So, why exactly does this happen? (Trading Question)

[solidshotnosh]

For the past several ticks in 1 hour intervals, 30, 15, and even 5 minutes the price was generally trending down, and quite fast too.

My question, is what "factor" causes such a huge upswing,( as I write this, it topped at around 580).

I mean, you're supposed to always trade the trend, and never buy on instinct right? Is this just investors out weighing traders, and that's why we see these wild spikes even when all signs are pointing towards sell?

I also have a few questions about the sheer amount of what I assume is bot trading at any given minute, seeing as it seems like it would be unprofitable considering the commission fees, but I'll save that for another thread and after some more research.

[rammy2k2]

CHINA

[johncoin]

Everybody panics and selling their BTC. Just stay and hold it. This chaos will remain for few days/weeks until the price goes up again

[polarhei]

I have little clues of this, I see this at least three times this year.

It shows there is panic selling like before, but still healthy for the time being as I mine more than I buy. Currently The event is caused mainly by misreading notice of People's Bank of China dated on 5 Dec 2013, Baidu Stops receive bitcoin for their services.

If you like to get, it's time to get.

[spin]

Currently The event is caused mainly by misreading notice of People's Bank of China dated on 5 Dec 2013, Baidu Stops receive bitcoin for their services.

If you login to btc-china you will se they are not receiving any money at the moment.  This is from https://vip.btcchina.com/account (requires login).

Dear BTC China valued customer: Due to new government regulations, BTC China will temporarily suspend CNY deposits. BTC deposits/withdrawals and CNY withdrawals are not affected, and will continue to operate in the interim. Rest assure that BTC China will continue to operate normally. Please pay attention to our notices for updates, as we find other ways to allow for CNY deposits. We deeply apologize for any inconvenience. BTC China, December 18, 2013
To stabilize the recent turbulent Bitcoin market and minimize potential market manipulation, BTC China will end the 0% trading fee promotion, effective immediately, and revert to the 0.3% trading fee. We deeply apologize for the sudden change. BTC China, December 16, 2013

[solidshotnosh]

I know about China, and I know the common "Buy and Hold" mantra, but that's not what I'm asking.

I'm asking, why, in any market, would people all of a sudden start buying a lot of volume when the it's been trending down?

It just doesn't make sense unless it's prospective investors that see the price at anything below 600 as an entry point, even though all signs point towards it trending down more.

And by trending, I'm referring to those lines that represent the moving average.

[Hawker]

Liquidity.  The market is very small and has a lot of cash sloshing about in it.  Picture a wobbly plate with water - it all flows violently the same way at the same time.

[MatTheCat]

I know about China, and I know the common "Buy and Hold" mantra, but that's not what I'm asking.

I'm asking, why, in any market, would people all of a sudden start buying a lot of volume when the it's been trending down?

It just doesn't make sense unless it's prospective investors that see the price at anything below 600 as an entry point, even though all signs point towards it trending down more.

And by trending, I'm referring to those lines that represent the moving average.

There is the general belief with any asset class, that there exists states of it being:

a) Overbought
b) Oversold

Obviously, when an asset is oversold, it means that the asset is at a relative bargain price, and therefore people will rush in to buy, in anticipation the the market force of 'buying momentum' will push the asset back up towards the mean, and then overshoot some thus becoming 'overbought' (time for a trader to sell). Furthermore, because people believe that this belief exists, this will further add to the effect of buyers rushing in when the price is deeply depressed (oversold). Furthermore again, because market manipulators understand this psychology, they can use their buying power to instigate a rush back into a collapsing asset, through the means of engineering the sort of 'buy signals' that traders are trained to look out for.

The difference with buying the dips and selling peaks in a bear market, is that there are always going to be many more people who realise losses than gains, which has the effect of slowly wittling away the level of capital interested in trading the asset, thus decreasing the buying power, thus adding to the contraction effect of the declining asset.

The asset hits its rock bottom, when the least amount of people, or rather the least amount of capital is interested in buying that asset, which is why everyone complains that they are never able to get in at the perfect times.......by the very definition of a market top or a market bottom, hardly anyone does stand on either side of those maxed or minimised trades.

[RodeoX]

Liquidity.  The market is very small and has a lot of cash sloshing about in it.  Picture a wobbly plate with water - it all flows violently the same way at the same time.

I think liquidity is a major factor also. In fact it's hyperliquid. Unlike stocks you could be all out in 15mins. Add to that a lot of very unsteady hands and you get to see what the NYSE looked like in the 1800s. Personally, I like it. Attempts to dampen the volatility may also kill the golden goose. Just be strong and enjoy the ride.

[tbosman]

Liquidity.  The market is very small and has a lot of cash sloshing about in it.  Picture a wobbly plate with water - it all flows violently the same way at the same time.

I think liquidity is a major factor also. In fact it's hyperliquid. Unlike stocks you could be all out in 15mins. Add to that a lot of very unsteady hands and you get to see what the NYSE looked like in the 1800s. Personally, I like it. Attempts to dampen the volatility may also kill the golden goose. Just be strong and enjoy the ride.

It's quite the opposite of liquid. The liquidity is a measure of how much volume you can trade without the price moving alot. This is exactly what happens with bitcoins, the price moves alot whenever someone buys alot.

Lets compare that with the stock market: i have no order book on us with my broker so i took a dutch blue chip, ING Bank. Market cap is 50 billion, first five layers of the book offer you about a million euro order with a price movement about 2 basis points, that is 0.02%. Correcting for market cap (6B for btc) this amounts to a 120k usd order of btc. On mt gox this will push the price more than 20 usd up or down, which is about 4%.

I wouldn't call that hyperliquid.

[Jcw188]

I understand what you're saying OP unlike some others with their answers (no offense to them).  Yeah, there has to be some point where the buyers start thinking it's a good deal and start outweighing the sellers.  For instance, maybe there is some long term support at the level where it bounced?  (I'm not sure).   Like it had support at that level in the past, or sometimes it's psychological, like ppl were saying oh it's under $500 it's a steal, I have to buy hand over fist.

[zimmah]

I think this market is so full of amateur 'investors' that it's highly unstable. Once the percentage of bitcoins traded by amateurs gets dwarved by experienced investors and actual customers that buy products with bitcoin, these things will become less common.

I have seen a lot of people post that they bought at $1000 and sold at $600, that's not average stupid, that's advanced stupid.

[Lethn]

Well to be honest I couldn't really tell you much because I can't see the whole chart because what your showing there seems to be the end of a price movement, when you have the start of a price movement there are usually a number of chart patterns you can follow that will explain what happened but sometimes I can be just people panicking too, if this was during the China announcement that may be an explanation.

I hardly pay attention to the paper prices beyond checking the exchange rates, I prefer to trade altcoins so I can get more Bitcoin.

[infinitybo]

Solidshotnosh, this happened because of BTC China.
Indeed it would not longer be accepting yuan deposits, due to bans put in place by their central bank.

[RodeoX]

to clarify, I meant liquid in the sense that it can be cashed out quickly. But your definition of market liquidity is correct. I should have used a better term.

[solidshotnosh]

Solidshotnosh, this happened because of BTC China.
Indeed it would not longer be accepting yuan deposits, due to bans put in place by their central bank.

I'm not asking why the price went down, I'm asking why do people BUY when the price is trending that fast downwards.

I'm starting to think this 650+ that we're currently sitting at is just a propped up value by the investors who couldn't afford to buy in at 1000, who saw their window @ 500-700, and we will soon see another sell off once they start getting whipped around a bit by the volatility of the market.

[tbosman]

to clarify, I meant liquid in the sense that it can be cashed out quickly. But your definition of market liquidity is correct. I should have used a better term.

Im still not sure what you mean then. Are you talking about the 3 day settlement period for stocks? Because i think most brokers will let you cash out immediately after selling with the incoming money as collateral. Also i don't think it really matters for trading per se.