Bitcoin Price Drop - Oct.5.14

We will update this page as we learn more

We are live tweeting the price movements(newest tweets are at the bottom)

The price of Bitcoin has fallen by nearly 20% this week. This is a continuation of a constant slide over the past month that has seen the price drop about 35%. Yesterday's low was $275; the last time the price has been that low was November of last year. Over the last 24 hours there have been more than 680k Bitcoin traded, that's over $204 Million USD. One year ago from yesterday, Bitcoin was at $122, so even at yesterday's low, it remained up by over 100% YTD.

Volume

Enough of the context, lets get down to what everyone really wants to know:

1) Why is the price falling?

2) How much lower is it going to go?

Although some continue to question Bitcoin during events like this, the reality is that the fundamentals of Bitcoin are unchanged and long-term prospects remain strong. Nobody can predict the short-term, and anyone who claims otherwise, is being disingenuous, if not intentionally deceitful.

The problem with attempting to predict the short-term, is that Bitcoin markets are so tiny when compared to other global financial markets. With only a couple of million USD, a calculated actor can exert a significant influence on the market. Keep in mind, this is not a new phenomenon and has been a mainstay of Bitcoin trading since the first markets opened. In fact, it has reduced in frequency as the price has increased. As the Bitcoin ecosystem grows, and the price increases, it costs more and more for an entity to exert the same amount of influence as before.

It appears an individual/entity intentionally sought to trigger a panic sale yesterday, taking advantage of the already desperate environment due to Bitcoin's recent price decline. We witnessed on multiple occasions throughout the day, large sell orders of roughly 30k BTC (~$9M USD) being placed slightly above the current market price.

Sell Wall

This phenomenon is referred to as a sell wall, because buy orders need to fill all the orders in the wall before the price can increase past its position. Furthermore, merely placing the wall has the tendency to push the price down for two reasons:

1) If the 30k Bitcoin were all to be sold at market rate, it would eat through all the current buy orders on the order book and bring the price close to zero. The flash crash would be most likely contained to the single exchange, and price should rebound quickly, but it would most likely cause a degree of a panic on the other exchanges as well. The entity placing the sell wall is telling everyone that they can crash the market if they want to.

2) The fact that someone wants to sell 30k Bitcoin at a certain price means the price probably won't be able to buy its way over that price point in the near future. This leads to traders closing their buy positions expecting price declines in short-term.

Since placing large sell orders, such as the one we saw yesterday, causes the price to decline, it is not the most advantageous way to sell all your coins. When selling that much Bitcoin, you should sell it over time in smaller batches or do a trade with a private seller. Outside of the possibility of incompetence, we believe that yesterday's sell walls were an intentional act of manipulation, to push the price lower.

Who can benefit from a lower Bitcoin price? Plenty of people.

1) Anyone who owes someone money denominated in Bitcoin. This includes Chinese exchanges that have offered Bitcoin denominated financial products. Most cloud based mining contracts have their payouts denominated in Bitcoin.

2) Anyone shorting Bitcoin. This can be magnified using the leverage option, that many exchanges now offer.

3) Supporters of an altcoin, looking to weaken Bitcoin's first mover advantage, and become the top digital currency. There's a lot of money to be made, if you invest in an altcoin that ends up replacing Bitcoin.

4) Hedge Funds and Institutional buyers may be trying to push the price as low as possible before taking a position. These entities have a lot of money at their disposal and have been known to use questionable tactics in the past.

Cramer described activities used by hedge fund managers to manipulate stock prices - some of debatable legality and others illegal. He described how he could push stocks higher or lower with as little as $5 million in capital when he was running his hedge fund. Seeking Alpha

5) Traditional financials institutions or oppressive government regimes that feel threatened by the decentralized nature of Bitcoin. Bitcoin provides financial freedom, and that is a threat to the status quo. The $9M USD required for yesterday's sell walls is nothing when compared to worldwide military spending or the budgets of major financial institutions.

With that all being said, of course the recent price decline isn't solely due to market manipulation. The manipulators intentionally took advantage of an already declining Bitcoin price. The price decline is most likely due to a combination of factors: sell pressure from miners covering their overhead, miners skirting capital controls, merchants instantly converting accepted Bitcoin for USD and investors selling either to cover their losses or due to a lack of faith in the currency. Bitcoin is still trying to reach a price equilibrium after the massive spike in price this year. Put simply, the price rose way too quickly, and now it needs to fall, until the demand between buyers and sellers levels out. Let's not forget that this time last year, the price of Bitcoin on Bitstamp was around $120, the ecosystem has come a long way since.

We will update this page as we learn more

We are live tweeting the price movements(newest tweets are at the bottom)

blockquote class=twitter-tweet lang=enpOver 9M USD worth of Bitcoin up for sale at $300 on a href=https://twitter.com/Bitstamp@Bitstamp/a. That#39;s a huge wall to climb. a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a a href=http://t.co/902NSkoOe1pic.twitter.com/902NSkoOe1/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518799118408622080October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpWould not suggest anyone buy or sell right now. Emotional trades can hurt you a lot. Lets see how this settles out. a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518800037179318272October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpThe $300 sell wall on a href=https://twitter.com/Bitstamp@Bitstamp/a was removed while price fell an additional $10 dollars. Seller may have pushed for market sell a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518800835481202688October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpa href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a fundamentals remain strong. Nobody can tell you what will happen in short term, but longterm prospects remain unchanged. a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a a href=https://twitter.com/hashtag/DOGE?src=hash#DOGE/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518801389540352000October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpNever thought the price would drop this low. We are in new territory. A lot more people willing to sell than expected. a href=https://twitter.com/hashtag/bitcoin?src=hash#bitcoin/a a href=https://twitter.com/hashtag/btc?src=hash#btc/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518803013579071488October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpWe have a slight rebound occurring. Up 13$ on a href=https://twitter.com/Bitstamp@Bitstamp/a in last 10 minutes. Major sellers may be running out of coins. a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a a href=https://twitter.com/hashtag/DOGE?src=hash#DOGE/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518803425178681345October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpQuick perspective: Price was around $60 this time last year as news broke of Silk Road seizure. a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a a href=https://twitter.com/hashtag/doge?src=hash#doge/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518804221953847296October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpOver 539 thousand a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a traded in the last 24 hours. That#39;s over $161 Million USD at current price. a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a a href=https://twitter.com/hashtag/DOGE?src=hash#DOGE/a a href=http://t.co/a7R1MaC4gZpic.twitter.com/a7R1MaC4gZ/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518809865423441921October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpIf you shorted below $300 I don#39;t know what were you thinking. Risk is huge and reward small. At least wait to see if we go sub $270./pmdash; DoctorBitcoin (@DoctorBitcoin) a href=https://twitter.com/DoctorBitcoin/status/518819922211008512October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enp.a href=https://twitter.com/DoctorBitcoin@DoctorBitcoin/a That is basically the one certainty of all of this. Definitely not worth it to put a short up at this point./pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518820239875002368October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpIt is 2:30AM in China right now. Should be interesting to see how they react to the price drop when they wake up. a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a a href=https://twitter.com/hashtag/DOGE?src=hash#DOGE/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518835696334032896October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet lang=enpChinese understand unique value of a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a easier than westerners b/c of the strict capital controls put in place by their government. a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518836731014287360October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet data-partner=tweetdeckpSimilar size sell wall, as this morning, has appeared on a href=https://twitter.com/Bitstamp@Bitstamp/a. For 30k a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a at $320, roughly 9M USD a href=https://twitter.com/hashtag/BTC?src=hash#BTC/a a href=http://t.co/Iv3YJQIlB8pic.twitter.com/Iv3YJQIlB8/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518875769414893569October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script

blockquote class=twitter-tweet data-partner=tweetdeckp2) Putting up a large sell order like that is meant to cause panic. It is a way for a trader to tell everyone he can crash market. a href=https://twitter.com/hashtag/Bitcoin?src=hash#Bitcoin/a/pmdash; CoinPrices.io (@CoinpricesIO) a href=https://twitter.com/CoinpricesIO/status/518879371290214400October 5, 2014/a/blockquote script async src=//platform.twitter.com/widgets.js charset=utf-8/script


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Disclaimer: This post is intended solely to provide information. As I have no knowledge of individual circumstances and technical level, readers are expected to complete their own due diligence before proceeding with anything mentioned in this article. The topics discussed in this post are advanced and readers proceed at their own risk. Readers are expected to complete their own due diligence before purchasing or selling anything mentioned or recommended.