Has the Bitcoin market also been invaded by algorithms? How should we deal with the mysterious price movement that dumps large volumes on small orders?
Hello everyone, algorithms! I want to leave stock trading to AI@xi10jun1days.
Bitcoin finally dropped below 100,000 yen temporarily last week, but then rebounded and seems to have regained its calm.
For those who have read up to the paid portion of this column, of course you’re fine, right?
This week’s performance (March 24, 2017 – March 30, 2017)
First, as usual, the performance. I’ll announce the changes first.
- Last week (up to March 23, 2017) assets: 78,561 yen
- This week (up to March 30, 2017) assets: 85,010 yen
- Change: +6,449 yen
Another high this week! We finally entered the 80,000 yen range!
During the decline from the 23rd to the 25th, some larger gains contributed, but after that, it fluctuated between losses and gains and stayed flat.
In any case, don’t engage in reckless trading. If you want to profit from the bitcoin market, this is key. Just steadily build up without unnecessary losses.
Algorithm? Mysterious price movement with大量 of small orders
Recently I’ve been noticing this more often: a price movement with大量 of small orders.
Seeing is believing, please take a look at the rightmost trade history.
Do you see it? At the far right, in the execution history.
There are a lot of tiny orders like 0.00165 BTC or 0.0110001 BTC being dumped in huge quantities.
Want to zoom in a bit more?
My goodness, such stingy orders...
Algorithmic orders are common in regular stock and forex markets, and the bitcoin market is no exception. In fact, perhaps it’s more so because it’s the bitcoin market.
Algorithmic orders seen in the Bitcoin market
I’m not very familiar with algorithmic orders myself, but these大量投下 orders resemble iceberg orders.
Iceberg orders are used to disguise large buys/sells by breaking them into smaller orders. See details if you wish, but there is no doubt these are orders that humans cannot handle manually.
In fact, in the bitcoin market, there are several such algorithmic orders.
For example, iceberg-like algorithmic orders. Occasionally there are orders of around 10 BTC to 100 BTC appearing and disappearing; that’s what those are. They push the price down in that way, or alternatively create downward pressure on the price.
There are also arbitrage-type algorithmic orders. Bitcoin prices differ slightly between exchanges, so arbitrage trading can be profitable.
However, just by looking at the order book you can’t tell which is which. Still, such algorithms exist and should be acknowledged.
In summary, the currently conceivable algorithmic orders in the bitcoin market are,
- Iceberg-type
- Show-book-type
- Arbitrage-type
There are probably other types of algorithmic orders as well.
Free summary: Beware of algorithmic orders!
Be especially careful with iceberg-like algorithmic orders. If you’re lured into selling or buying, your losses could grow.
That said, detecting them is difficult. And unlike other currencies, trading regulations are still lax here, so there’s a high likelihood you’ll be pulled around by algorithmic orders in the future as well.
I’ll cover how to spot them and how to respond in discretionary trading in the paid portion. Either way, the best thing is to trade within your limits!
Ending Corner 1: Try shopping with Bitcoin!
Actually, on overseas e-commerce site “FANCY,” you can buy products using Bitcoin! It’s a bit costly for shipping, but there are stylish items you won’t find in Japan!
I’ve summarized how to use FANCY on this blog, so please refer to it here.
- →FANCY (Fancy)’s account creation, registration, settings, and product purchase flow explained! | Yutori-sedai investor jun
- →How to purchase items on FANCY with Bitcoin (Bitcoin) payment | Yutori-sedai investor jun
Ending Corner 2: How should I file taxes for Bitcoin margin trading (BTCFX)?
Bitcoin margin trading profits must be properly filed! I’ve written a blog post after confirming with the tax office by phone, so please refer to it.
It seems interpretations can differ even among tax offices and tax accountants. Also, laws may change, so the way you file could change. Before filing, be sure to check with your nearest tax office or tax professional.
Note: The free portion ends here. The rest covers detailed analysis and future outlook, so this part is paywalled. If you want to read more, of course, you can subscribe as a donation-style support—it would be very encouraging! Thank you for your continued support!
