Topic: [Original] Let me tell you why bitcoin drops and why it will turn around - page 2. (Read 2446 times)

The price drop from 380 to 310 could be explained by a series of factors.

1. Recently, global commodity and equity market enter into a "risk off" mode that all risky assets, including bitcoin, are being sold off. You may challenge this by arguing the raise of Ripple. But 50% of ripple is controlled by Ripplelab. Therefore, it is not a free floating asset class and will not correlate with the other risky assets.

2. Year end tax selling. 2014 is a bear year for bitcoin holders. Some investors may want to realize the loss before the year end to gain some tax benefits.

3. Miners quit. Declining price incentivizes small and weak miners to quit and quiting miners tend to sell all of their storage.

4. Chinese future market. Chinese future players are overwhelmingly accumulating short position by futures.

But this declining trend will be exhausted after all and will be definitely turned around by the following factors.

1. Global equity market will stabilize with the announcements from central banks that easing and low interest rates will continue in foreseeable future.

2. Tax selling stops by December 31, 2014. Investors will relocate their investment portfolio in January 2015. Till then, I believe some value investors will start betting on two biggest losers in 2014, oil and bitcoin.

3. Once all small and weak miners quit, the bitcoin mining industry will be controlled by few monopolies. By then, the market landscape will approximate Ripple. The conglomerate of strong miners has the power to manipulate the price to protect their interests. They can do it easily by rationing the daily sale of bitcions, or by heavy public promotion, etc.

4. Too many retailing Chinese bears are shorting the bitcoin. The whales in Chinese future market will start pumping soon and squeeze those retailing bears to death. If they lift bitcoin from 300 to 400, image how much they can make from those 50 times leveraged future contract!!!