Bitcoinised – Bitcoin’s resurgence may not be short-lived

Updated: June 6, 2016

The Bitcoin price continues to make new highs after four days of ranging between 519$ and 548$ at Bitfinex. The volatillity is back in bitcoin. Ten and twenty dollar price swings are not something bitcoin has had in awhile, not to mention these massive one-day moves. In 2015, people got excited over a ten dollar move. Even with the news of Bitfinex being fined by the CFTC was not enough to start a sell-off. In the past, any type of negative news about exchanges was enough to start some selling. Even with the continual claims that bitcoin needs bigger blocks now or people will move to altcoins is not deterring the price from making new highs. Everyone wants to know “why is the price going up?”

China China China

Most people on social media and media outlets point to China as the main reason for the price going up. The Chinese currency Yuan is being devalued by the government which makes holding value in bitcoin more attractive. Worldwide interest rates are low and traditional investments do not yield very much profit. Buying some Bitcoin is an alternative for some. There are restrictions on moving capital out of China and speculation that people are buying Bitcoin to move value out of China. Allthough these reasons are widley accepted as the “China Narrative” if you look a litle bit closer you can see that is only one part of the puzzle.

The Volumizer

Most of the Bitcoin trading volume comes from the Chinese exchanges. These exchanges do not have trade fees that you pay every time you make a trade. They make profit by charging fees on Bitcoin and CNY that are loaned out to trade with and OTC trading. The volume at these exchanges has to be take with a grain of salt. Since there are no fees on trading then it would be possible to “wash trade”. A wash trade is a pracctice where you trade with your self in order to pump up the volume or manipulate the market. Anytime that there are no trade fees this could happen. If you have spotted strange price and volume movement together then you might have spotted the “Volumizer” akin to spotting the Bitcoin lochness.

Another thing to keep in mind is that even though the exchange might have the trading pair BTC/CNY someone in their basement in North Dakota could be trading on the exchange. There are plenty of western traders that use the Chinese exchanges so any volume there can not simply be attributed as commming out of China. Hold on, wasnt Ethereum going to take over bitcoin in market cap and price? What about the lagging development and lack of innovation in bitcoin. The Econmoist has already called the top of the Bitcoin rally and that Ethereum will surge as Bitcoin falls.

Ethereum taking over?

Misleading Etherium Chart

Did they reverse the chart?
Just two weeks ago the DAO and Etherium were all the rage. The price was going up and DAO was in the process of raising a record-breaking amount in crowd funding. Maybe you were caught up in the fever too. Were you one of the people that thought bitcoin was dead and that Etherium is the new thing that will take over? If you thought that or still do then, you are not alone. The Economist released an article “Etherised” that warns of a short-lived bitcoin rally and uses a misleading chart to display Ethereum´s market cap over bitcoins. Just to clarify any confusion let’s take a look at the raw numbers: Bitcoin 8.9 Billion USD$ Etherium 1 Billion USD$ source coin market cap. Although Etherium has gone up more in percent against the USD$ this year its market capitalization is still well below Bitcoin.

Is this the start of a pattern? Below on the chart, you can see when Brian Armstrong proclaimed that “altcoins are a distraction.” That Bitcoin is the thing that needs to be concentrated on.

After this remark, the price stayed below 315$ for months. Now with the change of heart, the rebranding of Coinbase exchange to GDEX and publishing of the article on May 24th by Coinbase co-founder Fred Ehrsam “Ethereum is the Forefront of Digital Currency.” the Bitcoin price has surged above 500$. If the pattern holds true, then we could see months of the Bitcoin price above 500$.
Bitcoin Flip Flop
Image Credits

Will Bitcoin stay above 500$ for months the same way it stayed under 315$ for months in 2015?

Let us know on twitter what you think the price will be in 6 months