Bitcoin Lacks Buy-Side Demand
Ben Myers | Oct 20, 2014 10:30AM ET
Large selling pressures across multiple exchanges have pushed the (Bitcoin) price below the first daily support level at $385.39 today. The origin and intentions of these co-ordinated sell orders are unknown and could be an attempt to pre-empt a move down. The second daily support level at $382.21 is currently being tested. If the price action continues to move lower, support will be found at $379.68. If buying pressures dominate, the price action should tend toward the daily pivot point at $388.92.
The CEO of Coinsetter recently argued that the Bitcoin price has declined as non-speculative Bitcoin users are mostly sellers at the moment, where speculative buyers are supporting upward price movements. At present, there is not enough buy-side demand to outweigh the non-speculative selling pressures. The Bitcoin industry is around 2-3 years out from matching existing payment systems value to consumers and weak price growth is expected until that is resolved. Also, regulatory challenges need to be overcome, nevertheless the long-term outlook is positive and the price action should improve as demand grows over the long run.
Crypto Lending
Yuanbao, a Chinese exchange, now offers its customers a mortgage for their Bitcoin. Fiat based peer-to-peer loans are now offered using Bitcoin and other virtual currencies as collateral. These services do not actually lend Bitcoin, users borrow and lend fiat currency only. Borrowers can set the terms, with interest rates ranging between 10-30% and maturity ranging from 15 days to one year. 2.5 million worth of Yuan has been loaned since the platform’s launch in early September. Also, BTC China has added several services to its existing offerings. A new mining pool and a merchant’s payment processing system are part of the expanded services offered. This development reflects a recent diversification trend that has been observed among Bitcoin companies in China. BTC China now covers all aspects of the digital economy, allowing users to mine and store Bitcoin, as well as acting as a payment merchant and an exchange for fiat currency.
The hourly chart below shows the bitcoin price on the Bitstamp exchange. The relative strength index is at 45.5 and looks set to drop further, indicating further downward moves. However, the MACD is signalling an upward move, as it displays an upward cross. Buyers could be tempted into the market at these prices and help push the price action higher. The $380 level has acted as strong support, as twice buyers have lifted the price action back above this level.
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However, when looking at the 4 hour chart, we see that the relative strength index is pushing higher today, currently standing at 46.8. A move above 50 will act as confirmation of an increase in the price. Volumes are lower than on Friday, but it is expected to pick up as the day progresses, so larger swings in the price are anticipated as the day progresses. The MACD indicator suggests the market is oversold and could make an upward cross, which will also act as confirmation of further price rises.
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