The Cryptomarkets Week in Review

Hello everyone, and welcome to a new – and hopefully regular – piece of content here on CoinReport. Cryptomarkets are an incredibly volatile environment, with price movements of 25% in a week not at all uncommon, and while much is written about it all as it happens, it’s not as frequent that we see a look back covering the top stories; the biggest movers and shakers of the week. So that’s what we’re doing in this column. This piece aims to provide a very brief look at the major price changes of the past week, as well as some surface-level looks at what news and events may have driven those changes. This first piece is going to be exclusively Bitcoin, both because there wasn’t all that much happening in the world of Altcoins, and because Bitcoin had quite a bit going on.

While this article is titled “Week in Review,” we’re not going to ever draw a hard line like that – we’re just investigating the most recent events. On October 1st, Bitcoin hit up against the $400 psychological resistance point (after having previously failed to pull up past $450) before diving precipitously to a new 1-year low: $275 (excluding the anomalous $100 price-points caused by glitches). $275 marks a low from which a steady uptrend has developed, bringing us up to our current price of around $375. The uptrend appears to finally be waning somewhat – and I expect to be writing this piece next week beginning with a smallish dip from a peak of around $400. With such a big scare after the drop to $275, the market is going to choose to proceed upward cautiously – at least until the Bitcoin firecracker gets lit, which is, as always, a completely unpredictable event.

So what about the why? The prevailing perception among market observers is that this price movement has been somewhat… manufactured. There has been much talk of a mysterious bearwhale – and the mysterious bearwhale’s wall. “Wall” is a colloquialism used in discussion of smaller assets to describe a single buy or sell order of a very large size. In this case, an absolutely appropriate description: the bearwhale’s wall was a sell-side order of 30,000 BTC at $300 per coin on Bitstamp. There has been some argument over whether it was all bought out, or simply removed at a point, but it is certainly a significant and anomalous event regardless of how it disappeared. Why would they choose to do that? In order to set up $275 as the new low – just a little over the previous $266 low, and certainly low enough to scare people into selling; low enough to cause them psychic duress. If someone is planning to infuse the Bitcoin marketplace with a lot of capital, lowering the market price is a good way to profit.

The first way this is potentially profitable for our theoretical bearwhale is that it suppresses the off-market buy price. Major investors in Bitcoin (and when I say major, assume I mean that if you offer to sell them less than 100 BTC, they don’t care) do most of their buying off-market, at prices determined based on the market price. This may be from large early adopters, from major miners, from mining pools, or simply from other investors. Lowering the market price allows them to buy cheaper – although they are still very likely to be paying over the market price, lowering it makes the buys more valuable.

Another way this could benefit bearwhale is by “shaking the weak hands.” It’s an old saying in the markets – weak hands sell to strong hands. To explain, imagine someone bought BTC near the April peak – say $225. They might be getting very skittish at $275, and want to sell and keep their profits. Or they might be an investor who bought during the megabubble, and want to try and cut their losses finally – they hit the point of maximum pain, as it were. If they sell to a new investor, that investor thinks “Wow, what a good deal!” and they’re probably going to want to make a good profit on that. If they sell to an early adopter – then the coins end up in the strongest hands possible. If they sell to someone who got in during the previous bubble, up anywhere from $800-$1200, then that buyer must have very strong hands to stomach the paper losses they’ve incurred and still make the (rational) decision to lower their cost-basis on the investment. In any of these cases, though, one thing is always true: Bitcoins have been taken off the market at these bargain-bin prices. What’s the advantage of this to the bearwhale? It will make it easier to raise the price quickly – once they decide to do so.

Is there a bearwhale? There’s certainly evidence of them: the wall. Are they the reason for the change in price? The downside, likely, but the upside? Unknown. Markets are complex entities about which we can never have perfect information – we can only look back, and see perfectly with our hindsight. Reviewing the past is the only way we can learn, in the hopes of understanding the possibilities of the future. Markets are constantly changing – like the wind.

Until next week – thanks for reading.

DISCLAIMER: The content of this article is not intended to constitute professional investment advice, or a recommendation to buy, sell, or otherwise interact with any security or investment product. The author may have a material relationship with assets mentioned in this article, and while he attempts to remain objective, appropriate caution should be taken by readers when considering making any investment in assets mentioned or discussed above. Cryptocurrencies are an extremely volatile marketplace in which even experienced investors should take great caution.