Best of the Week
Most Popular
1.Stock Market in DANGER of Strangling the Bears to Death - Nadeem_Walayat
2. Germany Pivoting East, Exit US Dollar, Enter Gold Standard - Jim_Willie_CB
3.Flight MH17 – Kiev Flash Mob's Last False Flag? - Andrew_McKillop
4.Stock Market Crash Nightmare! - Nadeem_Walayat
5.Gold - The Million DOLLAR Question... - Rambus_Chartology
6.Gold And Silver – BRICS And Germany Will Pave The Way - Michael_Noonan
7.The Jewish Selfish Gene, People Chosen by God, Everyone Else is Goyim to Kill - Nadeem_Walayat
8.The Israeli Promised Land Dream - The Criminal Roadmap Towards “Greater Israel”? - Felicity Arbuthnot
9.Which Way is Inflation Blowing? Watch Commodities - Gary_Dorsch
10.U.S. Economy Quarterly Review and Implications for 2014-2015 - Lacy Hunt
Last 5 days
What It Means - Paradigm Collapse And Culture Crisis - 27th July 14
Wall Street Shadow Banking: You Can’t Taper a Ponzi Scheme: “Time to Reboot” - 27th July 14
6 Tips for Picking Winning Gold Mining Stocks - 27th July 14
Israel's War on Children, Exterminating the Palestinians Future - 27th July 14
Guilt By Insinuation - How American Propaganda Works - 26th July 14
Surprise Nuclear Attack On Russia To Liberate Ukraine - 26th July 14
Use "Magic" Of Gold/Silver Ratio To Greatly Increase Your Physical Holdings - 26th July 14
Derivatives Market Species Origins - Abuse, Props and Risks - 26th July 14
Stock Market Manipulation and Technical Analysis - 26th July 14
China’s Stock Market Finally Looks Like A Buy - 26th July 14
Ed Milliband Fears Israel Jewish Fundamentalist Gaza War Massacres Backlash - 26th July 14
The Big Energy = Power Battle Is Coming - 25th July 14
USrael - Zionists in Control of America's Goyim Brainwashed Second Coming Slaves - 25th July 14
More Weakness Ahead for Gold Miners - 25th July 14
Gold Price Strong Season Starts - 25th July 14
Geopolitics and Markets Red Flags Raised by the Fed and the BIS on Risk-taking - 25th July 14
Gold Lockdown Until Options Expiry - New Singapore Gold Contract Threatens Price Manipulation - 25th July 14
The Bond Markets, Black Swans, and the Tiny Spirit of Santo - 25th July 14
No Road Map For Avoiding The Future - 25th July 14
Israeli War Machine Concentrating Women and Children into UN Schools Before Killing Them - C4News - 25th July 14
Israeli Government Paying Jewish Fundamentalist Students to Post Facebook Gaza War Propaganda - 25th July 14
Why the Stock Market Is Heading For A Fall - This Time Is Not Different - 25th July 14
An Economic “Nuclear Strike” on Moscow, A “War of Degrees” - 25th July 14
BBC, Western Media Working for Israeli Agenda of Perpetual War to Steal Arab Land - 25th July 14
Ukraine: What To Do When Economic Growth Is Gone - 24th July 14
Stock Market Clear and Present Danger Zone - 24th July 14
The Five Elements to Creating a Something-for-Nothing Society - 24th July 14
Instability is the New Normal? - 24th July 14
Israel's Suicide Bombers Over Gaza - 24th July 14
EUR-AUD Heads Into The Danger Zone - 24th July 14
Tesco Supermarket Death Spiral Accelerates as Customers HATE the Mega Brand - 24th July 14
Ukraine MH17 Crisis - Best Remember Who Your Friends Are - 24th July 14
Three Reasons Why Gold Price and Gold Stocks Will Rise - 24th July 14
HUI Gold Bugs Fighting To Break Downtrend - 23rd July 14
What Putin Knows About Flight MH17 - 23rd July 14
Why Microsoft Will Continue to Rebound, Huge Upside Potential - 23rd July 14
Will Putin Survive? - 23rd July 14
MH17 Crash Next Phase Economic Warfare - 22nd July 14
The TRUTH about China’s Massive Gold Hoard - 22nd July 14
Forex Multi-week Consolidation in EUR/USD Ended - 22nd July 14
Bitcoin Price Medium-term Trend Being Tested - 22nd July 14
Beware Of The Flash Mob - 22nd July 14
Can Putin Survive? - 22nd July 14
Israel Assault on Gaza: A Historic Crime, Nazi Like Final Solution - 22nd July 14
Zionist Israel an International Pariah - 22nd July 14
Reflections on the Global Misery Index - 22nd July 14
GDP Economic Statistic : A Brief But Affectionate History - 22nd July 14
TransTech Digest: Super Battery Bio-Power vs. Dirty CleanTech - 21st July 14
How to Find Trading Opportunities in the Currency Markets - 21st July 14
Stock Market One More Pull Back - 21st July 14
The Conquest Of Real - Degenerate Philosophies of the Book - 21st July 14
A Clear Way to Profit from a Graying Population - 21st July 14
Last Chance Critical Financial Market Forecasts Special Total Access - 21st July 14
Stock Market Crash Nightmare! - 21st July 14
Why the Stock Market Is STILL Cheap - 21st July 14
From Gore-Bore To Gore-War - 21st July 14
Gold Price Looking Drab - 21st July 14
An In-Depth Look at Gold Chartology - 21st July 14

Free Instant Analysis

Free Instant Technical Analysis


Market Oracle FREE Newsletter

Fed Impact on Stock Market Trend

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