Bitcoin Spikes: Can Anybody Explain Them?

in bitcoin •  6 years ago 

Bitcoin had yet another one of those moments this week where it spiked 10% in 30 minutes. Why? It could be ... Maybe because ... Possibly ... That's how most explanations start. And while this is a natural start to any explanation for why any market moves, in the case of Bitcoin it's often because there's no "obvious" explanation for anyone to latch onto. At least in the stock market we can blame tariffs for everything!

Okay so perhaps it might be because of excitement over the Bitcoin ETF decision next month (regardless of how likely it is). Perhaps it was over the Congressional hearing that started on July 18th. Perhaps it's because short sellers got squeezed and buy stops got hit by the dozens. My own theory is that it's because a few significant buyers jumped in and trading bots jumped on board after seeing volume rise and seeing Bitcoin break resistance at its 50 day moving average, causing more money to flood in and perhaps a few buy stops got hit along the way. But nothing is certain.

What are your theories? Another interesting element to all of this is that usually when the crypto market rises, money flows to altcoins as investors become more risk on. But in this instance, Bitcoin dominance has been rising at an accelerating pace. I have said before that I suspect there will be a "second wave" where money flows to crypto again and in that instance, I suspect altcoins will fare well. Is this the start to that wave?

As of right now, I don't think so. There needs to be a more fundamental reason (e.g: Bitcoin ETF approval, although that still seems unlikely in short-term) for people to pinpoint why they should flood more money into this market. For now, I believe this spike was just Bitcoin being Bitcoin. I'd love to hear your thoughts.

Coinbase announced they are exploring adding 5 cryptocurrencies (Cardano, BAT, Stellar, Zcash and 0x) to their exchanges if possible. This caused a boon in these cryptocurrencies, but it is worth noting that this boon was far smaller than the boost XRP saw back at the height of bubble due to speculation of being added to Coinbase. This illustrates exuberance in the market has decreased substantially, even if it is still a risky market overall.

What are your thoughts on the current crypto market? I am still simply holding with no trades, but I know a few of you are still likely actively playing around so feel free to share what you're up to in the comments below. Thanks for watching / reading!

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Thanks as always for your straight forward approach to cryptos.

Could be coincidental but whenever the re is a lot of interest in shorting bitcoin we get a pump like the one we have just seen.

I went camping for a few days and came back into cell service, and was like "oh hey."

LOOKS like a short squeeze off a pretty clear technical reverse head and shoulders pattern on the daily chart. Not sure if it was news based, I personally have noted news has a near zero effect lately, to the upside or downside. There is certainly a bunch of bot activity across the board. I think it can be explained though, it's more of a traders marketplace right now, not a retail investor's.

Screen Shot 2018-07-20 at 9.59.03 AM.png

With shorts comparison:
Screen Shot 2018-07-20 at 10.00.33 AM.png

And then the TD Sequential that traders use alot is on a weekly 9 suggesting this week is very important for market structure:
Screen Shot 2018-07-20 at 10.02.48 AM.png

In regards to the sudden spike in price, I believe you were partially correct, but there's a little more. With the trend of lowering volume these past few months, the market has become dominated by "derivatives", mostly on Bitmex, but also on Bitfinex and others, like Kraken. Just look at the daily trading volumes, Bitmex makes around 5bn, while Binance just makes a little over 1 bn.

Therefore, I suppose there were a lot of short orders around the moving average, based on the assumption that it acts as a resistance level. A whale or group of whales notices (or closely monitors or calculates, I don't know), and they decide to make a sudden long move. Betting that they'll catch both the bots and the shorters.

Their calculations seemed to be correct, as the bots picked up the volume, as you have theorized, but I also think a lot of the short positions were automatically liquidated, bringing the price up.

If you watch the price levels, there's an uncanny correlation between some of the large exchanges, mostly those that offer "derivatives" style trading. For me, this signals there are bots closely monitoring arbitrage opportunities or whatever. So, when the upward movement started, it quickly spread to all these exchanges, also fueling the bot follow-up and short liquidations.

The increasing dominance could represent an accumulation phase. This time we can see a second wave shifted. Bitcoin first and soon after alts, because of BTC ETF approval. Alt holders are moving to BTC to at the moment. Then they will move back into alts at lower satoshi price... No clue about this theory. Just my thought

Where are you these days? I miss your videos? I hope everything is ok. :)

I have a crypto channel and make daily videos. You might want to check it out.. Cryptovestor is really good.

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Firstly, if you ignore idiotic politicians you end up with idiotic regulations.

Secondly, TA is so much appreciated by people because it allows to explain anything which happened in the past. The arsenal of indicators is huge and you can always tweak the parameters to fit the curve. If I want peace of mind about the markets I go and watch some TA-pundit. (oh, the soothing power of self-delusion!)

Thirdly, I don't quite get your argument about BTC dominance. If you look at 2017, it was going down from Feb to Jun, and going back up from Jun to Dec, all the while we had a clear bull market. In fact, dominance dropped significantly going into Jan 2018 as BTC price hit the wall. The correlation here is not obvious, maybe make another video about it?

Finally, your videos are always interesting and have some good vibes, much appreciated!

Also think whales and bots are a good explanation, but nothing too unusual for Bitcoin in my opinion.

  ·  6 years ago (edited)

I think that what has been happening with Bitcoin lately makes it seem much less trustworthy, no matter what is the cause. I would be really hesitant to by any cryptos right now, especially if I were a newcomer into this space.

I would be interested in some statistics regarding how many people own crypto. I think that would be more relevant to a potential future developement of this "industry" than how much were the traders able to spike the price and the market cap.

Therefore, if we looked at the number of People who just own and sometimes use Cryptos vs Crypto traders, my theory is that the rate of traders has increased and the movements on the market are not regulated by the randomness of normal users' behavior as much as before.

  ·  6 years ago (edited)

On July 17 Nouriel Roubini tweeted:

"Bitcoin literally spiking up by almost 10% in about 30 minutes today based on no news. So only explanation: price manipulation. Since Tether recently printed another $200 million of fake money & since research proves Tether used to manipulate BTC, manipulation is at work again."

You've said before that Tether is either a scam or it will eventually be shut down by the US government. Is it plausible to you that Tether has been manipulating the market? Could one organization trigger 10% spikes in 30 minutes?

If hypothetically it were true that Tether has been manipulating the market, and you knew it, what would your investment strategy be in this market?

Source: https://twitter.com/Nouriel/status/1019371606550941696

I think there's nothing to explain there, just that some people are buying into the ETF hype. Moreover, the reason why I don't believe in TA is because at any given moment a whale decides to sell or buy and you will see spikes out of nowhere. What about China coming out with some new regulation or whatever? That's something that happens very often and it always shakes the market.

Am I surprised? Not really :)

@cryptovestor you were flagged by a worthless gang of trolls, so, I gave you an upvote to counteract it! Enjoy!!

This is the final bleed out of cryptos. We have hit near bottom. I'm actually more optomistic than ever!

I think OTC market causes most of the perceived randomness.
I imagine that billions of dollars are being traded there and since we dont see it via exchanges (probably crash the market if it was visable) it looks like random crazy swings. Just my opinion though, not a financial advisor.

Yes, Bitcoin bounced three times off that moving average, and I figured that would trigger a lot of technical analysis minded buy orders among whales who have been circling a bleeding Bitcoin like sharks.

Although institutional investors have yet to get the go-ahead to jump in, I am pretty sure a gathering storm of smart-money Crypto-uninvested institutionally-minded individual whales have been lurking about, circling, and I think their number is only growing with time.

Being institutionally minded, I think Bitcoin is benefiting the most because it is one of the only Bluechip type investments, in that it's Brand is as golden as the arches, and it's scarcity is even less than 21 million, with many private keys from it's early days forgotten.

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