The headlines describing the “crash” in bitcoin prices are predictable, considering that the price has more than halved over the past several weeks, but I don’t think that the word “crash” is particularly appropriate. What has not been reported is the simple fact that the decline in prices over the past week, for example, has been far more orderly than the price action during the early part of December, when frenzied buying of BitCoin pushed the best bid for BTC in the U.S. to over 19,000. While the chart above shows the CoinRoutes Consolidated BBO for the last week, the chart below depicts the CoinRoutes BBO from December 6 through the 14th.
As can be seen, the rally was far more disorganized and volatile. Disorganized, because the best bid was often extremely disconnected from the best offer, and volatile based on the lower magnitude of the short term movements.
What is interesting about this is that traders have held an almost canonical belief that falling prices are correlated with increased volatility. In the case of BitCoin, however, the opposite has been true. Perhaps it is simply an aberration, but then again, it might mean something. While I am not one to make price forecasts, this action does seem to suggest that we are close to the end of the “rout” and that there is an orderly transfer of ownership underway. I want to make clear that this is not investment advice of any kind and not a recommendation to buy or sell BitCoin. It is merely an observation based on the data available with the CoinRoutes Information Portal. I will leave it to the traders in the reading audience to tell me if this data is useful to them.