Wall Observer BTC/USD - Bitcoin price movement tracking & discussion

[jbreher]

do person to person transactions, localbitcoin, darkmarket etc.. have much of an impact on bitcoins price? Or is the price mostly determined/driven by exchanges?

Every transaction happens at exactly the bitcoin price. A willing buyer and a willing seller meet at a mutually agreeable figure. The 'market price' is merely an abstraction.

[600watt]

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

30k btc to be sold is surely not doing any good to the price. on the other hand on bitstamp alone 35k btc have been dumped on jan.5th. and another 27k next day. bitstamp has a market share of less then 0.2% (the real market share value is surely higher due to fake volume on chinese exchanges)

edit: missing word

edit2: i noticed your bearish posts lately. at least you make it clear that you have a short position.

[Tzupy]

Let's see where the support is now.

[600watt]

Let's see where the support is now.

the next 24 dumps are critical.

[BitcoinNewsMagazine]

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

30k btc to be sold is surely not doing any good to the price. on the other hand on bitstamp alone 35k btc have been dumped on jan.5th. and another 27k next day. bitstamp has a market share of less then 0.2% (the real market share value is surely higher due to fake volume on chinese exchanges)

edit: missing word

edit2: i noticed your bearish posts lately. at least you make it clear that you have a short position.

Sorry I have never shorted bitcoin. I can also make a good case that we have just finished an abc Elliott Wave correction and should resume upward trajectory soon with a price projection for Primary Wave 3 of $1800. Here is a preliminary chart, when I have some time I will write up a full article on my Elliott Wave count for bitcoin.



Need to make sure the bottom is really in at $735 on Bitfinex first.

[petahashminer]

seems $ 800 and

5500 yuans is holding..

[uhoh]

seems $ 800 and

5500 yuans is holding..

Indeed. First dump in a while that hasn't resulted in a 20 dollar spread and a ticker that looks broken.

[600watt]

30k btc to be sold is surely not doing any good to the price. on the other hand on bitstamp alone 35k btc have been dumped on jan.5th. and another 27k next day. bitstamp has a market share of less then 0.2% (the real market share value is surely higher due to fake volume on chinese exchanges)

edit: missing word

edit2: i noticed your bearish posts lately. at least you make it clear that you have a short position.

Sorry I have never shorted bitcoin. I can also make a good case that we have just finished an abc Elliott Wave correction and should resume upward trajectory soon with a price projection for Primary Wave 3 of $1800. Here is a preliminary chart, when I have some time I will write up a full article on my Elliott Wave count for bitcoin.



Need to make sure the bottom is really in at $735 on Bitfinex first.

please excuse my incorrect assumption then. your knowledge about the topic is much greater than mine.

[uhoh]

Vinny Lingham nearly got rekt with that mini-dump

https://twitter.com/VinnyLingham/status/820340119970332672

EDIT: Spoke too soon. 800.030 is the low. Stamp lagging at 816!

[JayJuanGee]

30k btc to be sold is surely not doing any good to the price. on the other hand on bitstamp alone 35k btc have been dumped on jan.5th. and another 27k next day. bitstamp has a market share of less then 0.2% (the real market share value is surely higher due to fake volume on chinese exchanges)
 

I get what you are saying that someone had to sell all those coins on January 5 and 6 on Stamp; however, traded is not the same as dumped, merely because the price went down during the process of the trading.  

Let's see where the support is now.

Right...

A potential test of $800 and $780.

[Killerpotleaf]

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

nice analysis

i think its doubtful PBOC will order all positions to be closed within a 24 hour period... from what i hear they want to bring an element of stability and health to the bitcoin market, they want things to be done right... not be the source of investors losing there shirt...

and you have to understand that the reason why price has dropped recently is because of this FUD... market is saying " if shit hits the fan what should price be " and then moves close to that price before the shit actually hits the fan.

I suspect the PBOC will allow margins, but not naked shorts... I think they are more concerned with AML, capital flight, and that exchanges aren't about to go GOX.

at this point, price has priced in a negative outcome to all this PBOC regulation, i believe we might see more downward pressure if some shit comes out, but i dont see more then -15% and very temporary, after all once its all said and done what are we left with? PBOC approved bitcoin exchanges  , there also a not half bad chance that not much shit comes out of this at all, exchange have been doing the proper KYC, maybe they'll get more guidance on how to prevent capital flight, a few rules to fallow, some reports to file, and a slap on the wrist for running bots.

[the artful bodger]

30k btc to be sold is surely not doing any good to the price. on the other hand on bitstamp alone 35k btc have been dumped on jan.5th. and another 27k next day. bitstamp has a market share of less then 0.2% (the real market share value is surely higher due to fake volume on chinese exchanges)
 

I get what you are saying that someone had to sell all those coins on January 5 and 6 on Stamp; however, traded is not the same as dumped, merely because the price went down during the process of the trading.  

The South China Morning Post suggests that crash was exacerbated by margin calls on Huobi. The exchange couldn't cope with the number of traders logging in, and effectively locked most of them out while they got margin called. A typical experience was described by a trader called Mr Ding who lost 409 bitcoins plus an extra 1,228 bitcoins on loan because he couldn't log into Huobi. The exchange told him it was his loss, and they were not compensating him.

That's probably why the PBOC started an inspection, because Huobi wouldn't compensate its traders. Without that margin trading the price should be less volatile. The PBOC's only protecting traders from similar situations, it's not banning bitcoin or closing exchanges.

http://www.scmp.com/business/banking-finance/article/2061997/chinas-bitcoin-market-another-ticking-time-bomb

“I have taken on big risks when making leveraged betting, but the collapse of the trading system made me unable to run stop-loss orders, so I think the platform should compensate for investors’ losses,” Ding said.
Ahead of the market crash, Ding had borrowed 995 million yuan from Huobi by pledging a principal consisting of the 409 bitcoins he already owned. He then bought a further 1,228 bitcoins with the loan.
Most of his holdings were compulsorily sold out by Huobi during the price collapse while he was unable to access his account.
Wu Xing, head of marketing at Huobi, said the log-in delay was caused by a torrent of visits and selling orders, which exceeded the capacity of the website.


“[The loss] was due to irresistible factors and not included in the compensation scope. We are sorry and understand the feelings of the investors,” she said.

[Chainsaw]

Long term support for the bottom:
<pic>

Descending wedge in the shorter term:



Descending wedges are typically reversal patterns, and we would have to break a strong support line to defy expectations upon pattern resolution. The support line will force the shorter term descending wedge to terminate before its forced termination at convergence. The two trends converge by 1/18 14:00.

I am expecting one more leg downwards, constrained by both the wedge and support.
If these hold, then the lowest low would be $686.

Some solid TA for once. Didn't catch that wedge myself

One thing I like about it is, the top of that wedge hasn't really been defined on-volume yet. So one way it could invalidate the short term trend would be to reshape itself into a downward channel, rather than wedge.

...and then we have transitioned into the cup and handle pattern :-)

Having broken on low volume, with no real follow through, this is looking increasingly likely. The case would strengthen greatly if we get a rally which stops on the yet-to-be-defined, resistance line parallel to support.  This is one of those rare scenarios where my short term expected position is bearish, but for exactly those reasons the medium term outlook is bullish.

[Killerpotleaf]

http://www.scmp.com/business/banking-finance/article/2061997/chinas-bitcoin-market-another-ticking-time-bomb

he went max leverage long on the third massive pump, with no stop loss order??
he must of thought it would break ATH and fly away.

[r0ach]

atm the divide between miners and devs are based on insults and broken promises. the code is out, but 3/4 of miners won't run it. what's the way forward?

You did not compose much of a valid question since you never cited any type of goal or endgame in the first place.  If you do the math, you will come to the conclusion that Bitcoin needs around 50 TPS (8 MB + Schnorr sigs) to have any type of market penetration in the upper middle class of the world with current population levels (assuming LN doesn't work out).  But, that's the problem - even if you achieve that level, people will demand it have 1000 TPS instead, and so on - never ending goals.  

This means Bitcoin will always be nothing but a centrally controlled technocracy in the end if people are allowed to say it's never finished and always has to have a team of their choosing control it.  Either this thing can be Grovers/Shors quantum computing proofed and then unleashed with nobody working on it, or there is no point in it's existence.  Meaning, Bitcoin has to have some type of endgame or that's an attack vector in itself to be controlled by technocrats.

To me, that endgame is either 8 MB + Schnorr signatures, or if it actually functions right (which I'm not convinced it will) LN + whatever is required to prevent an apocalypse from everyone closing channels at once (which nobody seems to have any damn clue of how to solve that problem).  It seems like to me that transactions would have to be queued in an orderly line to prevent it, and then you're back to square one of not having solved any problem without centralization.

[Chainsaw]

Hey, I've just noticed a pattern that this crash fits into, but it's only visible at very long range.

...

When the pressure-relief gasket blows on these bubbles it always corrects to just below the top of the previous propellor pattern. Same every time but increasing in size. Then there's a period of consolidation, followed by a slow rise, then steep rise and another gasket-blow.

Keep in mind that this pattern will hold so long as our bottom rests anywhere between $789.78 (Finex) and the previous bottom, at $504, changing only the slope.  The cup-and-handle scenario does not violate this scenario, and is extremely bullish.

I'd still love to see fear trigger a bit more of an overreaction to the downside. Rather than cause technical damage, I see short-term down as the fastest path to rally resumption.  

A Chinese New Year's formal announcement by the PBOC, assuaging go-forward fears...that's my dream scenario. I figure if we get some sort of sudden, positive external event like that, we are more likely to resume the rally in the short term. Conversely, if we simply exhaust, the (stronger) consolidative base would rise more slowly over the coming months.

[becoin]

i think its doubtful PBOC will order all positions to be closed within a 24 hour period... from what i hear they want to bring an element of stability and health to the bitcoin market, they want things to be done right... not be the source of investors losing there shirt...

You're wrong! Don't get fooled by narratives about PBOC "consumer protection" worries! They've stepped in because bitcoin price increased 200% in a short amount of time. If Bitcoin price have decreased instead PBOC would have never intervened to protect investors!

[the artful bodger]

i think its doubtful PBOC will order all positions to be closed within a 24 hour period... from what i hear they want to bring an element of stability and health to the bitcoin market, they want things to be done right... not be the source of investors losing there shirt...

You're wrong! Don't get fooled by narratives about PBOC "consumer protection" worries! They've stepped in because bitcoin price increased 200% in a short amount of time. If Bitcoin price have decreased instead PBOC would have never intervened to protect investors!

What about Mr Ding getting locked out of his Huobi account while he had 1638 leveraged bitcoins force margin called? Almost all leveraged Huobi traders got wiped out like him because Huobi wouldn't let them log in, and Huobi refuses to compensate them. The PBOC had to do something, or look ineffectual.

[JimboToronto]

Good morning Bitcoinland.

Still consolidating with almost no price change... $821USD (Bitcoinaverage). Not much volume either.

Hopefully the PBOC inspection panic is done and we can get back to normal growth.

[ErisDiscordia]

Bumping against the 4h EMA all weekend long...will it break down again?

I predict a violent move within the next 6 hours. No idea about direction.