In terms of dollars traded this volume doesn’t even rank in the top ten but with the BTC/USD exchange rate below $3, this level of volume has never before been seen.
The selling did cause the BTC/USD price to drop about 20% from the level just prior to the selling however as USD funds were moved to exchanges to take advantage of the selling the price started to rise to about the $2.70 level — a drop of about 10% from the levels seen in the days prior.
A tool available to traders caught without USD funds available when the selloff happened is the Bitcoinica exchange. Bitcoinica allows the value of bitcoin deposits to be used to obtain credit when purchasing additional bitcoins on margin. Leverage is provided up to five times (5X) the value of the bitcoins or USD deposited.
Margin leverage is not recommended unless the trader is experienced and even experienced traders will find their entire position wiped out following the forced margin selling that can occur when the price moves opposite to the traders desire.
Volatility causing the price to move 10% is not unusual for bitcoin so with this record level of volume to not result in an even larger price drop might indicate that a price floor in the $2s has possibly been found.
This would be welcome news for Bitcoin traders who have seen their holdings drop dramatically over the previous months. The price in the low $2s was seen several weeks ago so this selloff did not bring new lows when considering the past couple months.
Euro Now Second Most Traded Currency At Bitcoin Exchanges
For currency markets where bitcoins trade against the Euro trading volumes have never been heavier. More Euros traded on BTC/EUR markets over the past week than in any prior week in Bitcoin’s history.
This volume also propelled the troubled European currency to the number two spot on the list of currencies that trade against bitcoin. An article in the Financial Post describes why bitcoin is being seen by some in Europe as a safer destination for their money. The largest BTC/EUR markets exist at Intersango which operates out of London, at Mt. Gox of Japan and at bitcoin.de which is in Germany.
Relegated to the third position in the ranking of currencies is the British pound sterling but that too also just broke its all time weekly volume record for bitcoin trading. The largest BTC/GBP markets exist at Mt. Gox and Intersango.
Additional markets that just had a record-breaking week for trading volume include Intersango’s BTC/PLN market where the Polish zloty is traded and VirWoX’s BTC/SLL market. SLLs here refer to Second Life Lindens, the virtual currency used in the 3D virtual world where the largest component of its population are users from Europe. BitStamp, which operates from Slovenia, only offers BTC/USD trading but new deposits funded through SEPA transfers pushed that market’s weekly trading volume over its previous record high as well.
The increasing volumes at exchanges other than Mt. Gox are bringing Bitcoin into new territory. Over the past year, one market, the BTC/USD market at Mt. Gox, represented in the range of eighty percent of all bitcoin trading in any currency, as shown in the chart to the left.
At that level of dominance, each move in the BTC/USD at Mt. Gox would follow with a corresponding move in other bitcoin currency markets as the result of arbitrage which minimizes price inefficiencies between markets.
It appears though that in the past weeks Mt. Gox’s BTC/USD market is no longer in the driver’s seat as that market now reacts to rather than leads price moves. A perfect example is the BTC/CNY (Chinese Yuan) market where two weeks ago the record volume and price rise there seemed to appear out of nowhere and without justification. Now days later, that market just appears to have been first at discovering the new, higher price.
What isn’t known is if these increasing volumes at other exchanges is due to organic demand or if it is mostly just in response to problems at Mt. Gox. A number of customer complaints can be found on the BitcoinTalk form reporting delays starting in April with accessing USDs funds from Mt. Gox. Mt. Gox claims that is it is encountering “legal issues making it difficult to wire anything to U.S., or [to wire out] as USD”. Additionally, Dwolla changed its terms of service which prompted Mt. Gox to now require verification (with a photo ID) for all its customer accounts that elect to continue to use Dwolla’s payment network.
Bitcoin’s reach towards covering all areas of the globe continues regardless. In the past weeks new exchange methods have arrived in the following ways:
While volume through these specific methods is not likely to have an impact on the exchange rates on other exchanges anytime soon, they do show that bitcoins truly have a growing global reach. Bitcoin’s ecosystem strengthens with each of these expansions.
Vitalik Buterin, writer for Bitcoin Magazine (@BitcoinMagazine), describes today’s rally that has taken the Bitcoin BTC/USD exchange rate above its high water mark from 2012. Excerpts:
“Today’s maximum of $15.68 at the time of this writing [is] the highest that the Bitcoin price has been since July 6, 2011.”
“The [network data] figures, which attempt to measure Bitcoin’s actual usage rather than public opinion or interest in the currency as search volume and all market statistics inevitably do, show the same pattern: the values rose during summer 2012, dropped off in the fall, but then began to quickly pick up again in November after WordPress started accepting the currency.”
“The 14-day average is also now as high as it ever was, and may well go even higher.”