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Prominent Trader: Short-Term Bitcoin Price May Depend on South Korean Market

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South Korea Spy Suicide City

Prominent bitcoin trader, investor, and researcher Tuur Demeester stated that the center mass for the bitcoin price would depend on the South Korean bitcoin exchange market in the short-term.

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Earlier this week, South Korean cryptocurrency exchange Bithumb surpassed the trading volume of Bittrex and Bitfinex combined, two of the largest bitcoin and cryptocurrency exchanges in the market. More importantly, the trading volume and market share of the South Korean bitcoin exchange market overtook that of the Chinese bitcoin exchange market, officially becoming the third largest bitcoin market in the world behind Japan and the US.

For many years, the South Korean bitcoin exchange market and its trading platforms have demonstrated extreme premium rates in comparison to other major markets such as the US and Japan. The demand toward bitcoin from casual investors, institutional and retail traders have been increasing at an exponential rate, especially due to the weakening of the US dollar and intensifying conflict between North Korea and the US.

Since early 2016, an increasing number of investors in the finance sector have started to embrace and adopt bitcoin as a safe haven asset and digital gold. Many investors have invested in bitcoin to avoid global markets volatility and devaluation of reserve currencies. Because the South Korean bitcoin exchange market have outgrown many major markets and demand from local investors are at all-time high, Demeester explained that in the short-term, the price of bitcoin may depend on the South Korean bitcoin market along with Japan and the US.

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Even throughout bitcoin’s latest major price correction caused by the Chinese government’s nationwide ban on bitcoin exchanges, Bithumb, South Korea’s largest exchange, continue to demonstrate premium rates over other markets, securing the 4.2 million mark.

At the moment, the bitcoin price is demonstrating extreme volatility. Earlier this week, bitcoin demonstrated early signs of recovery by rebounding beyond the $4,000 mark after the finalization of the closure of leading Chinese bitcoin exchanges including BTCC, OKCoin and Huobi. But, on September 21, the bitcoin price endured yet another major correction, declining to $3,600 and since then, it has been relatively stable in the $3,600 region.

Eventually, as all of the Chinese bitcoin exchange market’s liquidity and traders move to neighboring markets like Japan and South Korea, and the two markets become the epicenter of the Asian bitcoin market, the bitcoin price would likely be able to find stability and recover.

Several key figures and experts within the cryptocurrency sector including Tim Draper, the billionaire early-stage investor who has funded some of the largest bitcoin exchanges in South Korea and Japan, explained that the exit of the Chinese bitcoin market will provide to be a positive event for the bitcoin industry because Japan and South Korea has significantly more efficient and practical regulatory frameworks for both businesses and investors.

Earlier this year, the Japanese and South Korean governments legalized bitcoin as a payment method. South Korea, which has been lagging behind Japan in terms of bitcoin innovation, market structure and trading volume, revealed a bill that would allow bitcoin companies to operate as proper financial service providers and remittance companies.

Son ji-hyoung of the Korea Herald explained:

“Under the bill that aims to revise the Electronic Financial Transactions Act, traders, brokers, or other business entities involved in cryptocurrency transactions would be required to get regulatory approval from the Financial Services Commission. The requirements include the retention of capital of at least 500 million won ($436,300) and data processing facilities.”

Most of China’s trading volumes will highly likely move to Japan and South Korea. Already, the majority of traders in China moved over to the Japanese bitcoin exchange market, allowing Japan to evolve into the largest bitcoin market in the world.

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Bitcoin

Bitcoin Futures Officially Launch on CBOE

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The long-awaited bitcoin futures contract officially debuted on CBOE Global Markets Sunday, sending BTC/USD sharply higher. Trade volumes were reportedly thin as CBOE’s website crashed immediately after the contract went live.

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XBT Goes Live

CBOE’s futures contract, which trade under the symbol XBT, went live at 6:00 p.m. ET. Within minutes, bitcoin prices surged over $1,000, a sign that institutional money was pouring into the market. The BTC/USD exchange rate reached a session high of $15,811 before giving up gains later in the session. XBT traded at $16,000 soon after the contract went live, giving it a premium over the spot price.

At press time, BTC/USD was trading at $15,248, where it was little changed compared with the previous close.

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Bitcoin’s total market capitalization is $260 billion. Trade volumes over the past 24 hours have exceeded $13.5 billion, according to CoinMarketCap. South Korean trading desks drove much of the daily turnover, with Bithumb accounting for roughly 16.5% of transactions. That’s equivalent to roughly $2.2 billion.

The Bitfinex exchange turned over 12% of total bitcoin transactions, which is equivalent to $1.6 billion, data showed. Coinbase’s GDAX exchange saw 6% of the volumes, or roughly $823 million. GDAX experienced technical difficulty last week as bitcoin prices crossed $19,000.

Although trade volume on the exchanges was robust, liquidity in the futures market was relatively thin.

Highly Speculative Instrument

It has been argued that bitcoin futures represent one of the highest forms of speculation in recent memory, given that they are cash settled and have no delivery requirement. This point was raised by Randy Mitterling in Twitter of all places in response to Nassim Nicholas Taleb, the world renown essayist, scholar and former trader. Mitterling, who serves as a Chief Investment Adviser, said:

“Bitcoin futures are cash settled. No delivery requirement. It’s just a sentiment indicator that could be completely wrong compared to the actual price. Truly the most highest form of speculation ever created.”

Taleb, himself a brilliant writer and probability theorist, had provided a series of insightful tweets about bitcoin in general and the new futures contract in particular. In a Sunday post, Taleb said the following:

“Note that Bitcoin has a limited number of natural sellers. The entire concept is very concave supply (it costs more and more to extract). The number of producers shrinks with time.”

In an earlier tweet, Taleb also said:

“No, there is NO way to properly short the bitcoin “bubble”. Any strategy that doesn’t entail options is nonergodic (subjected to blowup). Just as one couldn’t rule out 5K, then 10K, one can’t rule out 100K.”

The arrival of bitcoin futures probably ups the ante on other forms of institutional investments involving cryptocurrency. Some analysts speculate that bitcoin exchange-traded funds (ETFs) are the next logical step for a market growing more comfortable with the idea of cryptocurrency.

CBOE chief Edward Tilly recently told CoinDesk that the case for a bitcoin-linked ETF is stronger now that futures trading is under way. As such, CBOE may be prepared to submit a new proposal to the Securities and Exchange Commission (SEC) to allow bitcoin ETFs and exchange-traded notes (ETNs) to be traded.

Tyler and Cameron Winklevoss failed to launch their bitcoin ETF earlier this year after the SEC rejected their proposal on grounds that the Bats exchange would be unable to enter necessary surveillance-sharing agreements.

A bitcoin ETF would allow investors to buy and sell the asset class much like a stock transaction. For many, it is seen as a precursor to greater mainstream adoption of the world’s no. 1 digital currency.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

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Bitcoin

Bitcoin Plunges $2,000 on Eve of Futures Contract

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Bitcoin prices declined sharply over the weekend, as traders locked in profits before the highly anticipated XBT futures contract.

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BTC/USD Price Levels

The value of bitcoin pulled back sharply on Sunday, with prices hitting a low of $13,474. BTC/USD would later consolidate at $13,662 for a loss of $1,931, or 12.4%. The decline shaved tens of billions of dollars off bitcoin’s market cap. The coin was last valued at roughly $227 billion.

Despite the loss, trade volumes were still extraordinarily high on Sunday. Daily turnover in the bitcoin market crossed $14.7 billion. Interestingly, the Bitcoin Mercantile Exchange (BitMEX) saw the highest turnover Sunday at roughly 17% of the total transactions, which was equivalent to $2.5 billion South Korea’s Bithumb processed nearly 13% of all trades via BTC/KRW, which amounted to $1.9 billion. Bitfinex came in third at 9%, or $1.3 billion.

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Bitcoin put up massive gains this week, leading U.S. exchange Coinbase to crash temporarily. The exchange would later issue issue a gentle warning reminding account holders to “please invest responsibly.”

At its absolute peak, bitcoin clocked in above $19,500.

Broader Crypto Market Collapse

Bitcoin certainly wasn’t the only cryptocurrency in hot water on Sunday. In fact, the top 18 cryptos by market cap were in the red, according to CoinMarketCap. Only three of the top 66 coins were trading in positive territory.

Heavy losses were reported across the board, with the leading altcoins affected. Below is a rundown of some of the losses early Sunday:

Cryptocurrency Performance
Ethereum (ETH): -9%
Bitcoin Cash: -13%
IOTA (MIOTA) -18%
Litecoin (LTC) -12%
DASH (DASH) -10%
Monero (XMR) -16%
Bitcoin Gold (BTG) -18%
NEM (XEM) -30%
Stellar Lumens (XLM) -18%
EOS (EOS) -16%

As a result of the collapse, the combined value of cryptocurrencies fell to $376 billion Sunday. That represents a drop of $65 billion in just 24 hours. The total crypto market cap peaked north of $452 billion on Friday.

The declines followed another streak of record-setting gains for global cryptos that was largely driven by bitcoin. The world’s most expensive cryptocurrency has been riding high on news that CBOE will launch its bitcoin futures contract (XBT) a full eight days before rival CME Group.

XBT is a cash-settled futures contract based on the Winklevoss brothers’ Gemini auctions price. The contract will begin trading 6:00 p.m. ET Sunday on the CBOE Futures Exchange.

There’s no way to know for sure how Wall Street will treat the new derivatives contract. On Friday, the Futures Industry Association (FIA) issued a stern statement to the Commodity Futures Trading Commission (CFTC) that its members were concerned about the derivatives contract. In an open letter, the lobby group said XBT “did not allow for proper public transparency and input.”

Futures trading is said to be the domain of short-sellers, which could make bitcoin more volatile than before. That being said, the bitcoin community is excited about the prospect of a futures contract that enables them to bet on price swings without having to rely on cryptocurrency exchanges.

Disclaimer: The author owns bitcoin, Ethereum and other cryptocurrencies. He holds investment positions in the coins, but does not engage in short-term or day-trading.

Featured image courtesy of Shutterstock. 

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Analysis

Long-Term Cryptocurrency Analysis: Look Out Below?

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After last week’s observation that a major top is in or near in the segment, the Bitcoin surge continued for almost a week, with Thursday’s wild session taking the coin as high as $19,000 (the article uses Bitstamp prices) on some exchanges. While the currency already pulled back by more than 20% the long-term picture is still extremely overbought and a much deeper correction is likely in the coming weeks.

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BTC spiked below $13,000 today, violating the primary weak support at $13,300, with further levels now at $11,300, $10,000 and $9000, but stronger support only found at $8200 and $7700. Next week’s futures launch could cause another jump in trading activity, and volatility is expected to remain very high amid the likely correction.

BTC/USD, Daily Chart Analysis

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While not all altcoins participated in the, supposedly, last part of the rally, IOTA, Monero, and towards the end of the week Litecoin, also stretched above all conventional targets with IOTA also turning exponential after a deal with Microsoft. The coin exploded by more than 350% before entering an initial sharp correction, breaking the steepest short-term uptrend. Strong support is only found at $3 and $1.5, but potential Fibonacci support is at $2.35.

IOT/USD, Daily Chart Analysis

Let’s see how the long-term charts of the other altcoins look after the crazy week.

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