itBit Bitcoin Market Report: January 2016

itBit Bitcoin Market Report January 2016

With a strong finish to the year, many bitcoin traders closed their 2015 positions with gains topping 30%. Despite the positive momentum, the last two months have been far from smooth.

The price of bitcoin jumped from the high-$200s USD in late-Octber to hit an annual intraday high of $500 on November 4th. The price then proceeded to fall back down to $310 on November 11th, capping a rollercoaster three-week run. The bitcoin market stabilized in late-November and picked up momentum heading into December, closing the year around $430. The monthly high occurred on December 15th when the price hit $465. The market spent most of the month consolidating in the $400s, moving between $417-$465.


Bitcoin Finishes 2015 on a High Note




December Bitcoin Market Moving Events 



December BITcoin Market Moving Events summary

12/1   Goldman Sachs seeks patent for crypto trade settlement solution        -3.7%         
12/7 Purse raises 1 million USD         +1.9%       
12/8 Reports falsely claim Dr. Craig Wright to be Satoshi Nakamoto         +6.4%       
12/11 Bitcoin price rockets to 2015 closing high on record volume         +10.6%     
12/15 SEC approves Overstock’s Plan to issue blockchain securities        +5.9%        
12/26 Report surfaces that China might seek to regulate bitcoin        -10.4%       
12/30 Chain issues private investor shares on Nasdaq Blockchain platform        -2.0%         

January Price Outlook

The price of bitcoin looks to be range bound as it consolidates its latest move up. In order for the bitcoin price to break out, it needs to get above resistance which now stands at $465. Although the price has been flirting with breaking $465 in early-January, a test of the $417 level in the coming weeks is possible. If the price were to go below $417, the next support range would be between $393-$400.  




January Market Trend to Watch

Capital Outflows and currency Devaluation in China 

The continued struggles of the Chinese economy and Shanghai markets have led the People’s Bank Of China (PBOC) to institute capital controls and monetary easing programs. These monetary policies aim to curtail the record capital outflows from mainland China and buoy the country’s volatile stock market. Interestingly, these policies have indirectly benefited the bitcoin market.   


The Federal Reserve’s interest rate hike boosted USD dollar strength and made it more expensive for China to maintain its peg vs. the USD. This has depleted China’s FX reserves and in recent weeks, the PBOC has allowed the band around the peg to float more freely. As a result, capital outflows from the mainland have increased and the spread between offshore and onshore yuan has widened significantly. In an attempt to rein in speculators, China has also banned some foreign banks from selling offshore yuan.

The widening of the yuan spread and new controls on foreign banks have made it more expensive to get yuan offshore. As we have written in the past, bitcoin is a viable asset to move money out of the mainland and the resulting increase in demand would be positive for the bitcoin price.   


Bitcoin traders should also watch the pace at which China devalues the yuan. The money being pumped into the economy by the PBOC as part of monetary easing will accelerate devaluation and is another bullish indicator for bitcoin.


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