Bitcoin Reflections: 10th March 2018

Bitcoin has had a rough week falling over 20%. This is the sort of volatility that spurs the speculative nature of the asset. With an increasing amount of investors looking at the asset, nowadays it seems that Bitcoin finds itself as headline news around the world. For the long term Bitcoin bulls this is a good thing.

In the short term however we see how political and internal shocks can have a large impact on price. Here are a couple of things that happened in the span of the first week of March that may have played a role in this latest round of fluctuations:

1. Nobuaki Kobayashi cryptocurrency liquidations

Nobuaki Kobayashi is a Tokyo based attorney and bankruptcy trustee for the now-defunct Mt. Gox exchange . He disclosed on Wednesday (7th March 2018) that he has offloaded $400m worth of Bitcoins to repay creditors and still has $1.9b more that needs to be offloaded. Reports do indicate that his average selling price has been $10,105. Suggesting that he may have started to offload them recently. The volume on major exchanges broke the 20day Moving Average on Wednesday and remained above it for the rest of the week.

2. Binance API bot hack

Coincidentally on Wednesday major crypto exchange Binance released a statement that the part of their system that allows professional traders to trade via automated trading bots had been compromised. This put added pressure again on Bitcoin as exchanges have been and will continue to be the Achilles heel to the market. This may have triggered more panic selling as users tried to get their funds off the exchange. Until we do not move towards decentralized exchanges this is going to be an issue that can create massive volatility in the market. 

3. SEC statement of Exchange Regulation

To make things even more interesting on Wednesday the SEC made an statement saying that cryptocurrency online trading platforms must be registered and must follow additional rules. This created additional panic in the market for exchanges such as Bittrex and Poloniex. We are going to have to keep a very close eye on this as this could make it harder for these exchanges to bring on more new traders which is critical to continue boosting liquidity. Most major exchanges have already made it very difficult for new traders to verify their accounts and get their limits increased.  

4. Failure at a technical level

ProButterfly premium subscribers got a ping on Monday morning stating that Bitcoin had been rejected at a key level and volume had been declining steadily. For the shorter horizon traders in the community they were able to take advantage of this and strap on shorts that dovetailed into the other fundamental news that drove prices even lower creating a great trade opportunity.

In our Basic Crypto Currency Course we teach the basics of how to identify trends and trade with them. Above you can see a chart which highlights the key levels that we should be looking to time our entry and exits into the market. You can see that volume had been steadily decreasing for the last 2 weeks. That changed on Wednesday. We are going to be closing watching the volume and price levels.

5. G20 Conference & Bitcoin

Later this month U.S. Treasury Secretary Steven Mnuchin has indicated he is planning to raise the subject of cryptocurrency regulation at the G20 Conference. This could turn out to be a catalyst event for Bitcoin's price break either to the downside or upside and as such traders and investors should be keeping a look out for what is voiced. During the last CFTC meeting in the United States we saw what positive sentiment did to price. 

It has been an eventful week in Bitcoin. They say a week in Crypto is equivalent to a month or more in regular markets. Things are constantly changing as we need to stay on top of the things. In the short term large price swings for Bitcoin will always be there. If you are planning to invest in this market you need five things:

  1. Define your time horizon
  2. Execute a trade based on a strategy 
  3. Size your position correctly
  4. Set your stop and profit objectives
  5. Stick to the plan!

Always trade with a plan and life becomes a lot easier. 

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