Why the Bitcoin Crash Below $500?

Bitcoin crashed below $500 during opening of the Asian trading session this morning.


This is the first time since early February, during the death throes of Mt.Gox, that price action has seen these levels.

Looking for the reason why this relentless sell-off is happening, CCN brings you this incisive and original analysis, first:

People’s Bank of China

Although the PBoC pervasive ban of Bitcoin is rumored to be a rumor, the strong sell-off this morning coincided with market opening in East Asia and would seem to confirm that the market desperately fears that PBoC is about to voice strong rhetoric against the status of Bitcoin in Mainland China.

This Bitcoin crash is apparently flying in the face of the market adage that says:

“Buy the Rumor, Sell the News”

Bitcoin PBoC Wang Qishan

Wang Qishan being coached by Barak Obama

It seems that some traders have accepted the rumor of a PBoC ban as a given fact and are dumping in anticipation of a strong Chinese Bitcoin sell-off in the coming weeks. Or the majority of traders are all too aware that this is unconfirmed rumor and are buying on each lower low. Hence we see price descending in a stairstep fashion – being tugged between the fear of an imminent sell-off, on the one hand, and opportunistic buying (in case this is a rumor) on the other.

The important thing to bear in mind with market rumors is that they consistently instill fear, because as market wisdom has it, the human mind is prone to negativity and panic in the face of uncertainty. As is the case with all markets, so it is with BTC, especially with its ever-present and looming Axe of Regulation. Increasing the downward pressure on price, is the recent spate of exchange misfortunes – add these renewed regulatory uncertainties – and the jittery public consciousness is all the more understandable.

As discussed below, there is an uncanny timing to the PBoC rumour following so closely on the heels of the US Inland Revenue Service decree on the status of Bitcoin.

Update 06h32 UTC

Moments ago The Register published “Bitcoin Bloodbath as China shutters all trading sites” based on the same Caixin article linked below. Shameless sensationalism based on zero evidence.

Update 02h40 UTC

A translation of the Chinese newspaper Caixin article is made available in English and seems to confirm the rumor, yet fails to quote any official PBoC statement to corroborate the drama.

Update 02h27 UTC

reddit bitcoin huobi PBoC rumour

They didn’t? They will! When? Aw, shucks..!

Japanese Economic Data

CPI and Unemployment figures for Japan were released at market open this morning – and cooked to perfection, no doubt:

Japan economic data 28 Mar 2014

Japanese Economic Data courtesy of http://forexfactory.com

Tokyo and National Consumer Price Index figures both confirmed continuing re-inflation of the Japanese economy, which has spent the better part of two decades in a crippling deflationary spiral. Prime Minister Shinzo Abe’s controversial “Abe-nomics” strategy seeks to boost inflation via massive devaluation of the Yen, as well as tax incentives for manufacturers to export against the weaker (and therefore advantageous) Yen.

It may very well be that the prospect of improving economic conditions has swung traders’ sentiment toward Nikkei and Forex trades – leading to closure of positions held in speculative Bitcoin trades – and hence more downward pressure on the BTCUSD price.

US Inland Revenue Service

bitcoin accepted hereHere’s how Bloomberg broke the news: You go out to buy coffee. The cafe accepts bitcoin and you gladly pay the $2 bill with bitcoin. If you’re a US citizen, and you bought that bitcoin when price was at $250, you now owe the IRS $1 in Capital Gains tax. Not Happy Sell bitcoin Holdings Now.

In fact, a proper review of the US IRS publication document reveals that the ruling is only applicable to purchases in excess of $600. Well, thanks a lot Bloomberg… Then again, many useful things are payable in bitcoin, and cost more than $600. Capital Gains Tax on $600 is a lot more than CGT on $2… Not Happy Sell Bitcoin Holdings Now!

source: http://www.cryptocoinsnews.com/2014/03/28/bitcoin-crash-500/

Why the Bitcoin Crash Below $500?