As Bitcoin volumes rebound, enthusiasts rejoice, but skeptics still scoff

  • By Tom Cleveland

  • March 9, 2019
  • 1:35 am BST

Bitcoin observers are a bit confused. The volatility rate for February dropped down to 2.70%, the lowest figure since April of 2017, before the speculative mania that sent valuations sky high. Bitcoin values also appreciated 10.4% for the month, the first time that has happened since July of last year. Volumes are also back, hitting a $34 million level, as if suddenly rebounding over February madness. Bitcoin enthusiasts have every right to rejoice at recent events, but the skeptics in the community refuse to back away from their dire predictions of a major sell-off, which would send prices south of $2,000.

The first to pour water on the smoking Bitcoin embers was “The Crypto Dog”, an analyst with a Twitter following in excess of 100,000. He voiced the opinion, which had been substantiated by industry reports in 2018, that, “The volume could be fake.” Previous analytical reports had focused on the practice of “wash trades”, where exchanges inflate volumes with internal trading “bots” that repeatedly buy and sell the same digital asset for a countless number of times, thereby creating higher volumes for competitive comparisons. It is known that a few specific exchanges cater to “bot” users.

Crypto Dog, however, questioned how system data aggregators, like CoinMarketCap and LiveCoinWatch, pull volume data from all sources. Are they editing anything that looks suspicious or are they accepting whatever is reported electronically? Crypto Dog is unsure if “shady exchanges claiming to have loads of volume” are accepted on faith or if they have been tested by some algorithm-based process that could detect reporting anomalies. In any event, if the volumes are “real”, he is of the opinion that, “We’re about to bust out into a raging bull market.”

Mati Greenspan, a respected analyst with eToro, believes that the volumes are bona fide. He has also stressed in his tweets that higher market activity is usually a precursor to a major move forward. Greenspan has also explained in previous posts that: “More meaningful moves often go hand-in-hand with higher volumes.” As a result, he and many other analysts are confident that a potential rally may be lurking in the wings in the not too distant future.

But skeptics refuse to back down, as if emboldened by what they perceive as over-confidence. These analysts tend to have bearish views of the same near-term period over the weeks and months ahead. Willy Woo, an Australian crypto researcher, noted: “If Bitcoin follows the trend of sell-offs it experienced over the past 14 months, a strong move lower could be seen in the coming weeks.” Woo hangs his hat on the fact that this market appears very indecisive. Bitcoin prices have been range bound for all of 2019, even though February was a good month, and the $4,000 price level was tested. When in doubt, he claims the market will follow its prevailing trend, which has been down.

Alex Kruger, an analyst based out of New York, is even more blunt. He contends that cryptocurrencies are built upon a speculative bubble, fueled by irrational exuberance. He scoffs at the high valuations of many crypto token programs that he regards as worthless and evidence that “lower lows aren’t an impossibility.”

And so we are left with “dueling analysts”, each group holding steadfastly to its view of the future. There is one traditional view worth noting that generally applies to the foreign exchange market, and that is the longer the ranging period, the bigger the breakout. We, therefore, know that a big move is coming. We are just unsure of the direction.