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Bitcoin Volatility Triggers Huge Interest

Bitcoin VolatilityIt didn’t take much for interest to revert from the Blockchain to the Bitcoin, in fact a tearaway price is all that is needed, plus the return of the absent bitcoin volatility.

Although the initial drive in this Blockchain/Bitcoin combination was the Bitcoin itself, with the major focus on how this crypto currency can bypass the red tape and cost of fiat currencies, more lately the Blockchain technology itself has been causing the stir. A typical example would be Setl, an ‘institutional payment and settlement infrastructure based on block chain technology’ which on the 12th October announced “that it has established a test network which has broken the 1 billion transactions-per-day capacity barrier for blockchain movements.” Heady stuff! Yet these serious applications of the Blockchain pale into media disinterest when the Bitcoin goes on a 10-day roller coaster ride.

Chinese Lemmings

It is no secret that the Chinese love a punt. This year the Chinese government faced a political crisis when so many of their subjects decided to bet their shirt that their stock markets were on a one-way trip to the moon. Chinese are obsessed with the fear of missing out, the original FOMOs! They are more happy to lose cash than lose the face involved in not being in on the free ride. When it all goes pear-shaped they find that they have not only lost hard-earned money but also face anyway. So now that the Chinese are wary of their own stock market after having been burnt earlier in the year, they are looking for the next ‘get-rush-quick’ scheme and it takes precious little to convince them that this time kharma will be on their side. Last week they found their latest scheme and, hey, it was Bitcoin again.

The following is a chart from BitcoinPrice.com of the BTC v USD price from the 12th October.

Bitcoin Volatility

BTC v USD 12th Oct 2015 to 12th Nov 2015

In the slow build up from the 12th October to the 28th volatility was low as the Bitcoin was on a slow grind upwards; a scenario boring pension funds love, but one that traders hate: boring! From the 28th to the 2nd Nov the price traveled to $350. Then by 12.00 on the 4th November the price has shot up to $487.96, a $138 increase in two days generating a return of 39.5%. Then profit-taking for two days, a stand-off, then the bears step it up again and the price retreats to the $300 again. Glorious trading for the long gamma merchant!

Bitcoin Trading and Liquidity

One of the main reasons for these spurts of volatility is lack of liquidity on a tick by tick basis and this is common on all markets. What this means is that although volumes may soar the actually price range of the asset has also increased hugely. This means that if the range were divided by the volume traded, whether it be futures contracts or underlying value, the number traded at each price may well fall from when the market was not volatile. This of course means that prices lurch from one level to levels quite distant from the last with no possibility of trade in between. This means increased risk once in and although that is of course offset by the increased profit potential, it takes bigger cojones or a smaller brain to get involved. Unless of course one is trading binary options…………….

Bitcoin Binary Options

Buying conventional options on Bitcoin or buying and selling binary options on Bitcoin offer the trader some level of cover against a large adverse move as in both cases only a pre-known amount of money/BTC can be lost. There are many binary options brokers offering the client the opportunity to speculate on the price of BTC but not so many who are prepared to offer that service using crypto currencies.

The original offerings whereby the broker took BTC deposits were the sites BTCOracle, BTCLevels and SatoshiOption but they are very basic in terms of functionality.

The site BitPlutos is a much more functional site with graphic displays that aid decision making. The site even will exchange Bitcoins for you should you wish to deposit in mainstream currencies.

On the other hand, if you wish to deposit fiat currencies, i.e. USD, EUR, GBP then London Binary Option have a very handy site with exceptionally good charting aids including all manner of moving averages, MACD, stochastics, Bollinger bands, you name it…………

……….but do not trade like the Chinese!!

Happy Trading

 

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