by Chad Steinglass

Ups and Downs

There have been a lot of ups and downs in the BTC world in the last several weeks. Starting with an incredible run into the launch of the first futures-based ETF, and then a choppy seesaw ever since, culminating in a bit of a fall from grace this week. One of the things I’ve been focusing on this whole time is attempting to filter out what I see as quick moves caused by fast money or retail traders jumping in and out of the market, and lower frequency but larger volume moves made by large players or OTC desks executing through VWAP orders (Volume Weighted Average Price).

False Alarms

I touched on this last week and noted that there was one or several large traders vwapping sell orders every time we saw spurts of strength in the market. I’ve been searching for signs that this (or these) traders are finally done with the inventory they want to unload, but so far, each sign has proven to be a false alarm. One thing that I didn’t get into too much last time we spoke about this was thoughts on who is vwapping and why. A couple weeks ago I would have said it was likely traders who had positioned long specifically to trade against the bid from fresh inflows from the ETF unwinding any residual positions they had. But since then it has become apparent that there is likely something larger at play.

Mt Gox Trustee

On October 20th the trustee managing the distribution to victims of the Mt Gox hack of 2014 announced it finalized the terms of the award. The trustee holds about 150k BTC and BTCH, as well as a fair amount of JPY, and will be distributing these holdings to the claimants in the near future. Now, “near” in this case might still be 6-12 months from now, but finally it appears that the distribution will happen. Even though the Mt Gox trustee will distribute BTC and not fiat currency, I believe that there has been a significant amount of selling in the market associated with this development. Perhaps some of the selling is coming from traders who wish to get short (or less long) into the distribution with the idea that when the coins are finally transferred there will be a large number of sellers, and the traders think they’ll be able to buy the coins back cheaper.

Fortress Investment Group LLC

Determining The Seller

The truth behind the question of who it is that has been unloading inventory these past few weeks might not become clear for some time. But while we are in this regime of strong support but even stronger resistance, I will continue to try to look past the noise of any quick rallies or sell offs and focus on looking for signs that the large seller (or sellers) are finally running out of the inventory they are trying to unload. If the selling really is associated with the Mt Gox distribution, there would be an absolute maximum of 150k BTC to sell, and the likely amount should be less than that. Of course, there are always traders who recognize what the big players are doing and pile on in the same direction. But those traders will be quick to cut and turn the other way when they sense the trade is over.

We’ve all been waiting patiently for this chop to resolve itself, and for the seller’s inventory to run out. It looks like we’ll have to be patient at least a while longer. But if we can manage that, I think we’ll be rewarded for that patience in the long run.

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