This week on Planet Bitcoin - 29 April 2016

Friday 29 April 2016

TL;DR: buckle up, it’s looking like a bumpy ride.

After steady rises over the course of most of the last two months, from a low of around $400, and a lengthy period of consolidation, we’ve finally had a correction. $470 proved to be too strong a barrier and bitcoin took a rapid tumble of around $35, before moving back up to $445, and hopefully above in the coming days and weeks.

Chart

Zooming out to the six-month chart, we can see that $470 has been a barrier in the past. Retracements are normal and healthy elements of market action, with traders taking profits before the next move upwards, if indeed that’s where we’re heading. Volumes are low, which wouldn’t normally bode well for convincing moves. There may be reasons for that, though. There has been some speculation among the bitcoin community that miners may be holding onto their coins in anticipation of higher prices after the halving, currently due in July. Thus supply is drying up. This could well be a wider dynamic - with the recognition that selling pressure will be permanently lower in a couple of months, it doesn’t make sense to sell now.

Naturally, some traders seek to capitalise on a shorter-term timeframe. Bitcoin is unfortunately still prone to market manipulation, and when the volume of USD swaps is high (i.e. the amount of borrowed money to take out leveraged long BTC bets), that is an attractive pool of liquidity for a large trader to tap and buy back lower. Back in early June 2014 swaps on Bitfinex hit a high of over $20 million. That also marked a medium-term high in the price of around $700 that we have never seen since. On that occasion, it was a mini-bubble and traders’ irrational optimism; this time, it may have been a predictable step along the way to a higher high, since borrowed money wasn't anything like as high.

Assuming that’s what’s happened here, naturally or otherwise, we may well see a resumption of the previous trend shortly (as ever, this is not trading advice - caveat emptor). Meanwhile, Ethereum has seen a pretty brutal week, as alts generally do when BTC spikes. At one point it was down to around 0.015 BTC. That may have something to do with the news that founder Vitalik Buterin has sold around 25% of his total ETH stake. Whether this is a perfectly reasonable act of diversification and profit-taking, or a stab in the back for holders and a signal of no confidence in his own work, is largely a matter of who you ask.

Elsewhere in Bitcoinland, it seems that an unlucky user has accidentally included a fee of 291 BTC, equivalent to $136,000, in a transaction. The BitClub Network mining pool, which benefitted from the massive fee, said it was willing to give it back if the sender identified themselves, or else donate it to a good cause.

Meanwhile, all eyes are on the recent and hotly-anticipated SegWit release, upon which it seems that even ambivalent members of the community are now starting to pin their hopes. Interest in Classic has fallen steadily for the past six weeks, though SegWit will need to be adopted by around 95% of miners to be deployed fully.


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