Bitinstant's CEO Charlie Shrem Arrested and the Impact This News Has on BTCs Price

As many of you may know the CEO of popular exchange Bitinstant was arrested on counts of Money Laundering and conspiracy to commit more. This is the result of a DEA investigation of the CEO knowingly trading and funding Silk Road users who buy and distribute illegal narcotics. The amount listed in the conspiracy is a staggering 1 Million USD and with such negative news it is fairly obvious that the price of BTC would be affected.

Often with news comes it comes rapidly and the market takes some time to adjust, but in cases such as this it seems the market reacted quickly and violently and still is not done. More people across the world are waking up and reading the news and finding out that their BTC in Bitinstant may not be safe, or even their fiat stored there, this sort of insecurity is what drives downward trends and leads a Bear market.

Image of BTC Price on Bitstamp Before, During, and After the News Hit

Relevancy to BTC Traders and Holders

When news like this hits it's a boon for people who stay on top of such outlets that can quickly dump what coins they have and wait for a bottom to form. This is and can be very dangerous and a lot of people call it “Catching the Knife” as it's very easy to metaphorically cut oneself by doing this and actually lose BTC when the price doesn't drop or the buy order isn't fulfilled properly due to lag, or there simply not being enough sell orders at the right price. As we can see from the image above the Price was relatively stable and had been for the past several days at around 820 USD on Bitstamp. Just after the news hit the price plummeted almost 70 dollars down to 750 USD. It raised back up and has been struggling to recover since with only a portion of the market actually responding to this news.

A general rule of thumb is it takes 3 to 5 days for the market to legitimately react to any news, the more dire or devastating news tends to hit fastest with people issuing knee-jerk reactions in an effort to minimize their loss. Recall that the last time an exchange went down or had serious issues the confidence in BTC was damaged for a long while and the price dropped as well. Times are different and the price is likely to recover but until further information is brought to bear it's unknown how much worse it's going to get before it gets better.

This will depend based on you and what you want to do. If your goal is to Day Trade and make quick money now, then selling and buying right now while the market is highly volatile is likely to yield significantly good results, people will be buying up once the price drops to a resistance level and then the price will spike up due to these buys. After those buys settle the sell orders will start again and the price once again will drop it's obvious to see the downward trend even after it bounced back up and BTC is going to struggle for a few days yet to get over 800 USD once more.

Day Trading Advice

My advice to day traders is to sell 15% of your holdings now, and buy back in before the resistance kicks in which is around the range of 775 USD, it'll bounce a few times off this wall and with only 15% of the holdings gone you'll make good dividends without harming your total holdings in the rare event the price rebounds quicker than expected.

BTC Holder Advice

If you're a BTC enthusiast and you have a few BTC (or more) and you prefer to hold, then now is the time to buy, buy in just over 775 USD, a few cents to a dollar more to scrape the bottom of the barrel without bottoming out and missing the window and in a few weeks time the price will rebound and you'll have made a handsome profit by buying cheap coins.

Common BTC User

If you're just a common BTC user and have a few or fractions of a BTC and actively use it as an income then selling now would be in your best interest. Waiting for the price to go back up can take weeks if not more, if more bad news comes from this. Remember that markets always react faster and more powerfully to bad news. Everybody is afraid their coins will be worth less than they were a few days ago and they get rid of them like they're scalding them. If you can stand to hold out then do so and let the dust settle but if you're using it for short term income you really should get rid of them at the earliest point above 780 USD. It'll hit that resistance again but it won't last long so be quick about it before it drops further. Once it gets late for the USA markets the price will find a new bottom as it always does overnight for the US.

Advice To All

This is normal, the confidence in BTC overall is at an all time high as is this price. This is one minor exchange among many, so minor that popular metric sites don't even use Bitinstant as a credible tracking source for the price of BTC. Keep this in mind and remember to buy and sell with logic and data, not emotional reactions. If it “feels” any way, stay your hand, take a break from the monitor and data points and go for a walk, play a game, spend some time with friends to clear your head until you are certain that you'll be trading with cold hard facts and not panic selling or panic buying as people are wont to do. This trend is simply from people having a knee jerk reaction that is completely human and has nothing to do with the actual value of BTC. Keep that in mind and I hope this short article has been of some use!

Article By: Penguin Writer

Investing | E-Currency | Economics | Bitcoin

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