Bitcoin Forum

Is there a relation? Does high volume often indicate that bitcoin will change it's price more drastically?

In technical analysis volume is used as a confirmation indicator. You may notice that the epic rally of the early april didn't took much volume at all which probably signaled a certain weakness. On the other hand the volume spiked  really hard on the 12th of april and that was clearly a sign of the continuation of the downward trend.

https://i.imgur.com/Ubos4bs.jpg
On the 16th of april we had a lovely hammer candlestick formation (http://tutorials.topstockresearch.com/candlestick/Bullish/Hammer/TutotrialOnHammerChartPattern.html) which usually predicts a reversal. Strong volume indicated that the smart money successfully accumulated a huge position at the best price.

No. There is no correlation and no relation, and don't believe any of the nonsense that the technical analysis people will write.

Does Mt-gox report volume in number of transactions, or in number of bitcoins transacted? Ie, are 0.10 BTC 10x count as 1 or 10 in their volume reporting?  Should be 1.

you mean, take it with a grain of salt

How is this for a grain salt: of the 4 "hammer candlestick formations" on the chart above (3/6, 4/12, 4/16 and 4/19), only one predicted correctly. 25% success is fail.

Don't get me wrong.
Hammer candlestick formation works only after a downtrend. To find them we look for the dips.
The candlestick that you've mentioned  (4/12) is hammer, indeed , but it is not located properly , so there is no hammer formation there  :)
  

Sorry, I was being lazy with the terminology.  3/6 and 4/19 are actually called "shooting stars, but they also predicted reversals that did not happen.

so as I understand, the generation of new bitcoins becomes slower and slower.. right?

no,  we are talking about the daily trading volume at MTgox exchange. The same applies to other exchanges as well.




oops, I didn't checked them all.  3/6 looks more like a shooting star. Reversal didn't happen but there was a little drop in price during the next day.
 4/19  should  have a  bit longer upper shadow (at least twice the length of the real body of the candle) in order to be considered a shooting star.

The average price of a BitCoin, if I understand correctly follows the following equation:

Price of an average BitCoin = Total Market Capitalization of All BitCoins / Number of BitCoins

If people are selling BitCoins for more than they paid for it, the price goes up. If people are selling BitCoins for less than they paid for it, the price goes down.

"Price of an average BitCoin" is just layman's way of saying "Weighted Market Price of BitCoin".

Volume is just how much buying and selling going on. It doesn't tell you if people are selling up the price or selling down the price.

Drops tend to be sharper than rallies. That is why volume might work as an indicator. If we assume that the big investor is also the wiser investor, then your explanation could make sense.