High Volatility Exposes Bitcoin’s Fragility
Ben Myers | Aug 20, 2014 07:34AM ET
Yesterday saw an exchange, Bitcoin (BTC-e)-e, break down and have a significantly lower price than other exchanges. The other exchanges saw the price dip below $440 briefly, whereas BTC-e hit a low of $309 for a significant amount of time. The price now seems to be back in line with other exchanges but this is an example of how fragile the Bitcoin market can be.
The chart below shows the 4-hour chart for the Bitcoin price according to the BITSTAMP exchange.
With a new range being established between $440-$500, the current price is at $474.12. At the 4 hour time frame, the parabolic stop and reversal indicated a reversal of a downward trend to an upward trend at midnight. Buy orders should be placed and held until the parabolic stop and reversal indicates another reversal. The chart below shows the 4 hour chart and the Ichimoku Kinko Hyo. The price action is below the cloud, indicating a bearish trend. If the price manages to cross the $485.90 mark, we could see the price extend to $500. The cloud acts as resistance for the next couple of days and the price will encounter possible resistance at $514.10.
The daily chart below shows a downward trend and any sell orders should not be completed just yet according to the parabolic stop and reversal and buyers should wait for this reversal to put in buy orders. The stochastic and relative strength index are both suggesting oversold conditions, which means an upward bounce could be imminent. The price target in the upward direction is $500, whereas in the downward direction $360 is the next line of technical support.
Looking at the longer term, weekly chart, we see that the downtrend starting from winter 2013 is still under way, as the parabolic stop and reversal is still above the price action. However, the stochastic is moving closer to oversold territory, suggesting that sellers may lose control of the market and an upward correction may be due
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Australia’s tax authority made a decision, released today, regarding Bitcoin and raises the prospect that some Bitcoin transactions may be taxed twice. The Australian Tax Office (ATO) however has not set out a time-frame for when the rules will come into effect. For miners, the total value of Bitcoin would need to be declared at the end of each tax year. The Australian Bitcoin community have expressed their dissatisfaction with the ruling by the ATO, who think Bitcoin should be treated as money and taxed as money. The application of double goods and services tax to some Bitcoin transactions may adversely affect investment in the Bitcoin economy and could push Bitcoin businesses to relocate to countries with more favourable regulation.
BlinkTrade, a technology platform, is due to unveil UbuntuBitX, a West African Bitcoin exchange. This is the second exchange they have opened in a week, the first this week being in Venezuela, called SurBitcoin. BlinkTrade provides clients the technological capacity to set up their own exchanges and gives exchange users access to Bitcoin liquidity in regions where Bitcoin trading is not yet widespread. Venezuela has high fees for remittances and high inflation and also provides challenges, but if BlinkTrade succeed in Venezuela then they are likely to succeed in any country in the world. BlinkTrade’s next step is to enter the Brazilian market.
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