Bitcoin Price Prediction 2014 & How to Profit
Bitcoin is currently offered on a few binary options platforms such as AnyOption and TradeRush (as Bitcoin/USD), traded as the Up/Down binary option. Bitcoins binary options are also offered on BTC Levels, a binary options platform solely dedicated to Bitcoins binary options trading. On BTC Levels, Bitcoins are offered as binary options with high-rate and low-rate outcomes.
Whatever platform you decide to use, it is obvious that Bitcoins are presently traded solely on the basis of whether the asset will end up higher or lower than entry price at the expiry time. Clearly, the beauty of binary options with bitcoins is that you don’t have to guess the price but rather just ascertain the direction it’s headed!
When it comes to what determines the value of Bitcoins as an asset, this digital currency is a bit unique and unlike other assets traded in the binary options market. The value of Bitcoins are determined exclusively by speculative activity. Therefore in order to correctly predict bitcoin price in 2014 or better yet, the directional volatility, it is imperative that the trader knows what the driving force behind any speculative activity on the digital currency is at any given point in time.
Drivers of Bitcoin Speculation
Speculation will either increase demand or supply of Bitcoins as far as this market is concerned. In order to understand how speculation affects Bitcoins, let us delve back to April 9th and 10th 2013, when the value of Bitcoins suffered one of its largest intraday drops as a result of speculation.
On April 10, 2013, Bitcoin started the day on a high of $266 per BTC, continuing in the price action uptrend that it had been enjoying for the few days prior to that date. Then the drama began. A speculative sell-off hit the digital currency and caused it to shed 66% of its value at some point. It eventually recovered slightly. A month earlier, a flash crash had occurred which caused the value of Bitcoins to drop from $27 to $2 per BTC! These two incidents were lessons on just how Bitcoins could be just as affected as some other assets that had been hit by such massive intraday plunges. What really was responsible?
CONFIDENCE!
You see, there has been a lot of skepticism and guarded optimism about the place of Bitcoins in the global market. Other digital currencies like e-gold and Liberty Reserve while not being traded, were being used for online transactions. There was little regulatory oversight and by the time the relevant authorities knew it, illicit money formed the bulk of transactions in this currencies. By the time the FBI took down both digital currency operations, a lot of innocent people were affected. Now we not only have a digital currency being used for online payments and some offline shops, but we also have a digital currency being actively traded speculatively for money. The fact that Bitcoins have a large root in digital encryption has posed huge problems in terms of online security and also brought lots of questions about how regulators view the digital currency.
In a market where there is generally guarded optimism among traders and a kind of “wait and see” attitude by regulators, as well as strong armed pessimism by certain countries like China, you are bound to have these swings in price. As has been stated, speculative activity is as a result of demand and supply of BTC on the market.
Factors Driving Demand
Demand on Bitcoins tends to increase when statements or actions of credence are lent to the digital currency by strong voices in the financial markets. Ben Bernanke remarked in his letter to the senate during the Bitcoin hearings that the digital currency may “hold long term promise” if it was modified to make it more secure and efficient. Bitcoin broke the $1000 barrier on this comment, which was by and large, a veiled and guarded endorsement of the digital currency. Such comments improve confidence in a product, and increase the demand for it.
Another factor that comes in to play is the actions or at least the perception of regulators towards Bitcoins. Bernanke’s comments may be interpreted as some sort of approval for digital currencies, but he did point out that the central bank was not in a position to regulate these currencies. As such, the ball falls squarely on the court of regulators. So if there are positive moves by regulators to at least curb some of the excesses on the part of speculators, this could be viewed as a good thing and lead to more demand.
Factors Affecting Supply
When people start selling off their Bitcoins in panic, this will flood the market with the stuff and drive prices down. Anything that erodes confidence or spread panic among Bitcoins traders will lead to selloffs and an oversupply in the market, with loss of value. There are many things that can trigger panic selling of Bitcoins.
Lately, Bitcoin exchanges have been in the spotlight as a result of several Denial of Service (DoS) attacks aimed at hacking into, and cleaning out accounts of Bitcoins traders. A recent attack that occurred recently caused many exchanges to shut down in order to prevent panic sales. Even MtGox had to stop withdrawals on its platforms for some time in order to prevent a run on Bitcoins. Hacking is an obvious confidence issue with Bitcoins.
Then there is the inherent defect in the entire Bitcoins structure of transferring the digital currency in between accounts which could cause glitches that lead to the kind of flash crashes which have occurred at least three times on the Bitcoins exchanges.
Regulators in New York and Canada are now making moves to introduce regulation. At present, the music sounding out of the sound systems of regulators does not seem to sit well with market players. China recently banned the exchange of Bitcoins with the Yuan as well as the use of Bitcoins by online merchant sites. The action caused a collapse in the price of Bitcoins. With the drums being thumped in New York and other jurisdictions, traders are definitely worried about a repeat of the Chinese experience. It is likely that if regulations come up that cause the closure of many exchanges, there will be panic selling, at least in the short-term.
Conclusion
As a trader, you need to keep your eyes and ears open to these factors that could cause the price of Bitcoins to head up or tank. If you are a Bitcoins binary options trader, it may be best to stick to short term contracts. However, if you are thinking of directly buying bitcoins to hold the asset itself, you’ll have to file a purchase order via a regulated bitcoin exchange.
Nonetheless, with the kind of uncertainty surrounding Bitcoins at the moment, holding on to positions for a long time may not be the wisest option. We’ve had unprecedented success with trading bitcoins on short timeframes from 60 seconds to 4 hour trades.
Our prediction on prices in 2014 is a bearish one so leverage those put options and watch out for downward momentum as there will be plenty of opportunity to profit this year anticipating bitcoin prices with binary options. Let us know you thoughts in the comments below.
