Following mid-November's price spike, the bitcoin markets have resumed regular service. The price has dropped slightly, while trading volumes have reverted to more commonly observed levels.
The price started last week at $385, according to the CoinDesk BPI, and closed the week at $366 – a fall of 5%.
Trading volumes fell precipitously by 39% last week compared to a week earlier. The number of coins that changed hands across all exchanges tracked by Bitcoinity stood at 3.68 million – down from 5.99 million over the previous seven days.
The declining price and decreased trading activity last week is in stark contrast to the previous week's bidding frenzy. The price then achieved a high of $458 on 13th November.
Market watchers salivated as they anticipated a price breakout. The Nasdaq's resident blogger Martin Tillier, who has plenty of experience in the forex markets, advocated a bullish interpretation of the upswing. He pointed out that the Dollar Index had achieved a one-month peak, thus was due to decline. This meant that bitcoin traded against the dollar would gain in value.
"That could well be the short squeeze to end them all," Tillier wrote in his column last week, predicting that a breakout would take the price back up to $450 and beyond.
t was not to be, however. Instead, the bitcoin price has reverted to trading in the $350-$370 band, putting paid to hopes that last week's rally was the start of a new bull market.
Tillier's analysis remains optimistic, even in this trading band. In the less optimistic scenario where the price doesn't rocket, he wrote:
The bitcoin price may obtain succour from an unexpected source in coming days: China's central bank. Even more incredibly, the central banks of Japan and Korea are also helping to pile upward pressure on the bitcoin price.
It's not that East Asia's central bankers have decided on self-obsolescence, en masse. They're doing something more predictable – firing the opening shots of what's widely seen as a new currency war in the region.
It all started when the Bank of Japan cut interest rates unexpectedly at the end of October, helping to push the price of the yen down, relative to the US dollar. This move boosted its exports.
Now Japan's competitors, Korea and China, have followed suit. The People's Bank of China announced rate cuts last week, apparently to check the price of the renminbi relative to the yen.
As Nasdaq's Tillier has pointed out, it helps to look at both sides of a currency pair, even if you are a bitcoin obsessive.
Bitcoin-yuan trading accounted for 76% of trading volume in the last six months, according to Bitcoinity. If the yuan is going to get cheaper, then bitcoin grows in value.
Of course, the usual caveats about BTC/CNY trading volumes from the major exchanges dealing in that pair apply. While the trading volume figures are likely amplified as a result of their no-fees trading model, it's not often that bitcoin bulls can celebrate the monetary policy moves of central banks.
Possibly pulling the price in the opposite direction, however, the US Marshals Service (USMS) has announced an auction of 50,000 bitcoins that belonged to accused Silk Road mastermind Ross Ulbricht in December.
The agency is using the same format as the July auction of 30,000 coins that was won by venture capitalist Tim Draper.
Is another auction going to help or hinder the bitcoin price? Let's review what happened in the July auction. The run-up to the bid submission deadline saw the price rise gradually, from $444 on 18th May to $579 on 26th June. The auction took place on 27th June.
Rumours swirled in the following days, as the USMS began a slow drip of information about the auction. On 1st July, the agency said the coins were won by a single bidder – Draper as it turned out, who outed himself the following day.
Bitcoin markets appeared distinctly nonplussed by Draper's unveiling, if the price is any indicator. The price hovered in the $600s for much of the month, only to begin a steep downward decline in August. That slide hasn't really stopped since.
So another auction – this time with two-thirds more coins on offer – may not be the sort of news traders hoping for a much-needed rally want to hear. Tim Draper has announced that he will bid this time too.
The price started last week at $385, according to the CoinDesk BPI, and closed the week at $366 – a fall of 5%.
Trading volumes fell precipitously by 39% last week compared to a week earlier. The number of coins that changed hands across all exchanges tracked by Bitcoinity stood at 3.68 million – down from 5.99 million over the previous seven days.
Last week's giddy heights
The declining price and decreased trading activity last week is in stark contrast to the previous week's bidding frenzy. The price then achieved a high of $458 on 13th November.
Market watchers salivated as they anticipated a price breakout. The Nasdaq's resident blogger Martin Tillier, who has plenty of experience in the forex markets, advocated a bullish interpretation of the upswing. He pointed out that the Dollar Index had achieved a one-month peak, thus was due to decline. This meant that bitcoin traded against the dollar would gain in value.
"That could well be the short squeeze to end them all," Tillier wrote in his column last week, predicting that a breakout would take the price back up to $450 and beyond.
t was not to be, however. Instead, the bitcoin price has reverted to trading in the $350-$370 band, putting paid to hopes that last week's rally was the start of a new bull market.
Tillier's analysis remains optimistic, even in this trading band. In the less optimistic scenario where the price doesn't rocket, he wrote:
"Breaking that [downward trend] depends on establishing a new pattern of higher lows and higher highs. If BTC/USD holds above the $350 point ... it clears the way for that pattern to take hold."
Could central banks boost the bitcoin price?
The bitcoin price may obtain succour from an unexpected source in coming days: China's central bank. Even more incredibly, the central banks of Japan and Korea are also helping to pile upward pressure on the bitcoin price.
It's not that East Asia's central bankers have decided on self-obsolescence, en masse. They're doing something more predictable – firing the opening shots of what's widely seen as a new currency war in the region.
It all started when the Bank of Japan cut interest rates unexpectedly at the end of October, helping to push the price of the yen down, relative to the US dollar. This move boosted its exports.
Now Japan's competitors, Korea and China, have followed suit. The People's Bank of China announced rate cuts last week, apparently to check the price of the renminbi relative to the yen.
As Nasdaq's Tillier has pointed out, it helps to look at both sides of a currency pair, even if you are a bitcoin obsessive.
Bitcoin-yuan trading accounted for 76% of trading volume in the last six months, according to Bitcoinity. If the yuan is going to get cheaper, then bitcoin grows in value.
Of course, the usual caveats about BTC/CNY trading volumes from the major exchanges dealing in that pair apply. While the trading volume figures are likely amplified as a result of their no-fees trading model, it's not often that bitcoin bulls can celebrate the monetary policy moves of central banks.
US Marshals worry bitcoin markets... again
Possibly pulling the price in the opposite direction, however, the US Marshals Service (USMS) has announced an auction of 50,000 bitcoins that belonged to accused Silk Road mastermind Ross Ulbricht in December.
The agency is using the same format as the July auction of 30,000 coins that was won by venture capitalist Tim Draper.
Is another auction going to help or hinder the bitcoin price? Let's review what happened in the July auction. The run-up to the bid submission deadline saw the price rise gradually, from $444 on 18th May to $579 on 26th June. The auction took place on 27th June.
Rumours swirled in the following days, as the USMS began a slow drip of information about the auction. On 1st July, the agency said the coins were won by a single bidder – Draper as it turned out, who outed himself the following day.
Bitcoin markets appeared distinctly nonplussed by Draper's unveiling, if the price is any indicator. The price hovered in the $600s for much of the month, only to begin a steep downward decline in August. That slide hasn't really stopped since.
So another auction – this time with two-thirds more coins on offer – may not be the sort of news traders hoping for a much-needed rally want to hear. Tim Draper has announced that he will bid this time too.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended Content
Editors’ Picks
EUR/USD clings to gains above 1.0750 after US data
EUR/USD manages to hold in positive territory above 1.0750 despite retreating from the fresh multi-week high it set above 1.0800 earlier in the day. The US Dollar struggles to find demand following the weaker-than-expected NFP data.
GBP/USD declines below 1.2550 following NFP-inspired upsurge
GBP/USD struggles to preserve its bullish momentum and trades below 1.2550 in the American session. Earlier in the day, the disappointing April jobs report from the US triggered a USD selloff and allowed the pair to reach multi-week highs above 1.2600.
Gold struggles to hold above $2,300 despite falling US yields
Gold stays on the back foot below $2,300 in the American session on Friday. The benchmark 10-year US Treasury bond yield stays in negative territory below 4.6% after weak US data but the improving risk mood doesn't allow XAU/USD to gain traction.
Bitcoin Weekly Forecast: Should you buy BTC here? Premium
Bitcoin (BTC) price shows signs of a potential reversal but lacks confirmation, which has divided the investor community into two – those who are buying the dips and those who are expecting a further correction.
Week ahead – BoE and RBA decisions headline a calm week
Bank of England meets on Thursday, unlikely to signal rate cuts. Reserve Bank of Australia could maintain a higher-for-longer stance. Elsewhere, Bank of Japan releases summary of opinions.