Cryptomarkets Week in Review: November 14th, 2014

We’ve come out of a very strong cryptomarkets week on the price side, although with little action to justify it making headlines. Bitcoin was the big mover and shaker this time around, with an impressively volatile and bubbly rise. We moved from the $340 range to begin the week up to just over $450 on Bitstamp – an impressive action in and of itself, marking a nearly 40% rise. More impressive than that even was the action on Bitfinex. As an outside observer, I’d speculate that the unique action – and impressive arbitrage opportunity – that we saw on Bitfinex is the result of the leverage offered by the exchange. Bitfinex topped out at $475, making the weekly low to weekly high on that exchange a difference of more than $135.

Of course, after such a dramatic and swift rise, any observer could have expected what came next: a fall. The question at the price has stabilized since then is obvious: Will the next movement be to break back over $400, or to dip back under $375? As is always the case, anyone who believes they have a crystal ball is markedly incorrect – but the exuberance among the Bitcoin community is palpable on social media and in discussions elsewhere. Regardless of whether the next major move is upward or downward, the tenor of the community has changed, and the price history seems to indicate a similar shift back into the vicious uptrends Bitcoin is famous for. Time will tell, of course.

On the Litecoin side, if you were following along at home, you saw my simple prediction come true as Bitcoin rose precipitously, LTC/BTC fell very fast, before stabilizing and regaining some ground. The second question is of course whether that regained ground is going to lead into the beginnings of an uptrend or be lost immediately once Bitcoin resumes its upward momentum.

The remainder of the altcoin markets were shaking in their boots as the rise occurred. Often, markets derived from BTC (those traded primarily in relation to BTC rather than to more stable assets, like USD) seem to be somewhat disconnected from the reality of Bitcoin’s price movements – this has not been the case in recent days, however. When Bitcoin rises, altcoins tend to remain neutral relative to USD, which means they fall relative to Bitcoin. However, the individuals (and entities) that work heavily with altcoins do not always recognize this, and so a swift decline in BTC value (but a modest gain in USD terms) can be seen as a downtrend, or even in some cases the popping of a particular altcoin’s bubble. The question for altcoins to answer next week: Are we connected to the BTC/USD price? Is our price a referendum on the strength of the cryptocurrency’s fervor? On the strength of Bitcoin’s public image? Or on what? What determines the price of an altcoin?

Last but not least, a quick news roundup:

– OpenBazaar’s Windows launch is a very positive moment, as Bitcoin shows how the technology can be used to cut out middlemen – in this instance, eBay.

– The Consumer Financial Protection Bureau published a proposal that could force consumer protections onto digital wallet providers (think Blockchain and Coinbase, for example).

– HP published a bizarre survey whose headlines claim that 79% of US Organizations plan to adopt digital currencies. Not quite what their survey really showed – which is more like 79% of those running technical payment processing systems expect to adopt Bitcoin payments in the future. Whether that is better or worse than the headlining claim is up to the reader to decipher – but my call is better.

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.