Just a couple of days back, the United Stated Marshals Service (USMS) announced selling away another large stash of Ross Ulbricht’s Bitcoins (50,000 BTC). The statement came amid a 4% value surge on Coin Market Cap, subjecting Bitcoin once again to traders’ guesstimates, so can this auction affect bitcoin price?
An auction might be the most fundamentally accurate event for Bitcoin trading market — especially in the ways it drives the value. As we see the last two auctions held by USMS, you will notice similar price movements that took place before and after the events. For instance, let’s look at this chart below. [Credits: Trading View]
We have created two rectangular blocks, each representing the period of auction hypes. Despite their varying lengths, you can notice a pattern here. There are always speculative buyings before or around the auction (the large green candles), followed by an almost corresponding sell-off (the near-term bearish flags). There is indeed a conflict between demand before, and after the auction.
Also notable is the measurement of auction hypes which seems to depreciating alongside Bitcoin price. During the first event, there were three sections of people who had their personal opinions about future price movements. The first one believed that Bitcoin price will simply crash due to excessive supply; the middle one believed that it will not react to the auction; while the third one simply predicted a volatile spike.
At least there were speculations, which contributed a lot in hyping up Bitcoin value. In the end, the hype died and the price came back to being normal.
The second auction however missed this hype, thanks to Bitcoin price that had dropped 50% since the first auction. The technical indicators were also pointing towards a further drop that kept bidders away from this event.
What to Expect from the Third Bitcoin Auction?
The fundamental dynamics since the second Bitcoin auction have changed a lot. Bitcoin has recently recovered after testing its all-time-low (since October 2013) around 165, and is on a smooth uptrend ever since. However, if we zoom into the charts we can still see the absence of enough trading volume. Price thus is consolidating between presumed support and resistance levels.
The lower Bitcoin value however can also act as a great opportunity to enter the market for cheap. As you can see the 1H chart above, the price is currently attempting a smooth bullish correction — a part of which could be an influence of auction news. As the next auction is scheduled on March 6th, Bitcoin price is hopeful to consolidate until a couple of days before the event. However, we could see a small-medium spike towards 275 around the aforesaid date. A similar dump will follow as well.
[Disclaimer: Bitcoin trading is risky and could be manipulated under the influence of bad actors. NewsBTC won’t be responsible for any incurred losses faced by readers.]
Charts from Bitfinex