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Bitcoin (BTC) Shorts Fall More Than 38% In A Day But Price Continues To Fall

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Bitcoin (BTC)’s desperate buying frenzy seems to have come to an end as institutional investors that pumped the price begin to take profit. Retail bulls are still expecting a rally to $10,000 and the whales know that which means it is very unlikely to happen. The daily chart for BTC/USD shows the weakness in the price action as the rally has come to a halt after a parabolic run up. This rally is now very similar to the parabolic rally we saw during 2017-18. We all know how that turned out so there is no reason to assume otherwise in this case. There is however more reason to be bearish this time as the sentiment is too positive and the NVT ratio is higher than it has ever been in Bitcoin (BTC)’s entire trading history.

The network value to transaction ratio for Bitcoin (BTC) is like the profit to earnings ratio for stocks. It is a good indicator of how overbought or oversold the price is at a certain level. The NVT ratio peaked out at 213, the highest it has ever been. This is a very bearish development in the face of all the optimism as it shows that there is a lack of real interest in Bitcoin (BTC). Even most bulls would agree that the recent pumps in the price of Bitcoin (BTC) had anything to do with retail buying interest. It was a few big players that propped up the price to sucker in desperate buyers and to liquidate ambitious short positions. So, why then does everybody expect the price to rise to $10,000 and beyond? This is because most people believe we are in the late stages of the 2014-15 cycle which is as misleading as this whole situation could get.

In a recent analysis, I discussed how BTC/USD has not even capitulated yet because we are in the 2014 part of the cycle and not the 2015 one. The ongoing market cycle has to be longer than the previous one, not shorter. All of these factors point to one conclusion and that is a bearish reversal after the short lived bullish euphoria. The upcoming bear trend is likely to inflict maximum pain on the market and wipe out a lot of fraudulent blockchain projects. In an interesting turn of events, Bitcoin (BTC) shorts have fallen more than 38% today but the price has continued to decline. Now, most might wonder why that would be because if the number of margined shorts drops or are liquidated in case of a short squeeze, that should mean the price has to rise, right? Well, yes but there is something on Bitfinex called “claiming”.

This is when you convert a margin position into an exchange position without the trade showing on the order books. It is very likely that this drop was orchestrated by a single or a few big players who “claimed” their short positions. Those who have been following this chart for the past few days might have noticed how the number of shorts remained unaffected for the most part even as BTC/USD pumped through critical resistance levels. Now, all of a sudden the number of margined shorts has dropped more than 38% with the price dropping at the same time. If this can be pulled off so easily, what does it say about BTCUSDShorts? It says that this chart has now just become a tool to influence retail buying and selling. The manner in which the price rallied the past few weeks has made it clear that there is a lack of real buying interest in the market and it is going to end in more blood when the whales pull the plugs.

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Can Bitcoin Surge As Fast As It Did In 2017?

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In 2017, Bitcoin successfully hit $19,783, a figure which till date, is still the asset’s all-time high. The mark is still being used in comparison with the coin’s current price especially by naysayers who believe the glory days are not only over but probably will not be seen again.

However, what‘s most important is that back then, Bitcoin reached the $8,000 mark and less than a fortnight later (11 days precisely), it gained $2,000, hitting the $10,000 mark.

At the moment, Bitcoin is struggling to reach and surpass the $8,000 mark, a price it had previously surprised, several days ago. So, what’s the likelihood that we will see a similar bull run?

Current Predictions

Bitcoin was at $7,800 in November 2017. However, a little less than a month later, it had its biggest surge, hitting its all-time high in December. So, ever since the price rally began this year, analysts and experts have been trying their best to figure out the possibility of a similar bull run.

When Bitcoin started to break through earlier set resistance levels up until it reached $8,000, many analysts were sure that it was definitive proof of the end of the crypto winter that had plagued the sector since last year. This assertion was understandable considering the fact that it was about $3,150 in December last year and in about 6 months, shot up to $8,000.

The larger part of this rally happened in two months, – April and May – supporting the claim that Bitcoin usually sees massive gains in short periods.

According to Thomas Lee, co-founder of Fundstrat Global, in a tweet last month;

“Reminder that BTC generally generates all of its performance within 10D of any year. –ex the top 10 days, BTC is down 25% annually since 2013.”

Another researcher, Alex Saunders, has also stated that the $8,300 is significant because less than two weeks after Bitcoin hit that mark in 2017, it was able to reach its all-time high.

How Soon Can We Expect Another Surge?

At the moment, pretty much everyone agrees that the market will do fine. Some have expressed that pullbacks are almost inevitable but they aren’t and shouldn’t be a deterrent as the price would definitely correct itself after a few of those. However, there is no general agreement as to when exactly another surge will occur.

A cryptocurrency trader and investor has however predicted that Bitcoin would move fast. In a tweet The Rhythm Trader (@Rhythmtrader) said:

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Report: Bitcoin (BTC) Futures Trading Approaching All-Time High in May

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According to a new report published by The Block, the month of May is on pace to set a new all-time high in Bitcoin futures trading for the CME Group.

In a note sent to clients on May 21, the Chicago-based firm and backer to one of the largest Bitcoin futures trading exchanges, claims that May is “shaping up to be the strongest month ever for CME Bitcoin Futures.” The firm also reports a record day of trading on May 13, with 33,677 contracts being traded for the equivalent of $1.3 billion in BTC. Daily volume for Bitcoin future trading has also spiked during the month of May to 14000, up from 9900 in April.

CME Group continued,
“Since launch in December 2017 we have traded over 1.6MM contracts (+8MM equivalent bitcoin) representing over $50BN in notional value ($4.2BN per month).”

Beyond daily volume for futures trading, new account creation is also on the rise for the group. CME reports that the number of accounts for Bitcoin futures trading has climbed to an all-time high 2500, which the group interprets as a booming desire for traders to hedge on the risk of BTC,

“The number of unique accounts continues to grow showing that the marketplace is increasingly using BTC futures to hedge bitcoin risk and/or access exposure.”

Despite the seemingly bullish market for Bitcoin and cryptocurrency, with the price of BTC up close to 100 percent since the start of April, traders remain divided over the future valuation for the coin. BTC Futures, such as those offered by the CME Group’s exchange, have become a popular alternative for traders looking to speculate on the market movement for Bitcoin. Futures contracts have long been one of the more dominant products for the traditional financial markets.
Users can open long or short positions on BTC futures, depending upon where they see the price of the currency moving. With Bitcoin hovering near the $8000 mark for its second day in a row, both the bears and bulls are holding their breath over the next price movement for BTC. Some analysts are now calling for the currency to fall back to $6K before making another run at the all-time high. Considering the massive gains and bullish rally Bitcoin went on since the start of April, after more than 12 months of declining price and ‘crypto winter,’ some investors are anticipating a correction.

However, others see Bitcoin entering a perfect storm of market conditions for renewed investment. Given the economic uncertainty being generated over deteriorating negotiations between President Trump and President Xi, a looming U.S.-China trade war has bullish indicators for the price of cryptocurrency.

In addition, the mounting adoption of cryptocurrency by major industry players such social media giant Facebook and investment bank JP Morgan Chase have given a vote of confidence for BTC that was not present during 2017’s bull run. While FOMO will continue to drive the price of crypto, in both directions, the growing futures market provides another avenue for would-be speculators.

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Top 5 Tips Prior to Engaging in OTC Bitcoin Trading

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When it comes to dealing with Bitcoin trading, there are numerous options one can easily explore. Whether it is through regular exchanges, OTC trading, or peer-to-peer trading, any and everyone option can be worth exploring. However, those who want to experiment with OTC Bitcoin trading need to keep some very basic tips in mind at all times. No one wants to lose money in a way that could have easily been avoided.

Contents [hide]

  • 1 Private OTC Chat Rooms are a No-no
  • 2 Never Deal With Just Individuals
  • 3 Proper OTC Desks are Easy to Find
  • 4 If it’s too Good to be True…
  • 5 Don’t Invest Money one Can’t Afford to Lose

Private OTC Chat Rooms are a No-no

On the surface, there won’t be too many people who bat an eye where private OTC Bitcoin trading groups are concerned. Similar to pump signal groups or altcoin discussion groups, OTC trading is not necessarily a business activity out in the open at all times. Over the past few years, there have been plenty of legitimate private OTC groups, albeit the number of potential scammers should never be overlooked either. Since these criminals know people simply want to buy BTC at a competitive price, they will try to obtain customer funds without handing over any BTC.

Whereas most people would automatically assume such businesses are shut down pretty quickly, the reality is often different. Since these trades involve private groups, the information is usually not shared with the rest of the world. This is primarily because users know all too well they opted for a less-than-legal option and must pay the price for trying to take a shortcut. That doesn’t mean fake private OTC Bitcoin trading groups aren’t shut down in the end, though, but it seems unlikely any stolen money will ever be recovered.

Never Deal With Just Individuals

Over the past few years, the number of people who own Bitcoin has seemingly increased. As such, one would expect the OTC market to grow by leaps and bounds. Anyone is free to buy and sell Bitcoin at their own pace, as long as they don’t try to make millions of dollars from doing so. When traders deal with very high volumes of Bitcoin and fiat, they will need to obtain a money transmitter license sooner rather than later.

This is why private individuals offering OTC Bitcoin trading services are best avoided. It is very uncommon for any of these individuals to be officially licensed. As such, these users often tend to scam others and run off with their hard-earned money. While it may seem convenient to deal with an individual rather than a proper company, the results will often be disappointing or even worse.

Proper OTC Desks are Easy to Find

As the popularity of Bitcoin continues to grow by leaps and bounds, there are more and more legitimate and registered companies who engage in OTC Bitcoin trading. Some of the well-known names include Japan’s Coincheck, Kraken, Huobi, and Itbit.  These are just three examples of how many companies users can go through for all of their Bitcoin needs. It might involve a bit more work to get everything set up accordingly, but it greatly reduces the risk of losing any money in the process.

Speaking of finding a legitimate Bitcoin OTC trading provider, there are more and more companies joining the fray. This further expands the number of options users have to legitimately obtain Bitcoin through methods which suit their needs the best. To properly engage in this type of business activity, users should always conduct their thorough research before making any decision. It takes effort to get in on the Bitcoin action, after all.

If it’s too Good to be True…

It is better to avoid such offers altogether. No one will openly reject an option to buy Bitcoin slightly below market prices, but any price difference that seems too good to be true is almost always a scam. Offers like these will become a lot more apparent when the next Bitcoin bull run commences and FOMO starts kicking in accordingly. It is very difficult to buy Bitcoin at the real market price, primarily because the value fluctuates quite a bit every single day.

Moreover, any relatively shady business which explains why a user or company is engaged in OTC Bitcoin trading will usually indicate a scam looms ahead. Similar to the point above, conducting thorough research can usually prevent users from losing their money. A somewhat dubious background story combined with a too cheap Bitcoin price is usually a major red flag. Even so, there will be people who fall for these kinds of schemes simply because greed gets the best of them.

Don’t Invest Money one Can’t Afford to Lose

The golden rule as far as overall investing is concerned is to never spend money on such markets if the funds can’t be written off when things go awry. The same principle applies to OTC Bitcoin trading, as Bitcoin’s price is very volatile. Given the current value per BTC, there is a lot of money involved when one tries to obtain a full Bitcoin. As such, do not try to chase potential profits if the money is not there to spend on extras like these in the first place.

Disclaimer: This is not trading or investment advice. The above article is for entertainment and education purposes only. Please do your own research before purchasing or investing into any cryptocurrency.

 

source :nulltx

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