Bitfinex Malfunction Saved Longs Yesterday

Yesterday at 20:00 GMT + 0, Kool and the Gang decided it was time to go stop hunting. The price quickly fell $10 to $226 and it looked as if $220 was next up. However, a malfunction in Bitfinex’s order matching engine stopped the party in its tracks. Various users reported weird account balances, and the inability to place and cancel orders. What do panic traders do when a Bitcoin exchange is stalling? Press a lot of buttons very quickly and hope for the best. The frantic actions caused the price to quickly spike to $235, then careen back towards $226. Word to the wise: when the exchange is stalled, sit back and do nothing. At BitMEX if your browser its connection with the trading engine, you are notified immediately and unable to click buttons (I will expand on that in a subsequent post). Take a read of BitFinex Appears To Have Crossed Streams, BTC Crash On Hold for a more detailed explanation about yesterdays price action.

The market is flashing yellow with caution. Leveraged longs should use this respite to reduce leverage, and return to the sidelines. They should thank their lucky stars that Bitfinex’s Alphapoint roll out is experiencing growing pains. Otherwise, a messy and chaotic wall of liquidations looked likely yesterday. I wrote about the $213 – $225 margin call sweet spot in the May 4th Crypto Trader Digest. The savvy operators want to push the market to these levels, and let cascading margin calls do the heavy lifting.

The market is now consolidating around $230. Expect another attempt in the coming days. This time the longs may not be so lucky. If you share my views, begin shorting XBUK15 with a downside target price of $220. I wouldn’t consider the correction broken until the market can retake $240.

Crypto Trader Daily – 23 April 2015

Price Action

The price hovered around $235 for the majority of the trading day. Traders are waiting on the side lines until either $230 or $240 is retested. Although the overall trend is bearish, a rally to $240-$250 cannot be ruled out. Given the rapid decline from $300 to $216, there is room for a sustained dead cat bounce before $200 is retested.

 

Trade Idea

If you have some bullish bones left in you, accumulate a long position in XBUK15 positioning for a breakout above $240.

 

In the News

Margin Call: How It Works (BitMEX Blog)

MIT to Take Over Funding of Three Bitcoin Core Developers (CoinTelegraph)

Brock Pierce Elected Bitcoin Foundation Board Chairman (CoinDesk)