We have been following a gradual decline of the bitcoin price during the past four days and today the announcement came that PayPal merchants can now accept bitcoin. This analysis is provided by xbt.social with a 3 hour delay. Read the full analysis here. Not…
We have been following a gradual decline of the bitcoin price during the past four days and today the announcement came that PayPal merchants can now accept bitcoin.
From the analysis pages of xbt.social, earlier today:
The price chart hardly made a bump and a slow slide lower has continued all day. Why? Surely, this is the kind of momentous news that heralds wider adoption, which promises more bitcoin transactions, and that adds fundamental value to Bitcoin? One imagines traders running to their trading stations, quivering with anticipation and hitting the “Buy” button several times to get in on the euphoric rally. In the financial echelons of Wall Street and Singapore, wealthy investors stop sipping their morning coffee and digest the news: “PayPal accepts bitcoin now…?”. Feverishly on the phone to the Winkelvii, each on separate conference lines: “Buy! Buy! Buy!”
But, no. The bitcoin price charts a path that looks like the sinking of the Titanic.
The matter of whether news determines price has been a matter of discussion since the early part of the previous century. The subject was explored, by this analyst, in a CCN article entitled “Does News Really Move the Bitcoin Market?” and came to the conclusion that the subjective positivity or negativity of a news announcement does not determine the market’s direction. Instead, history shows that the market often uses news announcements (irrespective of their content) to capitulate a move that was in progress already.
This view is consistent with the Elliott Wave Principle school of thought that holds that the market is not moved by news, or even fundamentals, but by a stranger beast: the collective mood of all participants in the market. In a word: the market’s Social Mood.
We see this phenomenon clearly in today’s price chart. Some have objected that it may just be “delayed reaction”, but, objectively, the reaction is clear to see in the bitcoin price chart: The announcement has come and gone, and the selling pressure is intensifying. The market is acting out an underlying negative sentiment and wants to see price lower.
This, of course, has no bearing on the fundamental value of Bitcoin or the Blockchain. Remember that the often mistaken belief that the bitcoin price is moved when miners or merchants cash out is too simplistic and ignores the highly speculative – the commodity – aspect of bitcoin as a market instrument. Every cutting-edge hedge fund and bank-division trade manager has a finger in this pie, and large amounts of capital funds flow through the exchange order book every day. The bulk of daily bitcoin transactions can be attributed to speculative exchange transactions. Hence, when speculators see profits to be made during the next day or two on the downside, they care little for the news that will affect price a week or month or a year from now.
That Bitcoin is the de facto disruptive technology of our time was priced into the instrument during the exuberant rally above $1,000 in 2013. Those kind of price levels will pale in comparison to what is coming. Yet, for now – as during the past year – we have to endure the controlled price lows while the current set of large players buy up as much bitcoins as they can and position for the inevitable launch.
Bitcoin price movements do frequently coincide with news announcements, but the subjective quality (or implication) of the news can be shown to have no consistent effect on the direction of price movements. Bitcoin is a payment network/currency/commodity that exhibits some of the strongest fundamental values and qualities of any asset in the modern world. This is why I often refer to it as a Super Commodity – its impact has only begun to be felt and it’s Blockchain will eventually reorganize society. In this context, PayPal’s fatalistic acceptance of bitcoin is less of a Happy Day and more of the march of progress.
The bitcoin chart can be seen making a slow stepwise descent to support near 1440 CNY and $232 (Bitfinex) in tiny waves. Buying interest bumps price upwards on each new marginal low. It is difficult to determine whether we will see an acceleration of this trend when price breaches support or whether these are the final waves of the larger decline since the of end February this year.
Price movements since then have shown twists at each expectation – and the current juncture may be no different. Either price is about to turn or we see the larger Head and Shoulders pattern play out to lows near $200 / 1300 CNY or below. There is no clarity at present and no trade recommendation is made at this time.
The Bitfinex depth chart – mountains of orders collide.
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The writer trades bitcoin. Trade and Investment is risky. CCN accepts no liability for losses incurred as a result of anything written in this bitcoin price analysis report.
Last modified: January 25, 2020 10:09 PM UTC