11 May 2019

Bitcoin in the News : 2019-04 More++

In last week's post, Bitcoin in the News : 2019-04 Price, I wrote,
You might have to look twice to see the jump at the beginning of the month, which is partially hidden by the price numbers to the left of the chart. The jump is confirmed by the volumes. After going from 4000 to 5000 (in round numbers) in a few days, the price levelled off and continued in a gentle, upward trend.

What do other news sources say about the jump? The first story I looked at, Bitcoin Price Surges Past 5,000 to Highest Level Since November, was noncommittal:-

Traders struggled to pinpoint reasons for the rally, though some noted a flood fresh interest after Bitcoin breached the $4,200 level. The cryptocurrency briefly topped $5,000 and the value of digital assets tracked by CoinMarketCap.com jumped by about $17 billion in less than an hour.

Sudden swings in Bitcoin are nothing new, but price action had been relatively subdued this year as investors weighed the prospects for mainstream adoption after last year’s 74 percent crash. Market participants say big buy orders in Bitcoin can often lead to outsized moves, in part because volume is spread across dozens of venues. Trend-following individual investors and short covering can also exacerbate volatility.

Discussion of the jump was a recurring theme throughout the month and pushed other crypto-currency topics into the background. To get a handle on the consequences, I fell back on a technique that I used last year (see Bitcoin in the News : 2018-11 More++) in opposite circumstances.

How to explain the drops? In separate 'Bitcoin in the News' posts a few months ago I highlighted two mainstream financial news services [CNBC & Forbes] by showing which stories had been published by the two news services. Let's do the same for November, comparing the stories from both services with the goal of understanding the November price movements. Of course, this isn't a comprehensive look at all of their stories -- it's a list of stories that were flagged by Google News, using whatever its criteria are.

This month, I'll use Forbes again. It has stories from both cheerleaders and gloom-&-doomers, with the central objectivists also represented.

Many of the titles are self-explanatory, but I've added a comment for those that aren't. Three other stories that have nothing to do with the jump are worth mentioning.

  • 2019-04-13: Millions Stolen in Attack on Electrum Bitcoin Wallet Service (crowdfundinsider.com) • 'Hackers have launched a 140 000-machine botnet DoS attack against servers hosting popular Bitcoin wallet service Electrum'

  • 2019-04-19: How Mueller used Bitcoin to catch Russia (cnn.com) • 'Russian operatives used cryptocurrency at almost every stage in their online efforts to interfere in the 2016 U.S. presidential election, according to Special Counsel Robert Mueller's final report on his investigation.'

  • 2019-04-27: Bitcoin Price Reaction to Tether Fiasco May Signal Strong Fundamental Strength (newsbtc.com) • 'Bitfinex sent a whopping $850 million to a company based in Panama that resulted in the exchange losing access to these funds. In response to this, Bitfinex granted itself access to a significant amount of Tether’s cash reserves that are supposed to be used to maintain USDT’s 1:1 USD backing.'

This isn't the first time we've seen Tether associated negatively with bitcoin price moves. Use the search box for previous posts on this blog.

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04 May 2019

Bitcoin in the News : 2019-04 Price

For the third straight month, I can fall back on the same observation. From Bitcoin in the News : 2019-03 Price:-
In last month's post, Bitcoin in the News : 2019-02 Price, I summarized the month's price chart with:- >>> 'The individual patterns are all similar: the market is in a state of equilibrium, then something happens -- always accompanied by significant volume -- to move it quickly to another state of equilibrium. The cycle repeats.' <<< Although there were elements of that pattern in March, the chart was more like a steady ascent, punctuated by dips that corrected within a few days.

You might have to look twice to see the jump at the beginning of the month, which is partially hidden by the price numbers to the left of the chart. The jump is confirmed by the volumes. After going from 4000 to 5000 (in round numbers) in a few days, the price levelled off and continued in a gentle, upward trend. Two small drops were accompanied by large increases in volume.


Bitcoin (BTC) Price Index

***

Later: Let's look at the usual sources for an explanation of the big jump. In Cointelegraph's Analysis category, which has not often proved helpful, I found The Burst of the Bitcoin Bubble: An Autopsy by Marcello Minenna, one of those rare bitcoin articles strong on objectivity. The heading 'What is the floor of this incredible descent?' starts,

On the subject, we must consider that bitcoin, its clones and the rest of the digital currencies do not have their own intrinsic value. Prices are simply determined by the intersection of demand and supply on individual exchange markets; these are often highly illiquid prices, differing from each other by hundreds of euros without effective arbitrage between the various markets due to the structural limits of bitcoin and settlement platforms. Therefore, it is very difficult to think of determining what the fair value could be.

That got my attention, as did other observations. Later in the article, the author writes,

In the early months of the year, cryptocurrencies slowly regained value, but the real surprise came on April 2, when, in just one hour, bitcoin spiked by almost $1,000, surpassing $5,000 -- a new resistance that has basically held up over the weeks since.

It is not clear what the reason for this jump was (perhaps an algorithmically generated order or a liquidity squeeze connected to bitcoin derivatives followed by a forced buy-in on market makers’ quotes). After all, recently, various analysts had forecast a surge in the short term, and knowing the trigger event matters little. The real question is whether the market is heading back into bull mode. Multiple factors support an affirmative answer: [...]

In other words, the trigger doesn't matter, but all of the psychological factors in force at the time do matter. That's where technical analysis enters the picture. For this I've found Cointelegraph's Price Analysis tag to be helpful. Two articles discussed the sudden rise.

  • Bitcoin, Ethereum, Ripple, Litecoin, EOS, Bitcoin Cash, Binance Coin, Stellar, Cardano, TRON: Price Analysis April 3 • 'Bitcoin showed a glimpse of its former self when it skyrocketed by about 20 percent on April 2. With no specific news responsible for the rise, we can only speculate on what caused the sudden spurt in prices. Many theories have been put forth, one being a large order either by an individual trader or a group of traders that caused the price to break above the overhead resistance, following which the algorithms spotted the breakout and piled on long positions. Many traders who had been short on the digital currency were forced to cover their positions, which may have added fuel to the rally.'

  • Bitcoin, Ethereum, Ripple, Litecoin, Bitcoin Cash, EOS, Binance Coin, Stellar, Cardano, TRON: Price Analysis April 5 • 'Google searches for Bitcoin tripled as its price skyrocketed on April 2. This shows that interest in cryptocurrencies is still high. If prices recover, a large number of traders sitting on the sidelines will jump onto the crypto bandwagon. Though the rebound is a bullish sign, for it to be sustainable, Bitcoin needs to gain a wider adoption in day to day transactions.'

We know from the April chart that the price did hold. The crypto market was in a new state of equilibrium.

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