PM End of Week Market Commentary - 11/24/2017

davefairtex
By davefairtex on Sat, Nov 25, 2017 - 10:50am

On Friday gold fell -3.80 [-0.29%] to 1288.00 on very heavy volume, while silver fell -0.12 [-0.70%] to 17.01 on heavy volume. Given that the dollar fell -0.45% on Friday, gold's drop showed significant weakness.  It wasn't a great end to a more-or-less sideways week for PM.

The PM sector map was a mess this week; copper did very well, silver did poorly, while the silver miners actually did relatively well, coming in #2 just under copper, while overall the miners were mostly flat. How did that happen?  Things seem confused. Most items moved above their 9 MA lines on Tuesday, but silver is still lagging behind the rest of the metals - largely because of the big pounding it took on Monday.  3 items are all green, while another 4 are mostly red.  It is hard to see a trend forming one way or the other.  The PM sector map is saying: "reply hazy, try again."

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Copper $COPPER 3.32% 18.48% rising rising rising rising ema9 on 2017-11-20 2017-11-24
Silver Miners SIL 2.03% -7.20% rising falling falling falling ema9 on 2017-11-21 2017-11-24
Senior Miners GDX 0.18% 10.77% rising falling falling falling ema9 on 2017-11-21 2017-11-24
Palladium $PALL 0.07% 33.45% rising rising rising rising ema9 on 2017-11-21 2017-11-24
Gold $GOLD -0.49% 8.84% rising falling rising falling ema9 on 2017-11-22 2017-11-24
Junior Miners GDXJ -0.68% -4.79% rising falling falling falling ema9 on 2017-11-22 2017-11-24
Platinum $PLAT -0.86% 4.05% rising falling falling falling ema9 on 2017-11-21 2017-11-24
Silver $SILVER -1.70% 2.97% falling falling falling falling ema9 on 2017-11-24 2017-11-24

Gold fell -6.40 [-0.49%]. There was the relatively large sell-off on Monday, and an almost-as-big rally on Wednesday. Gold ended the week above all 3 moving averages, and gold's forecaster remains in an uptrend, although it did issue a brief (headfake) sell signal after Monday's big plunge. In truth, the takeaway is that gold continues to chop slowly higher, on steadily rising volume.

Pulling back to the weekly chart, I see the weekly forecaster issuing a sell signal this week, down -0.07 to -0.06.

The December rate-increase chances remains at 92%.

COMEX GC open interest fell -23,539 contracts this week; 73 tons of paper gold vanished.

Silver fell -0.29 [-1.70%] to 17.01. All of the losses happened on Monday's big sell-off, when the forecaster issued a sell signal to start the week. While the plunge on Monday didn't have any follow-through, and it seemed to have no market-related cause, the plunge on massive volume did keep silver from moving higher above its recent trading range. Silver ended the week right at its 50 MA, after dropping through the 200 and 9 MA lines.

Weekly forecaster issued a sell signal this week, down -0.29 to -0.16.

The gold/silver ratio rose +0.92 to 75.72, which is bearish.

COMEX SI open interest fell by -9,731 contracts.

The miners basically went nowhere this week; GDX rose +0.18%, while GDXJ dropped -0.68%. Senior miners ended the week in an uptrend (GDX: +0.08) while the juniors suffered a bearish engulfing on Friday and closed the week on a sell signal (GDJ: -0.18). However, looking at the HUI (which includes juniors, seniors, and silver miners), you can still see the potential for a double bottom pattern, which would be bullish if HUI can manage to break out of the top end of its trading range.  For the most part, the miners ignored the fuss on Monday with platinum, silver, and gold.

The HUI weekly chart (HUI: +0.15% on the week) issued a buy signal this week: +0.15 to +0.11. While the daily chart is a bit noisy, the weekly chart looks more benign – and more positive.

The GDX:$GOLD ratio rose +0.62%, and the GDXJ:GDX ratio fell -0.85%. Call it neutral.

USD

The buck fell -0.88 [-0.94%] on the week, with most of the losses coming on Wednesday and Friday. The forecaster ended the week at -0.82, which is quite bearish. The losses in the buck came mostly from gains in the euro (XEU:+1.12%) which rallied – probably – on hints that the SPD might be willing to form a coalition with Merkel after all. “Nobody” really wants new elections, especially not the SPD. There is also a hint that Flynn may now be cooperating with Muller's investigation; this would be dollar-negative, since it signals greater jeopardy for Trump. What did he do? As my friend the former-FBI-agent always reminds me, “its not the crime, its the coverup.” 18 USC section 1001: 5 years for lying to an agent of the federal government.

Here's a fun article about avoiding this fate – executive summary: don't talk to the Feds without a lawyer, and even then it can be really problematic. And apparently if you simply refuse to talk at all, that can be interpreted as something bad.  http://corporate.findlaw.com/litigation-disputes/how-to-avoid-going-to-jail-under-18-u-s-c-section-1001-for-lying.html

Wouldn't it be interesting if agents and employees of the Federal Government could get 5 years in prison for lying to the people?

The weekly chart issued a sell signal this week, plunging -0.76 to -0.54.

If Merkel does form a new government with the SPD, the buck may well make new lows.

US Equities/SPX

SPX rose +23.57 [+0.91%] to 26.02.42, making a new all time closing high on Friday. Telecom did best (XTL:+2.83%) – my guess: that's about the impending elimination of 'net neutrality', which means the big telecoms can relegate any traffic they want to an “internet slow lane” unless the originator (presumably) pays a fee to the carrier.  "That's a mighty nice streaming service you got there.  Would be a shame if anything happened to all those bits you are sending out." In the old days, this would be called a rentier scam (skimming cash, while providing no benefit), but today it is Making America Great Again, one telecom at a time.  My opinion, of course.

Apart from the new batch of Telecom winners selected by the regulators, the sector map looked relatively bullish.

SPX daily forecaster ended the week at +0.49, while the weekly forecaster has been steadily dropping, and is now at +0.33. The pace of the SPX uptrend is slowing down markedly, even though we keep seeing new highs.

VIX plunged -1.78 to 9.65. We are back in the single digits once more.

Name Chart Chg (W) 52w ch EMA9 MA50 MA200 50/200 Last Crossing last
Telecom XTL 2.83% 1.18% rising rising falling rising ma50 on 2017-11-21 2017-11-24
Technology XLK 1.82% 34.38% rising rising rising rising ema9 on 2017-11-16 2017-11-24
Homebuilders XHB 1.61% 22.05% rising rising rising rising ema9 on 2017-11-08 2017-11-24
Industrials XLI 1.29% 13.87% rising rising rising rising ma50 on 2017-11-24 2017-11-24
Cons Discretionary XLY 1.17% 14.04% rising rising rising rising ema9 on 2017-11-03 2017-11-24
Materials XLB 0.91% 18.72% rising rising rising rising ema9 on 2017-11-16 2017-11-24
Energy XLE 0.67% -6.66% rising rising falling rising ema9 on 2017-11-24 2017-11-24
Healthcare XLV 0.65% 17.69% rising falling rising falling ema9 on 2017-11-21 2017-11-24
Financials XLF 0.23% 17.00% falling rising rising rising ema9 on 2017-11-22 2017-11-24
REIT RWR 0.18% 5.06% rising rising rising falling ema9 on 2017-11-21 2017-11-24
Gold Miners GDX 0.18% 10.77% rising falling falling falling ema9 on 2017-11-21 2017-11-24
Utilities XLU 0.13% 18.49% rising rising rising falling ema9 on 2017-11-24 2017-11-24
Cons Staples XLP 0.02% 6.93% rising falling rising falling ma200 on 2017-11-17 2017-11-24

Gold in Other Currencies

Gold fell in all currencies, and was down in XDR by -15.07. Gold in Euros was down -25.

Rates & Commodities

TLT moved slightly higher, up +0.32%, making a new high, but it encountered some selling pressure after breaking out, dropping -0.28% on Friday, which caused the forecaster to issue a sell signal. Over the past few months, the forecaster has been dead on with its TLT projections. For the 10-year (TY), things have been a lot more choppy, but the daily, weekly, and monthly for TY are all in a downtrend. Still, the pace of the downtrend for TY appears to be quite slow – I believe this is a steady shift of money from shorter duration to the long end of the curve .

JNK moved steadily higher after last week's buy signal, climbing +0.54% making new highs, and sending the forecaster to a very bullish +0.80 rating. There are no bearish signs in junk debt in the short term. The longer term BAA.AAA ratio chart agrees; it appears to be about to resume its downtrend, which is a risk on signal.

CRB rose +0.96%, and has rallied back to the highs set a few weeks back. 3 of 5 sectors rallied, led by industrial metals (+2.44%). Mostly that's about copper, which rallied +3.55%, taking copper back near its old highs. Copper's daily and weekly forecaster is a bit of a mess, but the monthly is showing a clean, steady uptrend since late-2016. Here's what that looks like.

Crude shot up +2.19 [+3.86%] to 58.97, closing the week at prices not seen since July 2015. The EIA report was quite a bit less bullish than the API report (crude -1.9m, gasoline flat, distillates +0.3m) but the market sold off for about 30 minutes before resuming its uptrend. Friday's print was a closing white marubozu which had a 43% chance of being a reversal; crude forecaster ended the week at +0.68, which is a strong uptrend. News this week was fairly bullish: OPEC will probably extend its production cuts, the Keystone pipeline spill will cause a shortage (600k bpd is now offline), WTI futures moved into backwardation for the first time in years (which will encourage further inventory draws), and Venezuela was declared in default, which will hamper the efforts of their oil company PVDSA to conduct business. All this overwhelmed a bearish North American rig count increase (+15), which rose for the third week in a row.

Crude weekly forecaster remains in an uptrend, while the crude monthly appears to be ready to issue a sell signal. Looking under the covers, the monthly forecaster seems to get nervous when crude makes new yearly highs.  Although we won't know for sure until the month is over, here's what it looks like right now.  Note that we are fast approaching round number 60, which should act as resistance.

Physical Supply Indicators

* SGE premiums over COMEX are at +7.69.

* The GLD ETF tonnage on hand was unchanged, with 843 tons in inventory.

* ETF Premium/Discount to NAV:

 PHYS 10.47 -0.76% to NAV [down]
 PSLV 6.40 -0.92% to NAV [down]
 CEF 13.38 -1.9% to NAV [down]

* Bullion Vault gold (https://www.bullionvault.com/gold_market.do#!/orderboard) no premium for gold and a 1% discount for silver.

* Big bars premiums were: gold [1kg] 1.36% and silver [1000oz] 3.29%.

Futures Positioning/COT

There was no COT report this Friday because of the Thanksgiving holiday in the US.

Gold Manipulation Report

There were no after-hours spikes this week. The assaults took place during market hours. My sense: they don't attack gold directly as much anymore. I know, its tinfoil hat stuff, but now that I know how the different commodity price movements have such a strong effect on one another, whenever I see platinum or silver have a really bad day for no particular reason – and of course the gold price happens to drop right along with it – it just looks suspicious to me.

This time, it was platinum that was smacked.  Big volume, huge down day, and absolutely no follow through.  In fact, after the drubbing it took on Monday, platinum has now moved back into an uptrend.

Eurozone Status

  • Italian Elections: Anti-Euro M5S lead has widened vs the PD: 27.4% to 24.7%. A combination of FI + LN (both semi-anti-Euro parties) are at 29.75%. If the current trends hold, by March the PD will be lucky to get 20%. In looking at the charts, the FI appears to be the primary beneficiary of the migration issue. https://en.wikipedia.org/wiki/Opinion_polling_for_the_Italian_general_election,_2018

  • Merkel may get her way with the left-leaning SPD and form a grand coalition after all. The German aversion to minority government (and a boatload of pressure on the SPD – probably from Brussels as well as from within Germany) may end up proving the decisive factor. “Nobody wants a repeat of 1932” appears to be the subtext. And yet...

  • Its worth reading what the different party stances on immigration are. Roughly speaking, in order of enthusiasm for controlling immigration: AfD, Merkel's CDU, FDP, Shulz's SPD, Green, Left. SPD had “worst showing since 1947” in the recent elections. Specific migration issues include: whether or not to place a hard limit on immigration, family reunification (25 year old son arrives, and can bring in mom, dad, brothers, sisters, wife, children, etc), whether or not to deport failed asylum seekers, and views on immigration law (and citizenship) in general. http://www.dw.com/en/afd-cdu-spd-where-do-german-parties-stand-on-refugees-asylum-and-immigration/a-40610988 Note that 37% of Germans rate immigration as their #1 issue, and yet AfD only received 12% of the vote.

  • Spain's central government and Catalonia appear to be moving towards a settlement. The central government says it is willing to discuss a Basque-style greater fiscal autonomy – something it blocked back in 2012, so this represents a walk-back for them. At the same time, some of the members of the deposed government of Catalonia appear to be open to something short of independence. https://www.theguardian.com/world/2017/nov/21/spain-ready-to-discuss-greater-fiscal-autonomy-for-catalonia

Summary

Platinum, silver, and gold were all hammered on Monday, with heavy volumes occurring in platinum specifically. According to my models. If you pound on platinum, then gold should drop. That's what happened. This definitely crippled the PM rally that seemed to be forming last Friday, although the miners didn't seem to be particularly concerned about the plunge, and gold managed to (mostly) recover. Miners remaining largely afloat supports my thesis that the plunge was externally generated, rather than concerns within the sector itself.

Gold and silver big bar shortage indicators are back to normal; premiums on big-bar gold and silver are normal, GLD tonnage was unchanged, while ETF premiums moved lower. Shanghai premiums remain positive, but have not markedly changed.

The Euro recovered sharply this week, probably due to improving situations in both Germany and Spain, as well as Muller's apparent success in rolling Flynn (do you think Trump may have lied to any Federal Agent at any time in his life? Gotcha: that's 5 years in the pokey, Mr President) this may have combined to cause the buck to plunge. Its hard to know the cause for certain, but that's my sense.

Forecasting code says:

Uptrend: gold, platinum, miners, crude, copper, JNK, SPX.

Downtrend: silver, natgas, treasuries, USD.

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19 Comments

davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
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bitcoin: the big picture

Sometimes when you're working on the 4-hour timeframe, you might end up missing out on the big picture.

https://www.blockchaintechnology-news.com/2017/11/24/bitcoin-mining-electricity-usage-higher-159-countries-power-compare/

.... Citing the latest Digiconomist Bitcoin energy Consumption Index, the company notes that, as of 20 November 2017, the digital currencies estimated annual electricity consumption is 29.05 terawatts per hour (TWh). [0.13% of global electricity production]

If the current growth trend of energy usage continues at the current rate, mining will use more electricity than the UK in a given year by October 2018, and the US by July 2019.

lambertad's picture
lambertad
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Grant Williams Presentation

https://stansberrystreaming.com/presentations/grant-williams.html

Grant Williams has a new presentation out from the Stansberry investment conference. He nailed it again. 

charleshughsmith's picture
charleshughsmith
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yes but is it a bubble?

yes but is it a bubble? (grin)  of course it's a bubble by any conventional measure, but after 8 years of CB intervention and manipulation, there's very little "reality" left. Hence the argument that BTC is about the only thing that hasn't been falsified and controlled by central banks/states. 

Nonetheless, we're counting on you to call the absolute top here in BTC :-) Is it $10K or $50K?

cmartenson's picture
cmartenson
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Beware the Ides of ...December?

It remains my contention that once big-league futures trading opens on Bitcoin (on the CME) that it will no longer be the "free and fair" alternative but now be subject to the usual computer algo shenanigans that infest every other CME ""market.""

CME Group Announces Launch of Bitcoin Futures

Tue Oct 31 2017

CHICAGOOct. 31, 2017 /PRNewswire/ -- CME Group, the world's leading and most diverse derivatives marketplace, today announced it intends to launch bitcoin futures in the fourth quarter of 2017, pending all relevant regulatory review periods.

The new contract will be cash-settled, based on the CME CF Bitcoin Reference Rate (BRR) which serves as a once-a-day reference rate of the U.S. dollar price of bitcoin.  Bitcoin futures will be listed on and subject to the rules of CME.

(Source)

These algos love, and I mean absolutely LOVE bear raids and smashes as the way to harvest the most money from the most people.

Coming soon to a Bitcoin market near you.

I figure give these algos a quarter or so to test and figure things out.  Then get ready for some real unpleasant fireworks that will, in the end, destroy people's faith in Bitcoin as a reliable store of value as surely as they have eroded faith in gold, silver, and virtually every other commodity product they have touched.

It's nothing personal, it's just how they roll.

Uncletommy's picture
Uncletommy
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Got your seed catalog, yet?

Tulip bulbs are running around $1.20 a piece currently. They're about as inert as Bitcoins are now. I suspect that's why railroads and utilities hold such prominent spots on the Monopoly board. As for financials; perhaps they represent "?".  I can't but help share Grant's quandary, Hmmm?. 

AKGrannyWGrit's picture
AKGrannyWGrit
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Posts: 467
What?

.... Citing the latest Digiconomist Bitcoin energy Consumption Index, the company notes that, as of 20 November 2017, the digital currencies estimated annual electricity consumption is 29.05 terawatts per hour (TWh). [0.13% of global electricity production]

If the current growth trend of energy usage continues at the current rate, mining will use more electricity than the UK in a given year by October 2018, and the US by July 2019.

 

WHAT, holy shit what, that's insane.  Okay this high school graduate got a laugh out of this. Would appreciate you wicked smart guys commenting.

AKGrannyWGrit

davefairtex's picture
davefairtex
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meet spoofy

Nonetheless, we're counting on you to call the absolute top here in BTC :-) Is it $10K or $50K?

Sure thing Charles.  You just stand by, and I'll ring the bell for you right at the top.  :)

I can provide updates every time my code sees a trend change, but that's about all I'm going to sign up for.

I found it interesting that, when we're expecting a world of "less" here at this site, some of us can at the same time project a future where bitcoin will be using a measurable fraction of the world's electrical power generation.  Right now: 30 terawatt hours per year!   How many 300w solar panels is that? 1 panel might produce 500 kwhrs/year (300w x 5hrs x 365), so thats...60 million panels?  Did I get that right?

Of course they could change the code to do something else.  So far, its all vaporware though.

Chris-

While I tend to agree that CME futures most likely won't end up being bullish for bitcoin overall, I don't think that manipulation is waiting for the CME.

There may be manipulatory games already occurring in bitcoin right now, according to one commentator who looks for things like this.  The spoofing occurs (apparently) on exchanges that tend to be on the shadier side (i.e. without a banking connection), and who will only stay in business if the price of bitcoin continues to rise.

There are a lot of moving pieces in the following (long) article, but if you go down the rabbit hole far enough, you come away with the sense that it could well be happening. Given that I know some people who actually are involved in inter-exchange arbitrage, what the author is saying isn't all that far fetched.

https://hackernoon.com/meet-spoofy-how-a-single-entity-dominates-the-price-of-bitcoin-39c711d28eb4

Do the arb bots watch the size of the bid stack and trigger off that?  An interesting question.

I could write some code to look to see if "spoofy" appears at bitfinex.  It would probably take me a couple of minutes - turns out, there is a whole lot of software support for talking to exchanges...

 

AKGrannyWGrit's picture
AKGrannyWGrit
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Posts: 467
Bitcoin

It's my understanding that Bitcoin is supposed to be hacker proof (sorry more chuckles) well what happens when AI, super computers, deep learning, etc are given the task to corrupt, hack, delete or make a mess of Bitcoin.  I mean what could go wrong?

AKGrannyWGrit

charleshughsmith's picture
charleshughsmith
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electrical utilities, OPEC and the NSA

Maybe bitcoin is an NSA-coded front for OPEC and the electricity utilities to generate insane demand that then drives up consumption, with profits to follow accordingly. (tongue slightly in cheek...)

Thanks for ringing the bell at the top, Dave. :-) That will save me a lot of grief. The whole parlor game of picking the top of a parabolic run-up is anxiety producing because I'm always wrong about how high the bubble can go.  I thought NASDAQ was a bubble about to pop at 2K, ditto the SSEC/Shanghai index at 2K. Both topped 5K. I also thought the housing bubble would pop in early 2005, nope, ran like a banshee for another couple years.

sidenote: from what I gather, US volume is only 25% of the cryptos market. Japan and S. Korea are the big players, as both nations have effectively legalized cryptos.  It is somewhat ironic that Ms. Watanabe and Ms. Kim hold the reins, while the CME and hedges here are bit players. Food for thought.

PaulJam's picture
PaulJam
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that darn top

I suppose its a good problem to have, but top-picking anxiety is real.  I accumulated BTC and ETC mostly between Jan and March 2017, in amounts that i thought I could afford to lose  - were then about 1% of my net worth, and its now between 5-6% of my net worth.  

I'm taking to heart the reasoning that bubbles can go on longer than we think possible, so am holding on, for now, but darn, every time it hits a new high (7K, 8K, and now 9K)  I'm so tempted to start selling some., but can;t get myself to pull the trigger. 

I sold a little bit of BTC at about $5800 during this run-up and regretted it....

My trading skills are really poor - I tend to buy and hold, hold, hold, hold, (I held onto PM's that I purchased in 06-07 through the post 2011 swoon) and it has not been the best strategy for me financially, so trying to force myself to step out of my usual patterns in an informed way, or at least make what could turn out to be wrong decisions for the right reasons.

AKGrannyWGrit's picture
AKGrannyWGrit
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Posts: 467
Thank You Charles

I LOVE it when people have a sense of humor, thanks Charles!

Sun Tzu said that "all warfare is based on deception" Chapter I, verse 18 I think, so it behoves us to question everything,"

Amused Granny

charleshughsmith's picture
charleshughsmith
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trends run until they don't

PaulJam, I doubt anyone has the magic required to pick the top of anything. All we can do is be alert to long-term trend reversals--but that takes patience, as short-term reversals in BTC have been very common--as befits a low-float market (i.e. high volatility).

I saw someone repost an old tweet from 2011 in which an early buyer of BTC (6 cents per BTC) regretted selling at 30 cents, as now it was $8 (in 2011)...  heh... another reader regretted selling BTC he bought for $700 at $1700. 

The problem is trend reversal systems might well issue false signals in BTC, as it often drops 30% and then bounces right back to new highs.  Stop-clearing declines are part of the territory.

There's no reason to sell BTC if the L-T trend keeps marching higher.

davefairtex's picture
davefairtex
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what is volume

sidenote: from what I gather, US volume is only 25% of the cryptos market. Japan and S. Korea are the big players, as both nations have effectively legalized cryptos.  It is somewhat ironic that Ms. Watanabe and Ms. Kim hold the reins, while the CME and hedges here are bit players. Food for thought.

So on an unregulated exchange, what is volume, anyway?

If you wanted to "fake it until you make it" (https://medium.com/@bitfinexed/fake-it-till-you-make-it-when-bitfinex-themselves-used-to-spoof-their-entire-orderbook-18294585338) and you ran an exchange, you might well engage in wash trading to pump the volume of your exchange to make it look as though there was a whole lot of traffic there, when in fact it was just you "trading" with yourself.

The commentator I referred to was charging exactly that about bitfinex.

Until the commentator laid out the case, it didn't really occur to me what an unscrupulous exchange could do.  But now, with literally billions at stake, I think: anything could be happening.

I tried using volume data in training my code, but it simply wasn't useful in predicting price movements.  According to market theory, it should have been useful, but it just wasn't.  I now wonder if that's because a certain amount of it was just fake.

People have this sense that "the bankers are fraudsters" and while I think that's true, I also think its likely that there are a whole pile of fraud "opportunities" being collected upon right now in the coin world.  Just because they aren't banksters, doesn't mean things are "clean".  When billions are at stake...

Think about this.  Exchanges profit - largely - when prices rise.  Money gets sucked in, more people want to play.

And the critical piece: although bitcoin's blockchain is 100% transparent, all exchange trades happens off blockchain.  So the on-exchange bitcoin transactions are 100% opaque.  You are 100% relying on the exchange's word that you really do have the bitcoins they say you do.  As long as price is going up, nobody withdraws any money, and so if fractional reserve funny business is going on, nobody will see it.

Not until price drops.  Then the withdrawals will start, and then we get to see who has been swimming naked.

If you are looking for a top indicator, Armstrong (who seems to have data on literally everything that's ever happened) says that the party is over once you see an outside reversal after a massive move higher, either on the weekly or the monthly chart.  (outside reversal = "bearish engulfing").

davefairtex's picture
davefairtex
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exchanges vs underlying technology

My concern here is not that bitcoin itself is a fraud, but that there are probably frauds happening in and around some of the exchanges, and so the data we get from those exchanges is suspect.

Exchanges benefit if their volume is high, if their order book is deep, etc.  If you want your exchange to look good (and attract customers, who will then execute trades and make you money), there is a strong incentive to fake your data.

The frauds include the composition of the order book, the trade volumes reported, and quite possibly some of the trades themselves - these are technical details that only are interesting to people writing bots, but as Chris has pointed out, if you can convince the bots to do something (say by spoofing orders, or by reporting fake/wash trades), that ends up moving the market.

As a person interested in doing automated trading, this is a concern to me.  It should also probably inform anyone who might imagine that that "the current price of bitcoin" on a given exchange is an authentic, un-manipulated representation of the what the actual free market price in an honest market would have been.

 

charleshughsmith's picture
charleshughsmith
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thanks for the explanation of volume

thanks for the explanation of volume, Dave.  I don't know if you have an acct with a US based exchange like Coinbase, Kraken, etc., but they appear to be highly regulated already--lots of requirements are already in place.  My sense is non-US exchanges could be unregulated and therefore opaque.  I doubt Coinbase (with 13 M users now) would play fast and loose.

But we have to remind ourselves: BTC is more or less an open market, so there are lots of unknowns and big swings. This is what characterizes open markets. We've had managed markets for so many years, an open market looks "dangerous." Meanwhile, it's the managed markets that are never allowed to drop that are becoming systemically risky.

davefairtex's picture
davefairtex
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unregulated

So with all the exchanges linked with arbitrage bots (again, I know this happens because a friend of mine is doing this), all it takes is for a few unregulated exchanges to be engaging in shenanigans, and the manipulation will be felt by the "highly regulated" gdax.

Does Japan "highly regulate" their exchanges?  Certainly Taiwan doesn't.  Does Korea?  China?  How would we know if they did, or didn't?

For my part, I find the bitcoin prices to be a lot more predictable than the more highly managed commodity and equity markets.  I like them for that.

But at the same time, the case by that commentator on bitfinex is really compelling.  People are wanging around with price right now.  Manipulation is happening well before the banksters get involved.

charleshughsmith's picture
charleshughsmith
Status: Platinum Member (Offline)
Joined: Aug 15 2010
Posts: 716
the question boils down to: what matters most going forward?
The question boils down to: what matters most going forward? I read all the skeptics of cryptos, and I am amazed at the implicit assumption that BTC et al. are somehow more dangerous and risky than the guaranteed-to-collapse status quo. I have to wonder what skeptics will think when the status quo of fiat credit implodes. Which was riskier? I myself think healthy soil is "wealth," ditto wine in a cellar, solar panels, communities that know how to get stuff done, etc., but I also see a role for new forms of money that will naturally arise as the existing forms of money fail catastrophically. That BTC is being manipulated doesn't surprise me, but it's not the key dynamic going forward IMO.
 
Just as a reminder: I laid out the case for following cryptos closely last June 10 here at PP.com when BTC was $580 and its market cap was $9 billion. Now it's $150 billion, which is still mere signal-noise in a global economy with $330 trillion (yes, T) of "wealth" sloshing around.  We're more than halfway to my crazy forecast of $17,000, and I doubt CME futures or manipulation are the key dynamics going forward.
davefairtex's picture
davefairtex
Status: Diamond Member (Offline)
Joined: Sep 3 2008
Posts: 5418
price

Well Charles, price has certainly proven you correct so far.  And price is all that matters in this instance.

However, bitcoin has yet to go through a crash.  Some think it will do fantastically well, as people flee currencies to hide in bitcoin.  People thought the same thing about gold in 2008.  Things didn't exactly turn out that way of course.  Will bitcoin be different?  Is it a must-have, or a luxury-speculation, to be rapidly abandoned once people lose jobs and worry about making rent, car, or house payments?

Once we've gone through the full market cycle, then we'll be able to sort out what bitcoin really is.  At that point, you will be able to take your victory lap - or not, as the case may be.

Really, the thing that triggered me was the suggestion the bitcoin markets were "free and fair" while the other markets were manipulated.  Your post appeared just after I read that long article about bitcoin manipulation at bitfinex...I happen to know a trader that trades on bitfinex, and the "looks" and "silences" he gave during conversation about trades he made at that exchange spoke volumes - things I didn't quite understand at the time, but made a lot more sense after reading the article.  I didn't know the inside story - but he certainly did.  Something Rotten in Denmark.

Will it determine direction over the 10 year timeframe?  Probably not.  But it might pump prices higher and faster than they otherwise might have gone - giving everyone a false impression of just how much enthusiasm there is for the coins.

Rising prices carry their own imperative, and suck everyone in.  They make you look like a genius, too.  But I'm a crank - I am still waiting for that full market cycle before I lower the crown onto your head.  :)

 

charleshughsmith's picture
charleshughsmith
Status: Platinum Member (Offline)
Joined: Aug 15 2010
Posts: 716
agreed--big tests still ahead

Agreed--glad you are holding the crown in abeyance for now--the big tests for markets, incl. BTC, are still ahead.

I have no doubt "players" will trigger a crash or three in BTC et al. because it's profitable to sell at the top, crash the price, trigger sells, and then scoop up cheap BTC, then manipulate it higher. Rinse and repeat, that's been the MO since the 1920s. 

It's worth studying the chart of gold after the 2008 swoon/sell-off. Gold got hit as people dumped their assets to cover their liabilities, but then gold soon recovered and hit new highs within a relatively short span of time.  If we do get a market crash, maybe the same thing will happen to gold and BTC, and if so, then gold would "go on sale" for a brief period of time.

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