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What Happens When Bitcoin [BTC] Enters “Price Discovery Mode”?

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Currently, at $18,727, Bitcoin (BTC) is looking for one final push above its all-time high of $20,000. However, this year’s rally is backed by major institutional participation with some big players in the financial space pouring millions of dollars into this digital gold.

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With the rising institutional participation, financial giants have started working out Bitcoin investment instruments that cater to the institutional demands. Some of the regulated financial giants like CME and Bakkt are already offering to trade for the Bitcoin futures. On the other hand, there’s enough work going around introducing Bitcoin ETFs in the market.

But for all these investment products to exist in the market, it is important to understand the price discovery mechanism for the asset class. Let’s take a look at what does Bitcoin Price Discovery means in reality.

Understanding the Bitcoin Price Discovery Mechanism

The price discovery mechanism basically means deriving the price of an asset within a market based on the buyer and seller interactions. The Bitcoin Price Discovery means setting up a spot price for Bitcoin (BTC) trading which depends on a number of tangible and intangible factors.

Apart from the classic economic principles of demand and supply, there are a number of factors that come into the picture of the BTC price discovery. This can include factors like the flow of information among crypto markets, exchanges, as well as the interactions with the traditional markets. As we saw this year, the global economic condition and uncertainties also have a considerable weightage on the price discovery.

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As said, at the core of the Bitcoin Price Discovery is the most important demand and supply factor. Also, the Bitcoin Price Discovery depends largely on the futures and options market. Traders in this market have better information and judgment to take the desired action. In the case of any external information or news affecting market conditions or the economy, the actions taken by the speculative traders feed new information in the derivatives market which further drives the price movements.

The Bitcoin futures and options market plays a key role in the Bitcoin price discovery since they are the first ones to react as the transaction costs are much low here as compared to the spot markets. Thus, they include the element of future prediction about what is likely to happen.

Factors That Play A Key Role in the Bitcoin Price Discovery

As we all know Bitcoin works completely on a decentralized blockchain network and there’s no regulatory body governing it, unlike other asset classes. Bitcoin, and cryptocurrencies in general, is a very volatile asset and has been the subject of major price manipulations in the past.

Interestingly, although Bitcoin’s decentralized blockchain shields it from any external tampering or attacks, a number of exchanges where BTC trade are still centralized. Over the last few years, we have often heard things like massive exchanges with millions of dollars worth BTCs getting stolen and unaccounted for. Moreover, as most of the exchanges are not regulated, it hinders the accuracy in determining the BTC price value.

In order to determine the Bitcoin spot prices, the BTC price on the top-ten exchanges considered to be trustworthy is monitored. Usually, the BTC price movement is then monitored against other base fiat currencies like USD, EUR, GBP, KRW and JPY, or stablecoins like Tether (USDT).

Bitcoin Price Discovery has remained a tough task for a long-time. But as more regulated exchanges and marketplaces are coming into the picture, the scenario is improving. The institutional participation in BTC is likely to push further the demand for investment vehicles like Bitcoin ETFs and others.

Since such products only operate through regulated platforms, it will help to curb BTC’s price volatility and unpredictable behavior. During a panel discussion last year at Invest: ASIA in Singapore, Lennix Lai, financial market director at OKEx told Coindesk:

“If you can only buy or sell particular underlying tokens of bitcoin and you don’t have the capability to short, basically speculate in another direction, then the market would be a lot more volatile because it would be entirely driven by sentiment.”

“For example, you can view bitcoin as being much more volatile before CME Futures were introduced … so we should have more financial instruments like options to assist further in the price discovery process in relation to volatility.”

The recent participation from hedge funds, veteran investors, institutions, and other big players will bring more clarity to this concept of Bitcoin Price Discovery as the market matures.


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Author: Bhushan Akolkar




Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.

Source: https://coingape.com/what-is-bitcoin-btc-price-discovery/

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The Curious Case of a Conflicted Bitcoin Bearish Wedge

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Bitcoin is stuck below $20,000.

The flagship cryptocurrency has attempted to break above the psychological resistance level multiple times in the last two weeks. In one of the instances, it reached as far as $19,915 only to face a bearish assault at the new record high that pushed its price lower by $2,000. It is evident that traders’ profit-taking behavior goes wild when Bitcoin closes towards $20,000.

Bitcoin Wedge

But looking from a wider perspective, the entire range between $19,500 and $20,000 prompts traders to exit their bullish positions for a short-term profit. In late November, the BTC/USD exchange rate made two back-to-back attempts to break above $19,500, but it succumbed to higher selling sentiment near the level, falling to as low as $16,200 later.

A pullback ensued, and the price again faced the same bearish bias near 19,700 — a development from $19,500, nonetheless. And now, the $19,900-area is giving the same vibes, having been crashed the price to $18,109 upon its latest test.

The price behavior has left Bitcoin in a sequence of modestly increasing higher highs and lower highs. Envisioning them together makes it look like that they are forming a Rising Wedge.

Bitcoin, cryptocurrency, BTCUSD, BTCUSDT

Bitcoin Rising Wedge pattern in development. Source: BTCUSD on TradingView.com

In retrospect, traders see Rising Wedge as a bullish-to-bearish reversal pattern. So it typically happens the price ascends inside the Wedge range but breaks below its support trendline eventually. If accompanied by higher volumes, the negative breakout crashed the price by as much as the maximum distance between the Wedge’s upper and lower trendline.

Bitcoin’s current Rising Wedge pattern’s height is $3,249. Depending on where it breaks lower from, its price would likely fall by roughly $3,000. That would mean a plunge towards $17,000 — at least.

But There Is A Catch

The Wedge’s upper trendline is almost flat, with the difference between higher high levels close to $200. Some traders can also assume that it is a horizontal resistance level. If true, it would throw the entire bearish reversal theory, as discussed above, into a bin.

A horizontal line makes the entire Bitcoin structure looks like an Ascending Triangle. It is a continuation pattern wherein the asset in concern typically continues in its previous trend’s direction with a breakout above the upper trendline. An ideal bull target is as much as the height of the Triangle.

That means Bitcoin price — again — expects a move worth $3,000-3,249 but to the upside. It puts the cryptocurrency’s bull target at around $23,000.

So far, fundamentals favor Bitcoin.

The inflation narrative sticks because of the Federal Reserve’s likelihood of buying short-dated bonds and corporate debts amid a low-interest environment. On the one hand, excessive US dollar liquidity prompts investors to dump the greenback. On the other, the prospects of earning lower yields divert their attention to riskier assets like Bitcoin.

That explains why the cryptocurrency’s Rising Wedge pattern appears less threatening.

Source: https://bitcoinist.com/the-curious-case-of-a-conflicted-bitcoin-bearish-wedge/?utm_source=rss&utm_medium=rss&utm_campaign=the-curious-case-of-a-conflicted-bitcoin-bearish-wedge

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Hackers Demand 200 Bitcoin Ransomware After Compromising Leading Israeli Insurance Company’s Sensitive Data

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A notorious hackers’ group called The Black Shadow has compromised one of the largest insurance companies in Israel – Shirbit. The attackers have already released sensitive client documents and have demanded a ransom in bitcoin, which could rise to $4 million by the end of the week.

Israeli Insurance Company Hacked

According to a local media outlet, the first confirmation of the hack came on Monday evening. Representatives of The Black Shadow group posted an initial batch of compromised documents on a Telegram channel.

Shirbit had contacted the National Cyber Directorate and Capital Market Authority to open an investigation. Shortly after, the organizations confirmed the breach and indicated that the hackers have also leaked numerous insurance details, alongside the initial documents.

According to the report, Shirbit has many high-profile customers, including government employees. Company CEO Zvi Leibushor said that the safety of its clients is Shirbit’s top priority.

“Shirbit has invested millions of shekels in securing databases and protecting against cyber-attacks and meets all the stringent regulatory requirements in this area.” He added that the firm has invested “all resources and efforts needed for an effective safe and rapid solution to this cyber-attack, whose real goal is to try to harm the Israeli economy.”

Demand Requested In Bitcoin

After releasing a small part of the compromised documents, The Black Shadow reps have contacted the victims to request 50 bitcoins (about $960,000 with today’s prices).

However, in case Shirbit failed to pay the attackers within the first 24 hours, the demand would double to 100 bitcoins. The procedure will repeat and double to 200 bitcoins if another 24 hours pass without payment.

Furthermore, the hackers threatened the insurance company that if it fails to transfer the funds by the end of this week, they will sell all compromised data to other bidders.

It’s worth noting that numerous other Israeli companies and high-profile individuals have recently become victims of similar hacks and demands.

CryptoPotato recently reported that 20 Israeli crypto executives, all clients of the local telecommunications giant Partner, were hacked by stealing their SMS messages.

Another coverage informed that a new type of ransomware attacked called Pay2Key has been executed against several Israeli companies in the second part of 2020. The perpetrators had requested the demand in bitcoins, similarly to the Shirbit hack.

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Source: https://cryptopotato.com/hackers-demand-200-bitcoin-ransomware-after-compromising-leading-israeli-insurance-companys-sensitive-data/

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Bitcoin Price to Hit $36,000 in 2021: Kraken Crypto Sentiment Survey

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From what happened in the last couple of weeks, it appears that the crypto bull market is upon us. Bitcoin has been consistent with its volatility-induced rallies, and this is infusing confidence in investors.

So much, so that VIP clients in Kraken’s latest Crypto Sentiment Survey say that BTC will skyrocket to about $36,000 in 2021. They also feel that ETH could revisit its previous highs of $1500.

Bitcoin And ETH To Trade At Average Prices Of $15K and $549 By 2020 End

The latest Kraken Crypto Sentiment Survey covers investor sentiment for the second half of 2020. The exchange had already conducted a similar survey back in March this year. But then investors were way more optimistic about BTC and ETH price growth by December.

Now, the same respondents have retracted their bullish calls for bitcoin and ether (ETH) this year. According to the latest numbers,

The average bitcoin price target among 309 responses fell -35% surveyover-survey to $14,866, well below February’s average of $22,866. The median price target also retraced -28% from $19,424 to $14,000, and the most commonly cited price target was $15,000, down -25% from $20,000.

With respect to ether (ETH), the average price target among 289 responses was $549, off -32% from the previous survey’s average of $810. The median price target was unchanged at $500 and the most frequently cited price target was $500, up +66% from $300.

At 72 percent, traders and investors (down from 81 percent when the survey was conducted in March) comprised a majority of the survey responses. 18 percent of responses came from Institutions (broker, custodian, family office, hedge fund, lender, market maker, private equity firm, proprietary trading firm, or venture capitalist).

And the rest 4 percent – from crypto service providers (ATM, exchange, lender, payment processor) and miners. As compared to March, the researchers at Kraken anticipated a lower price growth optimism from the said respondents since the year is so close to its end.

The Outlook For 2021 Remains Super Bullish

When asked about how they see bitcoin and ether prices in the next year, respondents didn’t shy away from expressing their mega bullish calls. Survey participants called for an average bitcoin price target of $36,602 in 2021. Some put the median bitcoin price target at $25,000, but a lot of folks (approximately 61 percent) felt if not anything else, BTC will at least hit $20,000.

A small section of respondents reported hopium-induced ultra bullish calls.

Approximately, 8% of respondents provided a price target greater-than-or-equal-to $100,000, roughly 20% of respondents reported a price target greater-than-or-equal-to $50,000…

Survey participants were very optimistic about ETH’s outlook as well in the next year. This sentiment came from the discussions around Ethereum’s network upgrade and the growing popularity of the DeFi ecosystem. Respondents think ETH will trade at an average price of $1454 in 2021. Also, at the same time:

Close to 59% believe that ether will, at least, hit $800. Additionally, 22% of respondents see ether surpassing its previous all-time high of $1,595 set in early-January 2018 and just under 92% see ether, at the very least, trading higher than current price in 2021.

What becomes evident from the aforementioned numbers is that participants in a price prediction survey tend to project bullish figures for a longer-term.

Will Bitcoin(BTC) and ether (ETH) hit the above price targets in 2021? That still remains to be seen.

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Source: https://cryptopotato.com/bitcoin-price-to-hit-36000-in-2021-kraken-crypto-sentiment-survey/

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