Bitcoin Traders Adopt 'Wait and See' Stance As China Impact Fades

After a wild start to 2017, bitcoin took it slow this week.

This relative calm was punctuated by a handful of sharp fluctuations, which saw the digital currency’s price fall to as little as $810 on 15th January and rise to as much as $914 on 18th January, data reveals.

But, despite the calm, there was uncertainty under the surface.

According to analysts, the market is still reluctant to make big moves in the wake of continued news from China that has found its central bank more actively engaging with local exchanges.

Trader reluctance

For now, this is keeping traders on the sidelines.

Ryan Rabaglia, head trader and digital asset specialist at Octagon Strategy, described the situation as one where 'wait and see' is still the attitude.

"Although the last round of news out of the mainland has seemingly been fully digested, we're still seeing most traders sitting on the sidelines," he told CoinDesk.

Bitcoin Prices Spike Above $900 But Turbulence Remains

Bitcoin prices passed $900 today, though this feat was diminished by several rallies that ultimately failed to push its value above this benchmark.

Overall, the digital currency rose to as much as $904.76, after falling below $880 earlier in the session, climbing above this level amid modest volatility.

Later in the session, the price mounted another comeback, hitting a high just above $905, according to the CoinDesk USD Bitcoin Price Index (BPI). At press time, however, the price had dipped again to a value of $894.95.

This upward movement represented the latest session of relatively mild price volatility, at least compared to the sharp price fluctuations experienced earlier this month.

Most notable, however, about the day's trading, may have been the lack of any serious decline over the day's trading.

Bitcoin prices enjoyed their latest climb in spite of new Chinese regulatory developments that found the nation’s exchanges responding publicly to pressures from the People's Bank of China, the country's central bank.

Bullish sentiment

Still, market sentiment has been bullish, according to figures provided by a handful of exchanges, even with the confirmation that major Chinese exchanges Huobi and OKCoin had stopped offering margin trading. The market was 91% long on 19th January, Whaleclub figures reveal.

Tranquil price movements - what's next?

Bitcoin prices have thus far enjoyed a day of reasonably tranquil price movements.

During today’s session, the digital currency fluctuated between $820 and $835, having fallen to as little as $820.05 at 12:15 UTC and risen to as much as $834.70 at 02:15 UTC, according to the CoinDesk USD Bitcoin Price Index (BPI).

The lack of volatility that bitcoin prices have seen thus far today coincides with a broader trend, as bitcoin prices have been moving between $800 and $840 since late last week. The average price is currently $828.82, BPI data shows.

Traders have been watching the markets with suspense and waiting to see what steps the People’s Bank of China (PBoC), the country's central bank, will pursue after it held meetings with major Chinese exchanges BTCC, Huobi and OKCoin earlier this month. The PBoC later pledged to keep a closer eye on the ecosystem.

“We’re all waiting to see whether the PBoC does anything serious," said Tim Enneking, chairman of cryptocurrency hedge fund EAM.

What Central Bank? China's Big Bitcoin Traders Are All-In On Bitcoin

Despite recent reports that suggest China's central bank is casting a critical eye on domestic bitcoin exchanges, local traders remain largely unfazed.

In conversations with CoinDesk, members of the country's bitcoin trading community, as well as cryptocurrency exchange operators who were not involved in the talks, expressed their belief that the increased oversight of the industry will be a boon for the technology in the long term.

Over-the-counter trader Zhao Dong, who says he trades 250 BTC (or about $150,000) in the digital currency daily, said in interview that he had "no worries" about the future of the tech.

Overall, he believes that, rather than hostile, the People's Bank of China merely wants to limit investor risk, and that it has no intention of harming or otherwise limiting use of the technology.

Zhou Shouji, the operator of FinTech Blockchain Group, a bitcoin hedge fund that claims to have amassed $20m in investments, stressed that, despite the "high volatility" in the market, local traders "are not worried" about any potential government actions.

"Everyone gets the message," he added.

The statements come as the impact of the decision by the PBoC to make public its meetings with bitcoin exchanges BTCC, Huobi and OKCoin has left the bitcoin market in flux. (Yesterday, it hit its lowest point in one month).

At press time, the price of bitcoin was $770, a value that was roughly 40% below peak prices observed earlier this year.

A representative of China-based exchange Yunbi, for instance, noted that he is "not worried" about the impact, despite the fact his exchange was not in conversation with the PBoC.

Financial Times:Bitcoin was the best performing currency of 2016

The year 2016 was a good one for bitcoin. The virtual currency became the best performing currency by more than doubling its value, rallying 126 per cent on the year, while the runner-up, Brazil’s real, gained 21 per cent.

The rally had caught the attention of Chinese regulators concerned that the currency was being use to facilitate capital flight. Authorities had gotten wind of the fact that some of their citizens were using it to take cash out of the country while circumventing strict regulations. People would buy bitcoin onshore, then sell it offshore for another currency, and move the money to a bank account. In the past six months, the yuan has accounted for 98 per cent of bitcoin trading.

Aside from these activities, according to analysts, bitcoin has begun serving the same purpose as gold. At a time of increasing political uncertainty, it is being used as a “risk-off trade when [people] are concerned about what’s going on in the capital markets,” Chris Burniske, an analyst at ARK Investment Management told the Washington Post.

Yet bitcoin is very volatile. When news broke that hackers had stolen an equivalent of $66m of bitcoin from the Hong Kong exchange, bitcoin prices slid by 20 per cent.

But after last week’s slump, Bitcoin’s price began climbing again and there is evidence the currency is becoming less volatile.

Over the past three months, bitcoin’s volatility (30-day vs the US$) has displayed similar volatility to the yen, the British pound and the euro while being at times more stable than the Brazilian real, the South African rand and even gold. And it has achieved this without the help of a central bank.

Bitcoin ETF Could Amass $300 Million in Assets

A new investor note published today by analyst Needham & Company projects that a bitcoin exchange-traded fund (ETF) could attract as much as $300m in new assets in its first week alone.

Writing about the potential impact of an ETF on the nascent market, analyst Spencer Bogart speculates that such an approval is likely to have a "profoundly positive" effect on the price of bitcoin, and that the $300m estimate is "conservative". "

The resulting effort to source the underlying bitcoin for the trust would likely drive the price of bitcoin up significantly," Bogart writes.

Bitcoin's roller coaster - 2017 edition

2016 may have been a dynamic year for the price of bitcoin, but 2017 is shaping up to be a dramatic one already.

Bitcoin's race past $1,000 (and subsequent gyrations above and below that line) have already sparked headlines (both good and bad) worldwide, as today's dramatic fall from above $1,100 drove a massive influx of interest in the the digital currency.

If you’re just tuning in to the action, you may be wondering how things got to this point in the first place.

To get you up to speed, it may be helpful to look back at the past week's major price developments that took exchange markets near new all-time highs – and, as today showed, dramatic lows.

Bitcoin aims all-time high!

Things began heating up within a few short days.

As reported by CoinDesk on 4th January, early trading this week saw the digital currency’s price drift ever higher after crossing the $1,000 line.

A high of $1,060 meant that the price was inching closer to its all-time high of $1,165.89, reached on 30th November, 2013, according to data from the CoinDesk Bitcoin Price Index (BPI).

It was during this time as well that mainstream media sources, including The New York Times and The Washington Post began taking note, which continues to today

Heading down the hill?

This morning’s dramatic price plunge, however, would cast a shadow on those bullish sentiments.

Just hours after climbing closer to the all-time high set in 2013, market averages suddenly tumbled. Markets had been fluctuating between the $1,080 and $1,070 lines, according to BPI data, before falling to as low as $887.47.

Overall, USD-denominated markets fell as much 23%, with CNY-denominated markets tumbling more than 15% as well.

However, in the hours since, the price of bitcoin has recovered. At press time, the average market price is $978.25.

Conclusion

Of course, we'd be remiss to note that bitcoin is an open-source technology – meaning, tweaks to its core protocol are ongoing.

Amidst all the ups and downs, a number of bug fixes were released that showcase how bitcoin could continue to evolve and become more useful, even in the face of challenges.

2013 to 2017: Comparing Bitcoin's Biggest Price Rallies

Is it 2013 or 2017?

For bitcoin's investors, traders and enthusiasts, an answer to this question might be harder to give today than you might imagine.

Bitcoin prices surged above the $1,100 mark this week (near all-time highs) only to sink back down to earth amid higher volatility and foreboding – if not unclear – news out of China. Taken together, the developments evoke memories of 2013, when the price of bitcoin surged to similar levels, bringing the digital currency to international attention.

Both rallies were buoyed by bullish sentiment among those actually trading in the market, and somewhat more eerily, both would face headwinds from events in China.

At the same time, the ecosystem is fundamentally different today than it was in 2013-2014, both in terms of the exchange ecosystem (where the majority of trades are happening) and the amount of public interest in the digital currency itself (and its underlying blockchain technology).

So, how do the two bull-runs stack up side-by-side?

We explore some similarities and differences below using data from the CoinDesk Bitcoin Price Index and data provider Bitcoinity, as well as comments from industry participants.

1. 2013's rally was short-lived

First, let’s start with the price.

The graph on the right shows the price as it progressed from 6th September to 6th January in 2013, a four-month period during which the price shot past the $1,100 mark to its highest price ever.

Now, let’s take a look at the past three months.

Seems a bit different, right? Or maybe not? Now that we’ve laid the scenes for the respective rallies, let’s compare the two.

The most glaring difference developing between the two rallies lies in how quickly they came together. Prices climbed quickly during the 2013 rally, soaring more than $600 in a two-week period.

By contrast, the recent rally developed more slowly over time. This state of affairs changed over time, particularly as December drew to a close, and prices inched closer to $1,000.

The data suggests that the 2013 rally was far more volatile in its buildup, whereas in the aftermath of the peak, there are more similarities in terms of volatility.

In total, the price of bitcoin was above $1,000 for just 10 days in 2013, and only one day in 2014, according to BPI data. In 2013, prices quickly returned to the $600-$700 level, a low that, at press time, hadn't yet been reached in 2017.

On the other hand, both have similarities.

Both rallies were buoyed by bullish sentiment among stake-holders, with those trading or watching the markets expressing a strong belief that markets would keep on rising – "to the moon", so to speak.

2. Volume is now higher

Price data, however instructive, is only part of the picture, though.

To look at another side – and gain a window into some of the ecosystem differences between now and then – one should take a closer peek at volume data between the respective rallies.

For that, we'll turn to data provider Bitcoinity, which publishes information on global bitcoin trading markets.

Let’s cast a wide net and look at the volume picture over a five-year period, predating the 2013 run.

Volatility and Liquidity: How Bitcoin Compares to its Crypto Competitors

I established that bitcoin is well on the path to being the most stable currency in the world, an astounding claim, one that surprised even me.

Yet, when I break down the mechanism in which price stability is achieved, it makes sense.

Price stability happens at the exchanges. If you want to buy or sell a currency, and there’s millions of buyers or sellers on the other side of the market wanting to take your order, you will see a very small change in price movement from your trade.

When we look at fiat forex markets, the orders comprise of speculative trade, international trade and remittances. National trade within a currency never hits the forex exchanges.

But with bitcoin nearly all merchant and remittance activity worldwide hits the exchanges to convert to fiat, thus the potential for a much deeper order book. Another way to say this that with bitcoin, every cup of coffee you buy, anywhere in the world adds to market stability.

Its ceiling on stability should be orders of magnitude higher than fiat currencies.

The study concluded bitcoin would achieve fiat level volatility by mid-2019, which in my opinion is a level that will create a positive feedback loop that leads to more mainstream comfort with the currency.

This should open the way for bitcoin as a viable mainstream currency for the use of day to day commerce, further increasing its stability. A side conclusion was that payment startups such as BitPay are too early, and that their time will come in 2-3 years.

All of bitcoin’s competitors tote features that bitcoin is lacking – faster confirmation times and private payments. Both of these features will most likely be coming to bitcoin as layer two protocols in 2017.

If and when this happens, the battle for payments and general money will be fought solely on the playing field of economic network effects, that of liquidity and volatility.

Bitcoin remains the standout contender in this regard.

Bitcoin Price Moves Within $25 of New All-Time High

Bitcoin prices are up $100 on the day, having already shot past the $1,100 mark.

Markets have risen nearly 10% over the course of the day’s trading, according to data from the CoinDesk Bitcoin Price Index (BPI), which hit a high of $1,141 at time of writing before falling back.

With the move, global exchange averages have inched closer to the BPI's all-time high of $1,165.89, set on 30th November, 2013, leaving them roughly $25 below that level.

The digital currency's price appreciated sharply after crossing the $1,100 line, quickly spiking to a high of $1,129.28, before meeting some resistance.

Bitcoin prices will likely face continued resistance as they approach the all-time high, as figures from BFXdata.com show that there are more sell orders than buy orders at many price points between $1,137 and $1,140.

In the last 24 hours, more than 60% of BTC/USD orders on Bitfinex have been buy orders, according to BFXdata. Adding potential resistance, however, is that this figure has now fallen below 50% for the last hour.

CNY-denominated markets are also notably up more than 23% for the day, currently averaging ¥8,219.03 after opening the day at ¥6,686.60. The price is currently at ¥7,293.60, BPI data shows.

Bitcoin prices have surged since the start of the year, building on major gains seen at the close of 2016. Average bitcoin prices across global markets exceeded $1,000 on 1st January and have been edging upwards since.