The bitcoin price drop – to panic or persevere?

The price of bitcoin has plummeted recently, especially this weekend, when the crypto-currency bottomed out at around $290. But even bitcoin enthusiasts cannot agree on why, or what this means for the market.

The price of bitcoin is now hovering around $330, far from the all-time high of $1 242 in November 2013. Yesterday saw the price begin to climb slowly early yesterday as a 31,000 BTC sell-off blew up the market.

The wall, which seems to have been instigated by a single bitcoin owner or group – now referring to as the Bitcoin Whale – appeared just as the price began hovering around $300. A sell order at this point could indicate one of two things; an early adopter deciding that $300 was their breaking point, happy to walk away with $9 million, or an intentional plan to drive down the price by flooding the market, resulting in a crisis of market confidence allowing them to purchase the coins at a lower price.

But why has bitcoin value fallen in the first place? Reviews are mixed.

One theory about the price decline is bitcoin is more susceptible to manipulation than investors originally thought. The bitcoin exchange merchant community – firms that handle those transfers of dollars, yuans and euros to bitcoins and back again – has suffered more than its share of frauds, thefts, collapses and other mishaps over the last year or two. The collapse of the major bitcoin exchange MtGox in February definitely had a hand in pushing down prices.

Another is that Chinese computer programmers have sharply stepped up their “mining” of bitcoins.

Some countries have increased regulations or even banned the crypto-currency. While increased regulations demonstrate an increased knowledge of bitcoin, they may have scared off some investors. Recent moves by Russia and Bangladesh to ban the crypto-currency will reduce its popularity with residents and those doing business with them.

But a large majority of governments are open to bitcoin adoption, as are many companies, small and large.

The latest company to start adopting bitcoin is Acromobile, which announced today that it will be integrating Acromobile Payments with Bitnet’s platform to offer merchants the ability to accept bitcoin payments.

Jason Masciarelli, Founder at Acromobile, summarised the drive for bitcoin adoption.

“With companies like Dell and eBay already accepting Bitcoin, the demand from B2B and B2C merchants is really accelerating. With Bitnet we are able to deliver an integrated CRM and commerce platform to unlock the bitcoin opportunity for merchants with no risk and have them get paid in their local currency.

For some, bitcoin makes remittance payments cheaper, or allows for more secure mobile payments, or even allows businesses trading internationally to get paid in their own currency thanks to instant conversion services.Surely as more people adopt bitcoin as a payment method, prices should have risen? Investors are still betting on startups in the space: Circle has raised more than $25 million, and Coinbase and BitPay have each raised more than $30 million. Blockchain raised $30 million after this weekend’s crash.

It may be bitcoin’s very popularity that undermines its stock market value – as it becomes more well-known, smaller investors become involved, more susceptible to panic selling. It could also be that merchants accepting bitcoins rapidly convert them to dollars or other hard currencies, which drives down the price.

But its practical use will continue to encourage adoption. And for those who use bitcoins as transactional instruments the price drop might be irrelevant.

“Bitcoin is a currency with practical uses and one that people will continue to use while there are sellers prepared to accept it,” Gordon Fletcher wrote at The Conversation. “Its value in relation to other currencies, so long as it is known, isn’t relevant. There is no shortage of actual, state-backed fiat currencies around the world that face regular fluctuations in value — but still business must, and does, carry on.


Related reading

Leave a comment

Comments RSS TrackBack 1 comment