Mt.Gox Weekend Trade: News, Analysis

By
Venzen Khaosan @venzen
6 years ago

At 07h00 UTC Mt.Gox BTCUSD price skirted below $100 once more, continuing the relentless decline since the break of $250 on Thursday. Volatility is increasing as traders take advantage of low weekend liquidity to chase price for profits.

Questions about where this crash is going to find a bottom abound, since a rout in Mt.Gox’s exchange price negatively affects other exchange prices. At the time of writing, there are no reports of specific events that may be leading this decline and the only reasonable conclusion is that negative expectations for next week may be the cause.

Update 12h58 UTC

Mt.Gox Transaction testing is being reported on Reddit. The author speculates that the price advance from $100 to $140 may be attributable to the “freeing up” of stuck transactions. However, this may prove unlikely, as the price structure that unfolded to $140 is corrective in nature, indicating additional price lows may follow.

 

Views

The bad news surrounding Mt.Gox as a result of long running exchange software issues, as well as a morass of customer service issues has lead to widespread public criticism and votes of no confidence in its management.

Said Andreas Antonopoulos in a tweet yesterday:

 

The Gox relocation, delay and more bad communication shows that the problem is one of management. Won’t be fixed with a patch.

 

And from the ever outspoken Tyler Durden of ZeroHedge:

 

The disruption of Mt.Gox will be another test for Bitcoin… a test Bitcoin will survive… For Mt. Gox though, I think it’s pretty much game over.

 

After-hours Trade – Analysis

It has to be pointed out, however, that for many currencies that trade over the weekend there a phenomenon called “Filling the Gap”. It works like this:

Due to the majority of trades being executed during office hours, the effect of thinner weekend trade is often to push price to extremes – extremes that are less likely during busy market hours when the market has more participants who tend to oppose one another – thereby minimizing the duration of price movement in a single direction (up or down).

Since weekend trade is less “liquid”, price can be pushed into areas where the majority of traders (now absent) would have opposed such movement.

After the weekend, when day traders return to their desks they will notice a large gap between the closing price of Friday and the opening price of the Monday session. It is standard practice to trade in the direction of the price gap until Friday’s price has been re-established. This is called “Filling the Gap” or “Gap Trading” and whenever weekend trade creates such a gap there is a 99% probability that early trade on Monday will close the price gap.

If trade on Saturday and Sunday establishes a price level below $110 then we will most likely see trade returning price to $110 on Monday. Bear this fact in mind when seeing reports forecasting doom for Monday, and bear in mind the reason why weekend trade leaves price vulnerable to a strong direction push.

 

Back where we started.

Last modified (UTC): February 22, 2014 14:10

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