Volume Spike Without Price Movement

Recently, two major bitcoin exchanges, Bitstamp and OKcoin, have experienced a surge in trading volume without corresponding price changes. It’s like a party where everyone is dancing, but the music is stuck on the same note. Coincidence? I think not! The data shows significant increases in trade activity that just seems to be hanging around the same price range, specifically under US$20.

Meet the Degenerate Gambler

In a recent chat with BTCVIX, a self-proclaimed degenerate gambler and a highly regarded trader, the consensus emerged that much of this volume is the result of wash trading. In layman’s terms, wash trading is like a mirage; it creates an illusion of activity without any real substance. BTCVIX noted, “It feels like the casino’s lights are simply flashing to lure us back in – all sound and fury, signifying nothing!”

The Mechanics of Wash Trading

But how does one pull off such a trick? Wash trading is done by making large orders that are bought and sold for nearly identical amounts at breakneck speed. This movement increases transaction volume but barely nudges the price. The charts below illustrate what wash trading can look like, and spoiler alert: it’s not as flashy as it sounds.

Volume as a Prophecy

Even if much of this activity is artificial, the saying holds true: volume often precedes price. Bitcoin has recently been treading water, stuck in that tight under-$20 range since September. That said, a dramatic increase in trading volume could paradoxically lead to an actual surge in price. Think of it as a potential domino effect, building anticipation until something eventually gives.

Signs Pointing Upward?

The plot thickens! The price has recently busted through its 50-day Exponential Moving Average (EMA), sending bullish signals. Moreover, indicators like the Bollinger Bands and Directional Movement Index (DMI) are tightening, suggesting we might be on the precipice of a significant price swing. With other metrics like RSI showing positive divergence and MACD indicating a bullish crossover, it feels a bit like the calm before the storm. Is a rally on the horizon?

A Cautionary Note

Although the direction seems promising, caution is warranted. There are numerous resistance levels before hitting the US$300 mark, and failure to clear the US$260 level would cast a shadow over any bullish sentiment. Let’s hope that if the price does start to surge, it doesn’t falter like a poorly timed joke.