Best of the Week
Most Popular
1.Canada Real Estate Bubble - Harry_Dent
2.UK House Prices ‘On Brink’ Of Massive 40% Collapse - GoldCore
3.Best Cash ISA for Soaring Inflation, Kent Reliance Illustrates the Great ISA Rip Off - Nadeem_Walayat
4.Understanding true money, Pound Sterling must make another historic low, Euro and Gold outlook! - Marc_Horn
5.5 Maps That Explain The Modern Middle East - GEORGE FRIEDMAN
6.Gold Back With A Vengeance As Bitcoin Bubble Bursts - OilPrice_Com
7.Gold Summer Doldrums - Zeal_LLC
8.Crude Oil Trade & Nasdaq QQQ Update - Plunger
9.Gold And Silver – Why No Rally? Lies, Lies, And More Lies - Michael_Noonan
10.UK Election 2017 Disaster, Fake BrExit Chaos, Forecasting Lessons for Next Time - Nadeem_Walayat
Last 7 days
Saving Illinois: Getting More Bang for Its Bucks - 24th Jul 17
3 Stocks Sectors That Will Win in The Fed’s Great Balance-Sheet Unwind - 24th Jul 17
Activist Investors Are Taking Over Wall Street, Procter and Gamble Might Never Remain the Same - 24th Jul 17
Stock Market Still on Track - 24th Jul 17
Last Chance For US Dollar To Rally - 24th Jul 17
UK House Prices Momentum Crash Warns of 2017 Bear Market - Video - 22nd Jul 17
Crude Oil, Gold, ETFs & more: Pro-grade Market Forecasts - 22nd Jul 17
Warning: The Fed Is Preparing to Crash the Financial System Again - 21st Jul 17
Gold / Silver Shorts Extreme - 21st Jul 17
GBP/USD Bearish Factors - 21st Jul 17
Gold Hedges Against Currency Devaluation and Cost Of Fuel, Food, Beer and Housing - 21st Jul 17
Is It Worth Investing in Palladium? - 21st Jul 17
UK House Prices Momentum Crash Threatens Mini Bear Market 2017 - 21st Jul 17
The Fed May Show Trump No Love - 20th Jul 17
The 3 Best Asset Classes To Brace Your Portfolio For The Next Financial Crisis - 20th Jul 17
Gold Stocks and Bonds - Preparing for THE Bottom - 20th Jul 17
Millennials Can Punt On Bitcoin, Own Safe Haven Gold For Long Term - 20th Jul 17
Trump Has Found A Loophole To Rewrite Trade Agreements Without Anyone’s Permission - 20th Jul 17
Basic Materials and Commodities Analysis and Trend Forecasts - 20th Jul 17
Bitcoin PullBack Is Over (For Now): Cryptocurrencies Gain Nearly A 50% In Last 48 Hours - 19th Jul 17
AAPL's 6% June slide - When Prices Are Falling, TWO Numbers Matter Most - 19th Jul 17
Discover Why A Major American Revolution Is Brewing - 19th Jul 17
iGaming – Stock Prices - 19th Jul 17
The Socionomic Theory of Finance By Robert Prechter - Book Review - 18th Jul 17
Ethereum Versus Bitcoin – Which Cryptocurrency Will Win The War? - 18th Jul 17
Accepting a Society of Government Tyranny - 18th Jul 17
Gold Cheaper Than Buying Greek Villas in 2012 - 18th Jul 17
Why & How to Hedge the Growing Risks of Holding Stocks - 18th Jul 17
Relocation: Everything You Need to do for a Smooth Transition Abroad - 17th Jul 17
A Former Lehman Brothers Trader: It’s Time To Buy Brick And Mortar Retailers - 17th Jul 17
Bank Of England Warns “Bigger Systemic Risk” Now Than 2008 - 17th Jul 17
Bitcoin Price “Deja Vu” Corrective Sequence - 17th Jul 17
Charting New Low in Speculation in Gold and Silver Markets - 17th Jul 17
Bitcoin Crash - Is This The End of Cryptocurrencies? - 17th Jul 17
The Fed's Inflation Nightmare Scenario - 17th Jul 17
Billionaire Investors Backing A Marijuana Boom In 2017 - 17th Jul 17
Perfect Storm - This Fourth Turning has Over a Decade of Continuous Storms to Come - 17th Jul 17
Gold and Silver Biggest Opportunity Since Late 2015, Last Chance at These Prices - 17th Jul 17
Stock Market More to Go - 17th Jul 17
Emerging Markets & Basic Materials Stocks Breaking Out Together - 16th Jul 17
Stock Market SPX Uptrending Again After Microscopic Correction - 15th Jul 17

Market Oracle FREE Newsletter

Crude Oil, Gold, ETFs & more: Pro-grade Market 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.


© 2005-2017 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

Catching a Falling Financial Knife