This week on Planet Bitcoin - 9 September 2016

Thursday 08 September 2016

TL;DR finally!

After a month of consolidation, the market has finally begun to show signs of becoming more interesting. As we noted last week, a prolonged period of sideways prices very often provides a foundation for an upwards movement; having exhausted the sellers, there is only one way to go. (The counter-argument is that sideways trading exhausts the buyers. In practice, it doesn’t seem to work like this - there always seem to be enough new buyers, perhaps because it’s an expanding market.)


That’s what we saw this week. Most of the previous month has been spent in the $570-585 band, with the market rejecting $600 at almost every attempt. Then suddenly, on the 3rd September, it jumped without warning from $570 to just below $600, soon after comfortably crossing the line to $615 before another leg up to where it now sits around $625.

This impressive leap may have been prompted by a couple of things. In the background there is the picture of consolidation, which had presumably run it’s course. Then, bringing confidence to the market that had been shaken by the massive Bitfinex hack, the exchange started to reimburse customers who had lost funds. Bitfinex had issued an IOU token to its customers, each nominally worth $1. Skepticism was such that these had been trading at a significant discount to their face value - traders were simply not prepared to believe they would ever be fully honoured. In fact, they were changing hands at around half of that price.

In the event, Bitfinex bought back around 1% of tokens, at $1 each. This was welcomed by the market, as there had been speculation that the exchange would buy back its liabilities at a discount.

The other factor that may have been in play was the discussion around the Chinese Yuan at the G20. The Chinese government has said it will not devalue the currency further, but something about the claim failed to convince people - perhaps the economic data coming out of China. There’s some indication that the spike in price may have been partly caused by Chinese traders diversifying into bitcoin as a ‘safe haven’ asset - or perhaps simply as a proxy for the dollar.

Elsewhere in cryptoworld, Monero is faltering. The privacy-centric coin, which uses ring signatures to obscure transaction inputs and outputs, has soared in value over the past month, from just over 0.003 BTC to a high of over 0.025 - an eightfold increase. The catalyst for the rise was the news that it had been integrated into a couple of darkmarkets, offering a less traceable alternative to bitcoin. Of course, speculators jumped on the news, and drove the price up far beyond what organic demand warranted. Since then it has fallen 20% from its peak.

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