Bitcoin Price Collusion Powerless Against Uptrend, Adoption To Surge During Coming Market Turmoil

Journalist:
Venzen Khaosan @venzen
October 21, 2014

Bitcoin Price has held steady despite apparently coordinated efforts to pull price back into decline. We look at the outcome of an uptick in growth in the Chinese Economy, as well as the coming surge in Bitcoin adoption to be precipitated by unavoidable market turmoil.

China Growth Improves (a little bit)
Global Economy
Bitcoin Price Collusion
Summary
Comments

China Growth Improves (a little bit)

China’s quarterly GDP beat expectations by point one of a percent by coming in at 7.3% for July-September 2014. China’s economic growth was, according to Bloomberg, driven by higher export demand and increased “services”. Significantly, this turn of events has strengthened The Peoples’ Republic government case for avoiding quantitative easing, despite aggressive acceleration of the same in neighboring Japan.

Industrial Production (year-on-year) has improved to 8% vs. the expected 7.5%. The government’s policy of avoiding across-the-board interest rate cuts in favor of weaker economic expansion is, apparently in a safe lane, although China’s economy is headed for the slowest year of growth since 1990.

China’s contribution to global growth is sizable, and a slowdown in China will be a watershed not only for regional resource suppliers, like Australia, but for the globe. The International Monetary Fund (IMF) last week cut the outlook for 2015 global growth to 3.8% – down from 4% forecasted in July of this year.

And how does this relate to Bitcoin?

The expanding sinkhole of economic collapse in the West is common knowledge, but the ongoing currency war in the East is less well-understood. The gist of it is that when China finally yields to pressure (from Japan) to devalue the Yuan in the interest of staying in the export market competition, then the knock-on effects will threaten currency and market stability everywhere. Firstly in China’s Asian neighbors; then in the developed (Western) economies; and, finally, in the emerging markets (some of whom are BRICS partners) to which developed economies are heavily exposed via Emerging Markets funds and ETFs – a negative feedback cycle results.

Bitcoin is (amongst other important functions) a currency, a commodity and a payment network. More portable than Gold, more anonymous and quicker than the banks, as well as free from censorship and centralized control. Any global economic turmoil will see the use of Bitcoin sky-rocket. Ordinary wage-slaves and wealthy non-elites, alike, are losing trust in governments and the banks/corporations that pay-roll them. Bitcoin adoption doesn’t require desperate campaigning – the need for the functions of Bitcoin already exists, and the innovative functions of Bitcoin will capitulate in a rapid manner when the conditions are ripe.

Bitcoin users and campaigners, just keep on informing and educating. Bitcoin is trustless and decentralized – it’s not about the price; it’s about spreading the use of the Blockchain – in its ultimate use-case a bitcoin will, quite rightly, be worth very little in nominal pricing terms.

Also read: How Bank of Japan QE is Forcing China’s Hand
Also read: IMF Warns of Market Turmoil

What do readers think? Please comment below.

Global Economy

Gold

Gold has broken above $1,250 and is now in a strong uptrend toward its daily 200MA at $1,285.

Selected Economic Data

  • China GDP (quarterly)
    • expected: 7.2% (previous: 7.5%)
    • actual: 7.3%
  • China Industrial Production y/y
    • expected: 7.5% (previous: 6.9%)
    • actual: 8.0%
  • Japan Trade Balance
    • expected: -0.91T (previous: -0.92T)

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Bitcoin Price Collusion

Time of analysis: 06h30 UTC

Asian Session

As Asia trade began, toward the end of the US trading day, the Bearish Buccaneers were at it again. Their signature attack strategy goes like this: hundreds of small sustained (and identical) market orders bend trade to the downside and then a volley of heavy artillery (100+ BTC market orders) intended to ignite a sell-off.

BitFinex Depth Chart and Market Orders – end of US trading day 20 October

It’s not clear if this is a new cartel or the same group that had ridden the market bareback all the way from $680 down to $275. The previous signature is, by now, lost in the bitbin of cyberspace, but the tactic remains the same: wait for a retrace and when it hits 1.618, start machinegun fire… as soon as price and its moving averages form a confluence, push price action under the 20MA with a series of co-ordinated large market orders. Naturally, the sellers pile in. Take a profit, rinse and repeat.

The strategy and the tactic is sound as long as a downtrend is in force, but when the market’s mood toward Bitcoin has changed to positive then the strategy, now in opposition to underlying wave dynamics, becomes a recipe for loss.

BitFinex Hourly Chart

The magenta arrow shows the time and effect of the Bitcoin Buccaneers’ attack documented in the screenshot above. It can be seen how the market responds by buying into the new lows – instead of (as had been the case previously) taking the bait and joining the sell-off.

There are several explanations for the coordinated sell-offs that have now become a daily phenomenon. Perhaps the group is applying its old strategy in the hope of precipitating another sell-off. Without market support, they are clearly wasting ammunition. Perhaps this is the exchanges (and their institutional friends) who are trying to generate momentum by pushing price down to higher lows in the hope that the market will take the hint, buy in and begin a stampede above $400. Readers are welcome to shed additional light or air opinions in the comments section below.

Time of analysis: 08h00 UTC

European Session

Bitstamp Hourly Chart

Summary

Sideways consolidation continues between $368 and $400. $368 is the level of the daily 20-period moving average. Price going below $368 will be a warning that the bears have plans. With coordinated support from a bearish cartel price can be forced below $368 – however, notice in the inset chart on the right (Bitstamp daily chart at the start of the rally 2013) how even a dunk below the daily 20MA reverses straight into strong upside price action.

Analysis warns that the downside is limited. Joining a sell-off – especially short-selling – is fraught with risk because buying demand may surge price up from any level and at any moment. Have buy orders ready down below but don’t sell a bitcoin for less than $590 before December.

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Readers can follow Bitcoin price analysis updates each weekday on CCN. In-depth analysis articles are published every Sunday.

Disclaimer

The writer is fully invested in Bitcoin via BTC-e and Bitfinex. Trade and Investment is risky but not as risky as some other things out there. Take care only to take action in the market when you are 100% sure of the outcome. CCN accepts no liability whatsoever for losses incurred as a result of anything written in this Bitcoin price analysis report.

Bitcoin price charts from TradingView.
Images from Shutterstock.

Last modified (UTC): July 12, 2015 10:58

Venzen Khaosan @venzen

Market analyst and Open source developer with a keen interest in blockchain technology, consensus mechanisms and the decentralizing effect. He has found a solution to the PKI mechanism. Email me to discuss.