How to predict the price of Bitcoin without being psychic

First off let me be very clear about this...

I am not psychic!

Yet every morning when I wake up, I am able to predict what bitcoin is going to do that day and I use this information to make a little profit each day.

I'm assuming you've traded a little before but that you're new and don't have a lot of time to learn a bunch of jargon, so I'm going to keep this as simple as I can.

This particular skill, as well as many others are something I package and sell in the form of trading bots to private clients, but I wanted to share with you, how and why this particular concept works.

There are two kinds of traders.

There's your normal, buy low, sell high types which is what almost everyone is doing.
There are also another kind of trader called short sellers.
These guys move markets!

Short selling is when you think the price will be going down regardless of if it's currently high or low and in spite of the current trends.

It makes sense when you think about it. If you're pretty well convinced the price will drop further, you might want to sell more than what you have right now.
You can always buy back in, once the price drop is over with.

Let's say you have 1 bitcoin, and you feel certain that the price is going to drop $10 tomorrow.
If you just sell your 1 bitcoin, you can earn $10.00
But if you could sell 10 bitcoins you would earn 10x that!

You make a profit of $100 USD while everyone else has taken a loss on the day!!!

When you trade some multiple of what you have on hand, you are using leverage

In order to sell something you don't have, you'll need to borrow it from somewhere.
When you borrow money, to trade you are trading a "margin account" and the rules are different and more complex than normal trading.

I won't go into depth here but suffice it to say, the person lending you the money is going to want you to payback not only what they lent you, but also something extra.

Interest!

This is my secret. The interest rate is highly predictive of price direction for the day, because a lot of bots are tracking it now and using it as a primary trading signal.

This means that the amount of rise or drop is asymmetrically driven by the daily interest rate.*
Thus if interest rates rise, it means prices will drop.
And this effect has a lead time of up to 48 hrs!

If interest rates drop, it just means prices will be boring.
yes boring

What constitutes a high or low interest rate, is going to vary from exchange to exchange. Since I've lost all faith in bitfinex, I'm going to recommend you use the poloniex "lenders interest rate" and track the offers as well as the demands.

For poloniex BTC, the baseline rate is 0.01% .. 0.015%.
The closer rates are to that number, the less action is going to happen that day.

Any action that happens, is going to be in response to changes against that baseline. Ergo if the lend rate doubles, to say 0.03% then the price will drop by daily high * 0.03 (notice the lack of percent, keep it that way when you do the math).

If the lend rate drops, my experience on poloniex has shown that low interest rates are reflecting a sense of satisfaction with current prices, but apprehension as to price direction on the part of the lenders. The lenders want to remain liquid so they can respond quickly to a changing market.

This has the effect of moving the money to the orderbooks and increasing orderbook depth, which flattens prices out.

Why does it work for price drops so well?
Because the people borrowing money are convinced that the price is going to move at least that much, while at the same time you have lenders who are long on BTC but want to earn some interest, so they are completely out of the market and really just bagholding.

Looking at the numbers, things are about to get exciting.

Currently the 24hr high on the BTCUSD rate is $577.00 on the exchange side.
In lending, the offer side is 0.03% while the demand side is 0.045% this translates into an impending price drop of at least $17.19 USD per BTC from it's 24hr high sometime in the next 48hrs*

Why? Because this is money that has already been borrowed and must be paid back!
Once the price begins to drop, even a little, there is enough money borrowed to drive the price through the floor and into a whole new trading range about $20 lower than where it is now.

*(this is all other things being equal and barring unforeseen major events like the bfx hack)

There are other, even stronger indications that between now and the 23rd of August that the BTCUSD rate will drop significantly. The biggest being the fact that the US Government will be auctioning off a significant number of bitcoins on the 22nd, and this is something that always leads to a drop. However the market has been getting smarter and has learned to start pricing that sort of thing in early. But there are a lot of stupid bots and also uneducated investors still and they are enough to cause another panic as soon as the auctioned coins actually move anywhere because it looks to the bots like longterm hoarders will be dumping soon.
Since blockchain.info has removed BDD charts, you can find another BDD chart here just click BDD

Why share all this?

Because no matter which way the markets move, you always have the opportunity to profit if you position yourself correctly.
More importantly, the method is easy to learn, simple to use and
The more people who do it, the more accurate it becomes!