Bitcoin’s Price Still Headed to $10k

Despite continued interest from major payments companies and thought leaders, the price of bitcoin has declined in recent weeks, as optimism surrounding New York’s proposed bitcoin regulation gave way to backlash and the market grappled with the widespread use of new and more complex financial tools.
Both factors were recently cited by bitcoin hedge fund Pantera Capital as reason’s that bitcoin’s price has declined since July. In that time, the price of 1 BTC has fallen from close to $650 amid heightened interest from investors at the time of the US government’s auction of roughly 30,000 BTC to a value of $472 at the time of publication.
Still, it’s arguable that no investor has been more exposed to this recent price decline than noted venture capitalist and Draper Fisher Jurvetson (DFJ) partner Tim Draper, who on 2nd July revealed he purchased all of the nearly 30,000 BTC seized from now-defunct online black market Silk Road and sold by the US government.
In a new interview with CoinDesk, Draper revealed he has been surprised by bitcoin’s recent decline in value, though he remains optimistic in its long-term value as an asset.
Draper told CoinDesk:

“I guess the markets aren’t seeing what I am seeing. An entire economy is being rebuilt. I have a price target of $10,000 in three years. Even that may be pessimistic.”

The remarks are notable given that, should Draper have paid market price for the BTC holdings, he would have lost roughly $5m on his investment to date.

Bullish in emerging markets

Draper also addressed his overall investment strategy and recent moves, most of which have targeted bitcoin startups in emerging markets.
The 56-year-old investor, who has contributed to recent funding rounds raised by BitPagos, Korbit and Volabit, told CoinDesk that he believes these companies will ultimately succeed in the face of steep challenges.
Draper’s remarks suggest that he foresees these companies being able to overcome any obstacles posed by regulation and a current lack of consumer awareness, stating:

“These companies are making it easier for people to do business in their countries. As long as the governments realize that they are better off when their people are successful, it should be smooth sailing for our bitcoin investments.”

Investors should buy bitcoin

Price decline aside, Draper said he believes that investors should continue to seek opportunities in the bitcoin market, saying he would “encourage people to buy bitcoins and spend them”.
When asked what advice he would provide to investors and entrepreneurs observing the market, he pointed to bitcoin’s long-term utility as well as its low-cost transaction network.

Find more here:
 http://www.coindesk.com/tim-draper-bitcoins-price-still-headed-10k/

Margin Trading and the Bitcoin’s Price Decline

The price of bitcoin has been the focus of increasing debate over the past week, as, in the wake of its roughly $100 fall, the wider digital currency community has sought to find an answer for what could have caused such a sudden and unexpected movement in the market.
Adding to concerns were the two ‘flash crashes’ that reverberated widely in the mainstream press, one observed on Hong Kong-based bitcoin exchange Bitfinex and the other more recently on BTC-e – both of which have been widely attributed to the effects of the exchanges’ margin trading services on their respective markets.

However, members of bitcoin’s margin trading ecosystem allege that, in its search for answer as to what caused the crashes, the community has unfairly labeled them a scapegoat. This segment of the market, including the businesses that offer the service and their consumers, have been blamed unfairly as the impetus for the price decline, they say.
Speaking to CoinDesk, established margin trading service providers such as Bitfinex and OKCoin voiced their concerns about how last week’s events have been interpreted.
Offering a contrasting opinion, they argue that a stable bitcoin market requires the development of more advanced trading tools, including those just being introduced to the bitcoin market such as futures, derivatives and margin trading. Furthermore, they say that implications that margin trading has an outsized influence on the price of bitcoin are unfounded, and that they fail to characterize properly how their margin trading offerings impact their exchange services.

‘A thousand things’

Bitcoin Solutions president Adam O’Brien, whose Canada-based, still-in-beta brokerage service offers traders the ability to borrow 8x leverage, was sympathetic to the concerns of the bitcoin community. He questioned, however, that any one factor could be labelled as the driving force behind the price decline, saying:

“I see where people are coming from with these flash crashes, but there’s a thousand things that could cause a flash crash, just like there are a thousand things that could cause the price to increase rapidly.”

Zane Tackett, manager of foreign operations for OKCoin, which offers its international margin traders up to 3x leverage through peer-to-peer borrowing, acknowledged the influence of margin trading on last week’s decline. Yet, he cautioned that even without this activity in the market, the price would likely have reacted in a similar manner, telling CoinDesk:

“Downward pressure is going to bring the market down whether there is margin trading or not. So, margin trading might have made it happen quicker, but even without it I don’t doubt that we would be in the same situation as we are in today.”

OKCoin is one of three major bitcoin exchanges that offer margin trading, including BTC-e and Bitfinex. Other notable providers include BTC.sx, CampBX and BitMEX.

Educational offensive

Bitfinex has since become the exchange most commonly associated with margin trading due to the fact that prices in its order books declined precipitously last week, falling from roughly $550 down to $451 on 14th August in the first of the market’s two flash crashes.
As evidence of this link, Josh Rossi, vice president of business development at Bitfinex, took to Reddit on 15th August as part of an effort to better explain the volatility observed on the exchange and educate those he acknowledged may feel apprehensive about margin trading.
The ‘Ask Me Anything’ (AMA) session found Bitfinex seeking to highlight how it ensures a fair market on its exchange, while seeking to quell concerns about margin trading activity, which Rossi described as “baseless claims”. Rossi went on to explain that Bitfinex does not believe margin calls, stop orders or any type of leverage contributed to the flash crash on its order books, saying:

“We had approximately 650 BTC sold as the result of margin calls, out of a total amount of sales during this time of around 9,000 BTC. That is roughly 7%. Hardly, the cause of the drop in price.”

Rather, he suggested that a small number of very large orders hit Bitfinex on the morning of the price crash, and that they were flagged as potentially manipulative. As result, the exchange says the actions of the exchange actually prevented a larger crash than the one observed.
Bitfinex told CoinDesk:

“The drastic and sudden sale of a large number of coins, which would do the same thing to any exchange’s order book, was the main influence on people’s actions.”

The traditionally secretive BTC-e has not issued any statements regarding its own flash crash, and did not respond to requests for comment.

Fire in the movie theater

Bitfinex also provided detail in its AMA regarding how it uses “speed bumps” that slow down and flag large orders that could create undue “slippage” in the market, whereby the size of the buy or sell order causes the price to move (up or down) as it is being filled.
While not common for small bitcoin orders, slippage has long been a side effect for extremely large orders. As Binary Financial’s Harry Yeh explained at the time of the Silk Road auction, the 30,000 BTC sale was attractive to investors because if they had sought to purchase $18m in bitcoin on an exchange, the very act of executing the order would drive the price up roughly $50 per coin as it was being filled.

Read more:
http://www.coindesk.com/margin-trading-blame-bitcoins-price-decline/