Bitcoin’s Falling Price Nothing More Than Perception, Or Is There Manipulation?
Bitcoin’s price seems low, but many traders are unfazed by its movements, while some see manipulation.
This article does not contain investment advice or recommendations. Every investment and trading move involves risk, so you should conduct your own research when making a decision.
The past few months in Bitcoin’s history have been very interesting to watch, especially when honing in on its price fluctuations as a gauge of where it is going next. From about November 2017 to now, Bitcoin has almost come full circle as its price skyrocketed to $8,000 and beyond to $20,000 before falling back to the $8,000 mark.
Taking the time frame from November 2017, when people were cheering its groundbreaking move beyond the $8,000 mark, to today, when people are petrified that it will fall below that price, we can see very different perceptions in trader confidence.
However, traders in the know are less concerned with these movements of price and are not letting the typical Bitcoin fluctuations get to them. Some are explaining the current price as still massively positive, especially if one zooms out on the charts and looks at where Bitcoin is in the bigger picture.
There are others, though, that are pointing towards market manipulation as a potential cause for why Bitcoin’s price keeps shedding its gains between $8,000 and $10,000.
Returning to its range
Part of the reason for the concern over the Bitcoin price is that many investors only got into the market in and around the time the price was hovering around $20,000. The hype and adoption was massive at that stage, with Coinbase boasting about adding 100,000 users in 24 hours at the beginning of November last year.
That spike in price was unprecedented and unusual. As Anthony Pompliano, the managing partner at Full Tilt Capital, explained to Cointelegraph, the Bitcoin price is simply returning to its range.
“The day to day fluctuations aren’t very interesting to me. As your perspective zooms out, you notice that BTC will go through market volatility within a range. The Q4 parabolic run last year broke out of that range, so naturally the market will return to the range.”
“I think we’re back in the natural market range now and we should continue to see growth through 2018. I’m more bullish today than I’ve ever been.”
Pompliano also adds that Bitcoin does react to positive news, and that there are often spikes associated with that, but there has not been that much positive news of late.
“Additionally, I don’t think there is any specific positive news to drive a bull market. We’re seeing a hangover feeling among retail investors because of regulatory concerns, along with the last few months of bear market. Once we get a few positive news items, we should see quick inflection points,” he concluded.
There has been some good news relating to blockchain adoption, and while it is not being separated from Bitcoin, the technology adoption may not play in to the price of Bitcoin directly, as Pompliano adds, but it is still exciting to see.
“I don't think many people correlate ‘Blockchain adoption’ with ‘Bitcoin price’ or other cryptocurrencies. If they do, they shouldn't. It is exciting to see these companies leveraging blockchain technology and I anticipate this trend will accelerate.”
Pompliano mentions in his assessment that those who are concerned about the price of Bitcoin should zoom out a bit. Another figure who reiterates this idea is Mati Greenspan, senior market analyst at eToro:
“Anyone who thinks the crypto-market is falling should probably zoom out a bit. The total market cap of all digital assets is up 330 percent over the last year. Though it's not as high as it was during the peak, this is still unprecedented growth for any asset class, to say the least.”
“The price of Bitcoin on May 24, 2017 was $2,250, and at the time many thought it was a bubble and the price was too high. Today we're seeing lows of $7,300, which isn't as strong as the $20,000 peak but certainly still in a strong upward trend despite the sizable pullback."
Manipulating the market
Recently, the U.S. Justice Department said it had opened a criminal probe into whether traders are manipulating the price of Bitcoin and other digital currencies.
This in itself indicates that perhaps where there is smoke there is fire, and it also means that there will be a dramatic ratcheting up of U.S. scrutiny of these markets that critics say are rife with misconduct.
Another trader who for a while now has been calling market manipulation a cause of Bitcoin’s fluctuations has been vindicated by this investigation. Ronnie Moas, a stock picker who has turned his attentions towards cryptocurrencies as well, believes the Bitcoin price is being manipulated.
“I always mention manipulation, and regulation. When we broke below $9,000, $8,000 and $7,000, I said the price was being manipulated. The government is starting to crack down on this right now.”
Moas goes on to explain how easy it is to manipulate the Bitcoin market, as long as a person, or group, has large sums of money:
“If you have $2 bln, you want a diversified portfolio, and for me diversified is a $200,000 position, but there can be a position that is $200 mln, because you want 10 percent of your money in Bitcoin. But you don't want to pay $20,000 for a Bitcoin, so what you do -- and you can call it a Whale, a cartel, a shark, a consortium, a trading group -- you dump $20, $30, $40 million dollars on the market, and create selling pressure. People see those orders on the books, and they jump in front of them, because they are afraid you are going to move and shake the market down, and this feeds off itself.”
“The technical analysts then kick in with their sell signals, and there is panic and capitulation, and when the market capitulates, those people quietly come back in and buy five to ten times what they dumped for pennies on the dollar.”
People still fear that Bitcoin can drop to zero, but that fear is waning somewhat, especially with the adoption of Blockchain and cryptocurrency technology happening outside the financial and trading realms. Amazon, Microsoft, the entire banking ecosystem, and even some governments have all shown an interest in keeping the technology around for a long time.
The volatility of Bitcoin may not be as dramatic -- both up and down -- and that is something people have to come to grips with, but as the experts above mention, there has still been positive growth over a relatively short period of time.