Thursday, 8 September 2016

What Is Causing the Latest Price Rise in Bitcoin ?

Understandably, when BTC price spiked above the psychological level of a round number of $600 on 3 Sep, the Bitcoin community got a bit of a buzz. Some high-fives were performed, no doubt.

A sudden pop of BTC price on 3 Sep 2016
A sudden pop of BTC price on 3 Sep 2016


 A Quick Side Trip into the Past 
All the solid run-up in prices in the past all seem to associate with some events. Like the most recent one that i mentioned in my article about my 1st Bitcoin Purchase, and Halvening where the BTC price run-up was caused by the Halvening and, to a lesser extent i think, Brexit.

In the greatest price spike of all time in Bitcoin so far when it peaked at a dizzying height of over $1132 back in late 2013, it was caused by the positive feedback from US Congressional Hearing on Bitcoin. This was followed closely by the opening of OKCoin exchange in China (as of today, it's the biggest BTC exchange in the world by traded volume of some 16 mil BTC / m). These 2 events basically gave big positive endorsements and boosts to Bitcoin in its infancy. One by the US government, and the other by Chinese government. The 1st and 2nd biggest economies in the world. It's little wonder the BTC price did a moonshot.

Bitcoin Exchange volume distribution
Data as of 8 Sep 2016 (click photo to enlarge)
Chinese BTC community has been the biggest since the opening of OKCoin. 94% of Bitcoin are traded in CNY.

 BitCoin ETF 
What about this time? One could only make educated guesses. One of this could be the talk of potential setting up of a ETF that's based on Bitcoin such as SolidX ETF. But the successful listing of such etf is going to do a lot more for the BTC price than what we have seen so far. Is it coming close to being finalised? I don't know. It's probably not too early to set up for such an eventuality.


 U.S. Dollar Collapse 
Just as i received some newsletter regarding the Bitcoin's halvening 2 months ago, a few days ago, i received newsletter with the title "D-Day for the U.S. Dollar". Like the halvening newsletter i received, (this one is written by Jim Rickards. Or more likely by a copywriter on his behalf) it also has a date: Sep 30, 2016. Good newsletters need to have a date to produce a sense of urgency in the readers to subscribe the newsletters.

The Sep 30 date is the CNY's inclusion into SDR (read up my article SDR, Alternative Currencies, China, and the Collapse of U.S. Dollar). The newsletter ad said something like, "...the US Dollar is going to collapse beginning on September 30."

Not that i believe in this alarmist statement, but i wonder how much of this fear would spur the BTC price, which always benefited from any financial and/or political fear. Remember that Bitcoin was created in its political ideology, in no small part, as a protection / alternative against fiat currency in general, and USD in particular. (Gold also benefits from this. I believe this is the cure that James Rickards would dispense). So i don't know how much of the price rise is attributed to this gloom and doom message.


 Bitfitnex Heist 
After the Bitfinex hacking, sentiment of Bitcoin suffered a slight dent. BTC price continued to drift lower for a little while afterwards. The news had slowly faded with time (at least, it's receiving less negative headlines). In fact, there're some positive headlines with Bitfinex of late to the lost customers' fund of late. This should give Bitcoin a bullish sentiment boost.


 Technically Driven
Perhaps, there's no particular fundamental reason other than a technical one. And i believe this is the most likely driving force.

Bitcoin price chart from 2013 to 2016 showing trend lines (in red).
Bitcoin price chart from late 2013 to 2016 showing trend lines (in red).
Bought my 1st Bitcoin on late August 2016 as marked on chart.

If you look at this chart, after a correction since the all-time (so far) peak in late 2013 to early 2015, and then consolidated sideways for some 6 months, we have been on a rising trend since late 2015. When i bought my 1st Bitcoin a few weeks ago, while i didn't physically draw trend lines on a chart like this, i mentally drew them by eyeballing it. Because i'm only putting a small sum into Bitcoin, i didn't bother to try to be precise. Suffice to say that i imagined my entry price is very close to the uptrend line. Unless it beaks below the uptrend line (which i believe it wouldn't any time soon), i suspected that it would bounce off from the uptrend line once the price gets near it. I think that this is what happening right now.

I'll be keeping a very close eye on the chart when it gets to the previous high of $768.

This reason isn't exciting, but comforting for the Bitcoin holders because it's nice confirmation that the uptrend in BTC price is still in place.

Up, up and away!



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