gave - 29th Oct 14
Bitcoin Price Narrow Range, Might Not Be for Long - 29th Oct 14
UKIP South Yorkshire PCC Election Win is Just Not Going to Happen - 29th Oct 14
Evidence of New U.S. Housing Market Real Estate Bust Starting to Appear - 28th Oct 14
Principle, Rigor and Execution Matter in U.S. Foreign Policy - 28th Oct 14
This Little Piggy Bent The Market - 28th Oct 14
Global Housing Markets - Don’t Buy A Home, You’ll Get Burned! - 28th Oct 14
U.S. Economic Snapshot - Strong Dollar Eating into corporate Profits - 28th Oct 14
Oliver Gross Says Peak Gold Is Here to Stay - 28th Oct 14
The Hedge Fund Rich List Infographic - 28th Oct 14
Does Gold Price Always Respond to Real Interest Rates? - 28th Oct 14
When Will Central Bank Morons Ever Learn? asks Albert Edwards at Societe General - 28th Oct 14
Functional Economics - Getting Your House in Order - 28th Oct 14
Humanity Accelerating to What Exactly? - 27th Oct 14
A Scary Story for Emerging Markets - 27th Oct 14
Could Tesco Go Bust? How to Save Tesco from Debt Bankruptcy Risk - 27th Oct 14
Europe Redefines Bank Stress Tests - 27th Oct 14
Stock Market Intermediate Correction Underway - 27th Oct 14
Why Do Banks Want Our Deposits? Hint: It’s Not to Make Loans - 26th Oct 14
Obamacare Is Not a Revolution, It Is Mere Evolution - 26th Oct 14
Do Tumbling Buybacks Signal Another Stock Market Crash? - 26th Oct 14
Has the FTSE Stock Market Index Put in a Major Top? - 26th Oct 14
Christmas In October – Desperate Measures - 26th Oct 14
Stock Market Primary IV Continues - 26th Oct 14
Gold And Silver Price - Respect The Trend But Prepare For A Reversal - 25th Oct 14
Ebola Has Nothing To Do With The Stock Market - 25th Oct 14
The Gallery of Crowd Behavior: Goodbye Stock Market All Time Highs - 25th Oct 14
Japanese Style Deflation Coming? Where? Fed Falling Behind the Curve? Which Way? - 25th Oct 14
Gold Price Rebounds but Gold Miners Struggle - 25th Oct 14
Stock Market Buy the Dip or Sell the Rally - 25th Oct 14
Get Ready for “Stupid Cheap” Stock Prices - 25th Oct 14
The Trend Every Nation on Earth Is Pouring Money Into - 25th Oct 14 - Keith Fitz-Gerald
Bitcoin Price Decline Stopped, Possibly Temporarily - 25th Oct 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Free Forex Forecasts

No Stop for Bitcoin Price before $600?

Currencies / Bitcoin May 26, 2014 - 03:42 PM GMT

By: Mike_McAra

Currencies

In short: we don’t support any short-term positions in the Bitcoin market.

We frequently repeat that it is hard to exactly pinpoint what’s behind a given price move. While some reasons given by the media might have merit, in most of the cases claiming that “Bitcoin moved because X” (plug whatever you want for X) might not be warranted. This is probably done for the sake of a “good story” but does not have to have much to do with actual reasons for the price fluctuations.


At times, these fluctuations might simply be random. At other times the reason behind them might be hidden from our eyes and from the eyes of the reporters posting various kinds of analyses on media websites.

Take for example the exorbitant rise in the value of Bitcoin in November last year. Recall what was written about the “reasons” for that at the time. “Demand from China,” “possibility of positive government response in the U.S.” or “breaking of ties with Silk Road” were all cited as the possible drivers of the surge in price which brought Bitcoin as high as to the $1,200 territory.

As it turns out, these “reasons” might have actually contributed a lot less to the wild rise of Bitcoin than it was claimed at that time. An extremely curious report was released yesterday under the title “The Willy Report”. Its author analyzed trading log data from Mt. Gox and came to the unsettling conclusion that the exchange rate at Mt. Gox might have been artificially propped up. More than that, it might also be possible that the unimaginable rallies of April and November 2013 could be attributed to trading bots (specific programs designed to trade in an automatic manner). Our fair warning is that all of the analysis in “The Willy Report” is highly speculative and there’s no actual proof of any wrongdoing on the part of Mt. Gox. However, the data, as it is analyzed, seems at least puzzling.

Without getting into too many technical details, it would seem that special programs were active on Mt. Gox. These programs would trade according to pre-determined rules and had specific characteristics which distinguished them from regular customer accounts. For instance, they would have different ID numbers in the database or wouldn’t pay fees.

Based on these distinguishing features, the author of “The Willy Report” compiled reports on the trading activities of the accounts they suspected to be actually trading bots. As it turned out, these “suspect” accounts had been buying Bitcoin, and buying it heavily without selling much of what they had bought.

The author comes to the conclusion that these bots might have artificially led to an explosion in price in November 2013 and possibly April 2013. Now comes the really interesting part. The author of the report added up the amounts bought by two bots, who they dubbed “Willy” and “Markus.” Willy bought around BTC270,000, Markus around BTC300,000 and then Willy added another BTC80,000. This totals BTC650,000, which the author describes as “suspiciously close to the supposedly lost ~650,000 BTC.”

Is it possible that the bitcoins lost at Mt. Gox are tied to these suspicious buying patterns? Again, this is pure speculation and no actual proof has been seen. However, this analysis would provide an interesting point to clear up for the official investigation in Japan.

Now, let’s turn to the charts.

Bitcoin paused on Friday and Saturday, only to resume the rally on Sunday. The volume yesterday was relatively high (almost BTC20,000) and the exchange rate moved 8.6% up. With this move, the currency came closer to the $600 area, a level it hasn’t crossed since March 21.

Today, the exchange rate has also gone up, 2.1% (this is written before 8:00 a.m. EDT). The volume is weaker than yesterday but still a lot can happen during this day. Our take on the current show of strength is that it reads different than the rallies we’ve seen in the recent past. First of all, it didn’t start right after a period of falling prices but rather after a period of stagnation. Does this mean that this might change the current outlook? It might be bullish for the short-term, particularly if Bitcoin breaks above $600 but a correction would be expected after the recent period of growth and there’s still possibility that this is just a counter-trend rally.

Consequently, we would like to see both a close above $600 and a corrective downswing before considering long speculative positions.

On the long-term BTC-e chart we see that the current rally is very much unlike the two most recent ones (all marked in grey). We’ve seen a strong move up after a period of calmness while in the previous cases a move up came after depreciation.

Because of this, the bearish short-term outlook is weakened at this time. We don’t see the recent move as a start of a new strong long-term uptrend just yet. There’s still the possibility that the price will remain below $600 or come back below this level following a break above it. For now, we are still inclined to bet on the currency retreating to $500 but a move above $600 confirmed by Bitcoin staying above this level could have a bullish impact on the outlook. The jury is still out on this one.

Summing up, in our opinion no short-term positions should be kept in the Bitcoin market now.

Trading position (short-term, our opinion): no positions. A move above $600 might have bullish implications if Bitcoin stays above this level.

Regards,

Mike McAra
Bitcoin Trading Strategist
Bitcoin Trading Alerts at SunshineProfits.com

Disclaimer

All essays, research and information found above represent analyses and opinions of Mike McAra and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mike McAra and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. McAra is not a Registered Securities Advisor. By reading Mike McAra’s reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Mike McAra, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.


© 2005-2014 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

Free Report - Financial Markets 2014