Bitcoin prices diverge on fall overnight.

The bitcoin technicals are more bearish after the break of the 200 hour MA toward the end of the session yesterday.

However, the bearishness was different for different exchanges.

Looking at price action on the Coinbase exchange, the bitcoin price tumbled to a low of $14,001 near the start of the day. The initial catalyst was a break below the 200 hour MA (green line) at $17,929 (at the time). In addition to the technical break, the sharp fall was attributed to a rotation out of bitcoin and into bitcoin cash on the Coinbase GDX platform. Coinbase offered bitcoin cash on their exchange today but not without some negative fanfare (see Adam's post here). Traders selling bitcoin, apparently ran into a liquidity issue on their sales.

The low price on the GDX platform stalled just ahead of the 50% retracement of the surge higher from the near $8000 low from November 24th. That 50% comes in at $13,924.

The subsequent snap back rally took the price back to the 200 hour MA. Once again, that MA was where the price started it's fall yesterday. The sellers leaned against that MA and the price has rotated back lower. The market is back in balance from a liquidity perspective.

Stay below the 200 hour MA keeps the sellers in control. On the downside, the 38.2% at $15,311.04 is the next downside target to get back below to increase the bearish bias. The 50% is another target on weakness.

Contrast that price chart with the chart from Bitstamp - another leading exchange for bitcoin.

There was a similar fall below the 200 hour MA at the end of yesterday's trading (green line). That turned the bias lower and the price fell. However, the low for the Bitstamp bitcoin, stalled at $15,800 - well above the $14,000 low on Coinbase. There was not the sharp sell off on a liquidity void on the GDX platform.

The correction higher on Bitstamp, was also able to get back above its 200 hour MA (green line at $17,671.21 currently), but could not approach the 100 hour MA (blue line). The price has since fallen lower - back below the 200 hour MA - but remains above the low for the day and its 38.2% retracement at $15,162.22. Those are targets on weakness. Risk is the 200 hour MA. Stay below is more bearish. I would expect that a move above would turn sellers into buyers again.

The price action today, highlights a few concerns for trading cryptocurrencies:

  • I am encouraged by the technical price action. Traders do tend to pay attention to things like MA, retracements. That helps in defining and limiting risk and defining a trading bias.
  • I am not impressed with the lack of price transparency. The price of bitcoin diverged by more than $1,800 at one point. Price transparency will keep the market from reaching it's potential
  • I am also not impressed with the liquidity void. The Coinbase tumble, illustrates the risks from lack of liquidity. It could happen at any time on any exchange. For example, if a big seller comes in and sells on Bitstamp, it could see it's price outpace the Coinbase exchanges price. That is real.

    Mom and Pop selling their 0.10 of a bitcoin, is not going to cause much of a ripple, but if "Joe Miner" - who controls a large stash of bitcoin from earlier days - wants to cash in, that could pose a huge problem in the market, especially for the Mom and Pop's in the bit-world.

    Yesterday's tumble from the 200 hour MA at $17,929 to $14,000 represented a 22% fall. The fall on Bitstamp was only about 10.5% from the 200 hour MA break.

    That - and the fact that the rotation on Coinbase may have been as a result of insider trading - will get regulators more concerned. That would not be good for the bitcoin market.

These are the risks that bitcoin traders face. It is nice when the price just goes higher and higher, but is always the risks that real traders are concerned about. (see post on that idea here).