Bitcoin in the News : 2019-12 Price

In last month's post, Bitcoin in the News : 2019-11 Price, I observed,

The November chart was the fourth out of five in the second half of the year to show a falling trend.

The December chart shows neither a rising nor a falling trend. It was basically flat with some bumps along the way.

Bitcoin (BTC) Price Index

As for spikes in volume, three were more significant than the others, where the last two were part of a cluster:-

2019-12-05 1200 (Spike in price)
2019-12-16 1600 (Drop)
2019-12-18 1200 (Jump)

As usual, Cointelegraph's Analysis category had nothing to say about those high-volume periods. For the first time, the service's Price Analysis tag also had nothing to say beyond the analysis of technical patterns. I'll come back to the subject when I look at other news sources in next week's '2019-12 More++' post.

***

Later: Re 'I'll come back to the subject', I found a number of stories in Forbes. The date on the first story ('spike in price') doesn't quite match what I calculated, but that just underscores how unsophisticated my tools are.

• 2019-12-04: Bitcoin Crashes After Sudden Leap Higher (forbes.com) • 'Bitcoin and other major cryptocurrencies, including ethereum, Ripple's XRP, litecoin, and bitcoin cash, have suddenly leaped, with bitcoin rising almost $1,000 in just minutes. [Update:] After suddenly surging, the bitcoin price has given up almost all of its gains, dropping to around $7,200 per bitcoin.'
  
  
• 2019-12-04: Bitcoin’s Surge This Morning Shows Market's Vulnerability (ditto) • '"As I write this morning, today's price spike does seem a bit suspicious," said Mati Greenspan, founder of the newsletter Quantum Economics. He pointed to "the sudden movement on an otherwise uneventful day, the low volumes across exchanges, the quick retracement after the move. It all points to the assumption that this was the outcome of a single player with a large buy order. Or in other words... a large whale stacking sats." Tim Enneking, managing director of Digital Capital Management, offered a similar perspective. "With this unusually low volume crypto markets have experienced, any single, large transaction has an [outsize] impact," he stated. "This is true both because the transaction itself will affect markets and because, in the absence of other signals, market watchers overreact to such a transaction and exaggerate the move, regardless of direction," said Enneking.'

A 'large whale stacking sats' makes sense if you know that 'sats' is short for 'satoshis', i.e. the smallest unit of bitcoin. The spike shows how easily the price of bitcoin can be manipulated. Introduce a large transaction into a calm market and watch as other traders react, like dropping a stone into a calm pond and watching the ripples. The next set of stories is from later in the month.

• 2019-12-16: Bitcoin Moves Sharply Lower Again As Other Major Cryptocurrencies Go Into Free Fall (forbes.com) • 'Bitcoin, which yesterday dropped by 3.5%, has moved lower again, dropping over 5% since this time yesterday [...] The cause of the sudden sell-off was not immediately clear, however, analysts have noted a drop in crypto market trading volume recently. [...] In periods of low trading volume, crypto prices are more vulnerable to so-called whales moving the market by placing massive buy or sell orders at a little above or below current market rates. These can trigger trading algorithms that then send prices sharply higher or lower and can be a sign of market manipulation.'
  
  
• 2019-12-18: Bitcoin Recovers After Falling To Lowest Since May (ditto) • 'Bitcoin prices bounced back today, rising more than 10% in a matter of hours after declining to their lowest in more than seven months. [...] Some analysts described today’s rally as being purely technical in nature.'
  
  
• 2019-12-19: Is This Why Bitcoin Suddenly Rebounded Yesterday? (ditto) • 'Bitcoin and cryptocurrency markets suddenly rebounded yesterday, with the bitcoin price climbing back above the psychological $7,000 per bitcoin mark after a sell-off earlier in the week. [...] A report out earlier this month found the cost of creating new bitcoin, a process known as mining, now averages around $6,300 per bitcoin -- something that could mean bitcoin is perhaps unlikely, but not guaranteed, to fall below this level.'

The phrase 'purely technical in nature' is not an explanation. It's an admission of ignorance. On top of that, the last explanation makes no sense to me. Does the price of gold depend on the cost of mining it?

If the price drops too low, miners go out of business, thereby reducing new supply. If the supply drops, the prise will rise -- assuming demand remains steady. Then new miners will start operation. This is necessarily a medium term phenomenon, not something that happens in a few days. Or am I missing something? (It wouldn't be the first time.)

Bitcoin in the News : 2019-11 More++

In my previous post, Bitcoin in the News : 2019-11 Price, I looked at one burst of bitcoin activity, noted the explanations offered by analysts, and wondered,

Rumors and market manipulation -- why would anyone entrust significant sums to this market?

For this current followup post, when I started to gather news stories from the same month, the first story that popped up multiple times was on the same theme. The first two occurrences were:-

• 2019-11-04: Did Bitcoin Price Manipulation Fuel 2017 Surge? Study Says Yes (bloomberg.com) • 'Academics update paper that alleges manipulation using Tether'
• 2019-11-04: Study: Single anonymous market manipulator pushed bitcoin to $20,000 (cnbc.com) • 'A forensic study on bitcoin’s 2017 boom has found that nearly the entire rise of the digital currency at the time is attributable to “one large player,” although the market manipulator remains unidentified.'

It happens that I had already mentioned that story -- from the same source -- last year in Bitcoin in the News : 2018-06 More++:-

2018-06-13: Much of bitcoin's 2017 boom was market manipulation, research says (cnbc.com) • 'By tracking Bitfinex transactions, which are recorded on a public ledger, [University of Texas finance professor John Griffin] found that another cryptocurrency, tether. was used to buy bitcoin after large price falls.'

What's the difference between the two incarnations of the research? The first identified possible market manipulation; the second attributed it to a single entity. As I understand it, that entity created money by issuing unbacked tether, then used that funny money to buy bitcoin, thereby fueling its dramatic rise in 2017. If so, the possibilities to do the same by other entities are limitless. No printing press required.

As for the burst of bitcoin activity in the '2019-11 Price' post, I also found multiple stories. The first was:-

• 2019-11-22: Stark China Warning Causes Bitcoin To Suddenly Crash 10% As Other Major Cryptos Nosedive (forbes.com) • 'The Shanghai-based central bank also warned against conflating the country's interest in blockchain with bitcoin and crypto. [...] The bitcoin and cryptocurrency industry has been rocked by reports of Chinese police raids on the offices of major bitcoin and crypto exchanges Binance and Bithumb in the country over the last week -- though both have denied the raids took place.'

And if those two stories weren't bad enough, consider this story that appeared multiple times in another of my Google News interests, botnets:-

• 2019-11-27: Stantinko botnet mines Monero using YouTube (finance.yahoo.com)

Money talks and the bad guys are everywhere. I'm holding my nose as I post this.

Bitcoin in the News : 2019-11 Price

In contrast to the first half of 2019, where five out of six monthly bitcoin price charts showed a rising trend, the November chart was the fourth out of five in the second half of the year to show a falling trend. The only exception was last month's Bitcoin in the News : 2019-10 Price.

My usual technique to understand a chart is to identify periods of high volume and find relevant discussions in the bitcoin / cryptocurrency press. What does the November chart say?

Bitcoin (BTC) Price Index

In November there were more than a half-dozen periods showing jumps in volume. The most significant cluster was:-

2019-11-22 0800 (Drop)

Although there was no corresponding discussion in Cointelegraph's Analysis category, the site's Price Analysis tag had a couple of relevant articles.

2019-11-22: Price Analysis 22/11: BTC, ETH, XRP, BCH, LTC, EOS, BNB, BSV, XLM, TRX • 'Fear gripped the markets on the news that Chinese authorities had raided the offices of the leading cryptocurrency exchange Binance. This negated all the positive effects that had accrued following President Xi Jinping’s endorsement of blockchain technology. Though Binance denied reports of any raids, price action within the sector has remained subdued.'

So the drop was sparked by a rumor? For more about 'President Xi Jinping’s endorsement', see the '2019-10 Price' post.

2019-11-25: Price Analysis 25/11: BTC, ETH, XRP, [...] • 'We believe that the current dip is showing signs of a bear trap.'

So the drop was another skirmish in the ongoing battle between bulls and bears? Plant a rumor and act on the confusion provoked by that rumor. That sounds like market manipulation. Rumors and market manipulation -- why would anyone entrust significant sums to this market?

Although Binance has been mentioned occasionally on this blog, what is it exactly? Wikipedia's Binance page says,

Binance is a global cryptocurrency exchange that provides a platform for trading more than 100 cryptocurrencies. Since early 2018, Binance is considered as the biggest cryptocurrency exchange in the world in terms of trading volume. [...] The company was founded in China but moved its servers and headquarters out of China and into Japan in advance of the Chinese government ban on cryptocurrency trading in September 2017. [...] As of January 2018 it was largest cryptocurrency exchange with a Binance coin (BNB) market capitalization of $1.3 billion. [...] On May 7, 2019, Binance revealed that it had been the victim of a “large scale security breach” in which hackers had stolen 7,000 Bitcoin worth around U.S.$40 million at the time.

The relationship between Binance and 'Binance coin (BNB)' isn't clear to me. BNB is one of the coins listed in the Cointelegraph articles I've quoted above, so it must be significant. I'll look at that another time.

Bitcoin in the News : 2019-10 More++

As summer is followed by autumn, so a Bitcoin in the News : 2019-10 Price post is followed by a review of news from the same month. Of the 90 or so bitcoin articles presented by Google News alerts, only 16 made my short list, making it a shorter short list than I can remember. Most of the other articles were about someone predicting a price: bitcoin will go {up / down / sideways}. Since anyone can predict anything about price movement, I tend to ignore these. One prediction that did make the short list was:-

• 2019-09-30: McAfee Explains ‘Rationale’ For Why He Still Sees $1 Million Bitcoin By 2020 (forbes.com)

I've seen this prediction before, but what's behind it? After some estimates about the 'real' number of bitcoins that are available -- "21 million bitcoins, 7 million of which have been lost forever" -- the argument goes like this:-

"In any case, just run some numbers," McAfee said. "If bitcoin gets to be 5% of world financial transactions, which, you all know it will," he said, even mentioning "maybe 10% or 20%," then bitcoin would be worth "$10 million per coin, based on those numbers." • "I’m just a very conservative man," McAfee said with a laugh. "I said one [$1 million] and I’m sticking to one."

'You all know it will.' We do? There are so many assumptions built into that argument -- 5% of financial transactions, the supply isn't expanded, nothing better comes along -- that it's based entirely on faith. By coincidence, another article a week later goes further into potential pitfalls.

• 2019-10-08: Two Bitcoin Developers Explain How The Cryptocurrency Could Still Fail (forbes.com)

The story mentioned a number of risks. The first two have been recognized for some time; the last two are less well known:-

51% attacks; government crackdowns; rules of the Bitcoin network are changed in favor of a more centralized model; an accidental bug

Finding no other stories as compelling as those two, I returned to the '2019-10 Price' post, where I identified two sharp moves and wrote, 'Apparently, no one understands the cause of these sharp movements.' I should know better than to make statements like that. There were three stories from Forbes.com that addressed the causes:-

• 2019-10-25: Bitcoin Has Crashed Again -- What Now? (forbes.com) • 'Bitcoin (BTC) is falling because China is closing with the U.S. on a trade deal.'
• 2019-10-25: Forget China -- Is This The Real Reason Bitcoin, Ethereum, Litecoin, And Ripple’s XRP Bounced? (ditto) • 'Bitcoin has swung wildly this week, as many had expected it to, with it losing $1,000 per bitcoin a few days ago before suddenly shooting back up earlier today. [...] Bitcoin volumes have been struggling recently, leaving the market especially vulnerable to so-called whales placing large orders or liquidating short positions.'
• 2019-10-25: Bitcoin Defies Death Cross, Surging Close To 20% (ditto) • '"China’s endorsement of blockchain technology helped Bitcoin recover, and along the way, a short squeeze helped push prices even higher," said Joe DiPasquale, BitBull Capital’s CEO.'

It's not clear to me why a China / U.S. trade deal is bad for bitcoin, but I'll watch for more clues. As for the other China connection, here's a story from a different source:-

• 2019-10-26: Bitcoin surges to over $10,000 in biggest single day move since April (marketwatch.com) • 'Since a 2017 decision by the People’s Bank of China, cryptocurrencies are banned in the country, although a digital renminbi is being developed by the central bank and likely to launch soon. China was one of the biggest sources of demand for cryptocurrencies during the 2017 bull run.'

Although an endorsement of blockchain technology doesn't necessarily lead to a lifting of a cryptocurrency ban, it's a step in the right direction. The explanation makes more sense than technical jabber like the so-called 'death cross' that pops up in so many negative analyses.

Bitcoin in the News : 2019-10 Price

Just like last month's post, Bitcoin in the News : 2019-09 Price, last month's price chart had two stories. The first story was an observation on the trend for the month: the first time since June when the price increased during the month. The second story was a recurring observation that I've repeated several times this year:-

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 chart below shows a heavy volume for the most important move, heavier than I have recorded at any time this year (remembering that the bars in the chart cover a four hour period, if they can be believed at all).

Bitcoin (BTC) Price Index

The starts of the two most pronounced price movements were:-

2019-10-22 0800 (Drop)
2019-10-25 0400 (Jump)

Each movement lasted about a day. Cointelegraph's Analysis category had nothing about the movements, while the site's Price Analysis tag covered both. First, here's an interesting, but misleading, observation from a few days before the drop.

2019-10-21: Price Analysis 21/10: BTC, ETH, XRP, BCH, LTC, EOS, BNB, BSV, XLM, TRX • 'While the supply of fiat currencies has been steadily increasing for the past few years, Bitcoin’s (BTC) block rewards has reduced at each halving. The rate of supply will reduce further following the halving in 2020. Previous instances of halving resulted in a sharp price increase and for this reason analysts are anticipating a repeat rally as the 2020 block reward halving approaches.'

If everyone knows when an event will occur and if there is general agreement on the impact of the event, then that information is already baked into the price. There is no 'insider information' in bitcoin, although this isn't necessarily true of all crypto currencies.

2019-10-23: Price Analysis 23/10: BTC, ETH, XRP, [...] • 'Bitcoin’s (BTC) plunged today, dragging the whole crypto space along with it. [...] At the moment, there is not a direct reason that explains today’s strong correction. Some analysts believe that Facebook CEO Mark Zuckerberg’s testimony before the United States Congress on Libra might have triggered the fall.'

A news article on the same day, 3 Likely Reasons Why Bitcoin Price Crashed, offered a few more explanations:-

1. Technicals: support finally gives after 9th try
2. Mr. Zuckerberg goes to Washington
3. Google’s quantum breakthrough spooks Bitcoin investors?

That last explanation deserves a deeper look than I can give it now. For a previous post on this blog concerning quantum computing, see Shor's Algorithm (November 2016). Back to the chart and the associated Cointelegraph analysis, the 2000 point increase was covered a few days after it occurred.

2019-10-28: Price Analysis 28/10: BTC, ETH, XRP, [...] • 'The seesaw price action over the past week has lightened up the crypto space once again. While the aggressive bulls view the sharp upside move as a bottoming signal, the bears consider the rise as a bear market rally that should be sold into.'

That wishy-washy forecast continued for the rest of the article. Apparently, no one understands the cause of these sharp movements. There were two smaller volume spikes starting 2019-10-09, but I have no reason to believe that they would shed new light here.

Bitcoin in the News : 2019-09 More++

In last week's post, Bitcoin in the News : 2019-09 Price, I noted,

September saw two distinct states of equilibrium separated by a sharp drop. The drop started roughly at 2019-09-24 0000, i.e. around midnight on 09-23, and lasted about a day.

An enlightening explanation for the drop was from Cointelegraph.com:-

A few speculators might have built up positions expecting the prices to surge following the launch of Bakkt. However, when that did not play out, they started closing their trades in a hurry. As a result, important support levels cracked and the rest of the traders were forced to close their long positions.

What did other experts have to say about the drop? Just like for previous 'Bitcoin in the News : More++' posts, I isolated all articles from a single source looking for a pattern. The following are all from Forbes.com:-

• 2019-09-23: Bitcoin Market Falls Sharply As Litecoin Suddenly Crashes • I first read that headline as a cause-effect relationship, but the article presents it as a coincidence.
• 2019-09-24: Bitcoin, Ethereum, Ripple’s XRP, And Litecoin In Shock Meltdown • 'The sudden sell-off, which wiped $20 billion from bitcoin's value and a further $5 billion from the combined value of the wider crypto market, was put down to the muted reaction to the launch of the hotly-anticipated Bakkt bitcoin and cryptocurrency platform.'
• 2019-09-24: Wall Street Paves The Way For Bitcoin To Become 'People's Currency' • 'Wall Street is working to ease Bitcoin’s volatility by introducing Bitcoin derivative products. Like the Bakkt Regulated Bitcoin Futures introduced this week.'
• 2019-09-25: ‘Striking’ Bitcoin Market Manipulation Revealed • 'New research has warned of a "striking systematic trend" in bitcoin price movements, with bitcoin falling far further than average ahead of CME's bitcoin futures contracts being settled each month.'
• 2019-09-25: Bitcoin Has Crashed -- What Now? • 'Back the direction you believe is the long-term outcome and buy the dips or don’t play at all.' • Why not go short?
• 2019-09-26: Bitcoin Price Sees Second Sharp Decline This Week, Falling Below $8,000 • 'Following a decline of more than 15% in an hour on Tuesday [09-24], the Bitcoin price fell another 8% Thursday morning [09-26].'
• 2019-09-27: Bitcoin Chaos Continues As Facebook’s Mark Zuckerberg Reveals Libra Woes • 'Facebook chief executive Mark Zuckerberg has revealed his libra cryptocurrency, which is largely credited with sparking bitcoin's bull run earlier this year, may not launch in 2020, as previously expected.'
• 2019-09-29: Bitcoin Mayhem Results In Mixed Messages • 'As bitcoin technical data looks bleak and bitcoin bulls advise traders to "buy bitcoin at every chance"...'
• 2019-09-29: Bitcoin, ETH, XRP, LTC, And XLM Sell-off -- Is It Overdone? • 'The losses spread across the entire market, with only 11 out of the top 100 cryptocurrencies advancing and 89 declining.'

There were other stories in September, but none were as revealing as the Bakkt fiasco. Maybe 'fiasco' is an overstatement. Time will tell.

Bitcoin in the News : 2019-09 Price

Last month's Bitcoin price chart reveals at least two stories. The first story is the third straight month -- encompassing all of Q3 -- when the price declined. Where the first two months of Q3, 2019-07 Price and 2019-08 Price, saw small declines, September's drop was substantial. The second story was a return to the type of chart last seen in 2019-05 Price, where I noted,

For the fourth straight month [...] I can use the same observation: 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.

September saw two distinct states of equilibrium separated by a sharp drop.

Bitcoin (BTC) Price Index

The drop started roughly at

2019-09-24 0000, i.e. around midnight on 09-23

and lasted about a day. As usual, Cointelegraph's Analysis category had nothing to say about the drop, but the service's Price Analysis tag had an article before the move signalling the 'long-awaited launch of Bakkt':-

2019-09-23: Price Analysis 23/09: BTC, ETH, XRP, BCH, LTC, EOS, BNB, BSV, XLM, ADA • 'If Bitcoin prices plunge and start a down move, altcoins are unlikely to run in the opposite direction to start a new uptrend. But if Bitcoin remains range-bound or starts a new up-move, then select altcoins are likely to continue their outperformance.'

The next 'Price Analysis' article was after the drop:-

2019-09-25: Price Analysis 25/09: BTC, ETH, XRP, [...] • 'The total cryptocurrency market capitalization had repeatedly taken support close to the $250 billion mark since mid-July of this year. However, the recent collapse in crypto markets led by Bitcoin (BTC) has broken the support and market capitalization has dipped to just under $220 billion. It is difficult to pinpoint the exact reason that started the fall. A few speculators might have built up positions expecting the prices to surge following the launch of Bakkt. However, when that did not play out, they started closing their trades in a hurry. As a result, important support levels cracked and the rest of the traders were forced to close their long positions. Another possibility is that the flight to safety following the news of an impeachment inquiry into United States President Donald Trump might have resulted in the quick drop.'

I don't believe for a second that the Trump impeachment inquiry had any impact on the bitcoin price -- why should it? -- so Bakkt deserves real consideration. Before looking at that, I'll interject the next 'Price Analysis' article, which summarizes the psychology around bitcoin trading:-

2019-09-27: Price Analysis 27/09: BTC, ETH, XRP, [...] • 'When Bitcoin (BTC) rallies sharply it does not leave a chance to buy. Traders then regret missing the bus. They promise themselves that they will buy on the next dip. However, when the prices correct, fear grips the traders and they again miss pulling the trigger. While there will be many reasons for a fall, unless the basic fundamental reason changes, traders should continue to look for buying opportunities.'

That analysis assumes that after a drop the next trigger will signal a rise, but it's more likely a 50-50 chance of a rise or a fall. Anyway, let's get back to Bakkt. This time Cointelegraph's 'Analysis' category had a relevant piece:-

2019-09-27: First Week of Bakkt: Slow Start Unlikely to Dampen Long-Term Prospects • 'After more than a year spent ensuring full compliance with the United States authorities, Bakkt, the first federally regulated platform for Bitcoin (BTC) futures trading, launched on September 23.'

Is that date, September 23, a coincidence? The article's next paragraph explained the Bakkt concept.

Conceived by the global trading giant Intercontinental Exchange (ICE) and counting a solid portfolio of investors from Microsoft’s venture fund M12 to Starbucks as its backers, Bakkt offers institutional traders something brand new. The platform’s value proposition is physically-settled BTC futures contracts, combined with a sound custodial service approved by the Commodity Futures Trading Commission (CFTC).

Unfortunately, 'trading volumes on the platform remain meager', and

Bakkt’s launch coincided with an immense slump in Bitcoin’s market price, leading some analysts to suspect a causal connection between the two.

'Causal connection' or not, the service's web site Bakkt.com ('Building the future of digital asset infrastructure'), points to a Bakkt blog post, We have liftoff: a milestone for the industry (medium.com), signed by its CEO Kelly Loeffler. For more about the service, see What is Bakkt? (coindesk.com).