Yes, look back to the last 18 months as plenty of time to buy sub $800

Bingo!




I am still amazed that you seem to flip flop more than a game of pong.

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The big three Chinese exchanges (OKCoin, Huobi, and BTCC) have all disabled margin trading for all clients onshore in China. This is in response to the recent on-site “inspections” (aka Ride The Red Dildo) by the PBOC.

With margin trading eliminated, the question remains what happens with existing leveraged positions. If the PBOC forces the exchanges to unwind all positions, that will negatively impact the price. The CNY spot book of each exchange is a combination of leveraged and unleveraged traders. The ratio of leveraged longs to shorts is of interest. If the net leveraged positioning is long, that means a combination of leveraged shorts and long sells were matched against them. Given that we just witnessed a new all time high in the CNY price of Bitcoin, I estimate leveraged longs outnumber leveraged shorts. In the event of a margin call, as the exchange unwinds both sides, the net effect will be a drop in price. The magnitude of the drop depends on the size of the imbalance.

30% initial margin (3.33x leverage) was the normal amount of margin offered. The collateral will be exhausted if the price moves 30% below or above the entry price of longs and shorts respectively. Given that the exchanges themselves lent funds to speculators, should the price move further than 30% they would suffer a principal loss. For illustration purposes, assume that the long / short ratio is 100 XBT / 50 XBT. The 50 XBT shortfall was provided by long sellers of Bitcoin. If the book was unwound, 50 XBT would need to be sold into the order-book. Hopefully, the order-book liquidity is sufficient such that the average execution price is no lower than 30% (the initial margin) below the average entry price of all long positions.

However, now that margin is removed, the actual liquidity will be substantially lower. If the margin positions were to be unwound, it would happen at the worst possible time. Some white knight whale would need to fully fund purchases of Bitcoin as it was dumped onto the market. Last week the BitMEX Bitcoin / USD 100x leveraged swap, XBTUSD, traded a record of nearly 100,000 XBT over a 24-hour period. The actual open interest fluctuated between 10-20x lower than the recorded trading volume. Given that trading fees are 0 in China, I estimate open interest is 100x lower than recorded trading volumes.

The big three exchanges routinely traded around 5 million Bitcoin per day during the recent pump. Using a 100x divisor, assume that each exchange’s actual open interest of loans is 50,000 XBT. Also assume that longs represent 60% of that total, and shorts 40%. That leaves a net 10,000 Bitcoin of required selling on each exchange. 30,000 Bitcoin in total must be sold across all the exchanges. The differentiations between the exchanges is quite small, which means that they all have the same customers. It is also the same handful of market makers responsible for all the liquidity in China. As trades happen on OKCoin, liquidity will be removed from Huobi and BTCC simultaneously. Therefore, we cannot sum all the liquidity offered by each exchange.

30,000 Bitcoin is worth 268 million CNY. That is not chump change when you consider all purchases must be fully funded. If we take the most liquid order-book (OKCoin), how low would the price go if 30,000 Bitcoin were dumped?

Each day brings new developments on how the PBOC is constricting business operations of Chinese Bitcoin exchanges. The Fear, Uncertainty and Doubt (FUD) will depress buyer appetite further decreasing on-exchange liquidity. The pace of the forced margin call dictated by the PBOC will determine how far the price dips. I haven’t performed any extensive analysis on the order-book depth but my finger in the air estimation is a 10% to 15% drawdown from current levels. Hence my short term price target for Bitcoin is $650.

If and when the PBOC forces a China Bitcoin margin call, it will be an amazing buying opportunity. Without leverage, the only marginal sellers are Chinese miners. After the plunge, the marginal demand for Bitcoin will be higher than the supply offered by miners. The demand for a store of wealth not controlled by a government or central bank remains strong in China. I reiterate my call for USDCNY of 9.00 by the end of 2017. That would take Bitcoin substantially over its recent all time high of 8,895.98 CNY. It is still too early to tell whether the unwinding of margin positions will be orderly or chaotic. Much depends on exchange CEO’s fluffing skills. Get on your knees, boys: for the sake of Bitcoin.

reprinted from Bitmex Crypto Trader

Maybe. The rising price/falling volume makes me a little nervous about which direction the next move will be.
Normally I wouldn't care too much but I get paid tomorrow for 3 months work and it's going to make a difference  

You gotta consider this trade volume matter in context, which means zooming out a bit to either weekly or 3 days.. you cannot really look only at daily volume or time intervals shorter than a few days in order to get a decent grasp of the situation... that's my thinking.

The mere fact that trade volume may decrease for a few days is not indicative that the price battle is over or that there is some kind of manipulation that is about to take place or major change in direction. 

A temporary drop in trade volume for a few days is merely an indication that some of the parties are regrouping.. which could take a few days and even trickle down for nearly a week before they resume the battle (in a more voluminous way).

And if we don't? If we think of them as a tool, sort of like hiring people and asking half of them to dig holes and the other half to cover those holes up just to prove some work was done. If too many line up willing to do that you reduce their compensation, if not enough show up you raise the salary. But now these people keep showing up and asking that they control how many holes they dig. And then hire shills to run ads and try to influence your decision  

The question is how low will it go down this year will it be under 200 usd or will it hold the in 500 USD spot until it reaches the 1000 USD again.

Your idea is not so bad, but perhaps the distribution of your funds should be in reverse: the higher the price would correspond to a smaller amount, and the more the price go down you should have enough funds to acquire more, as a kind of martingale.

I remember the US briefly banned shorting during a crash years ago. It was legal until they decided to briefly ban it, then they unbanned it again and it went back to legal. China's the same, it's legal until they say it's not, then back to legal when they say it is.

maybe one of the results of the chinese sniffing around is that we discover they've been naked short selling it all these years. could be fun.

Who's there?