The Rise, Fall and Rise of Bitcoin and the Reasons Why
About 6 months ago we wrote a piece on Bitcoin – we were pretty fascinated with the Cryptocurrency and we still are. At the time it had risen from $15 to $266 and then fell to as low as $40 before stabilising at above the $100 mark or so. It was a pretty wild rise and the figures don’t tell half the story.
Afterwards, Bitcoin seemed quite laggard and a lot of people it might just sit there and slowly wilt away, losing value until it died a quiet death. It seems that it’s not the case. A raft of weird occurrences have pushed it back to centre stage and what seemed like its encore a few months ago may have just been a prelude to a very interesting story.
Bitcoin came to the centre of the popular conscience again when the nefarious Silk Road site was closed down by the FBI a few weeks ago. The site and Bitcoin went hand in hand thanks to the cryptocurrency’s cryptic and untraceable nature and the Silk Road’s selling of guns, drugs, counterfeit passports etc.
Silk Road, Baidu, China and the USA
Around 10% of Bitcoin transactions on earth were related to the site, so as you can imagine its closure had an effect – a 15% plus drop in value. However, because Bitcoin stopped doing drugs, its initial comedown seems to have been followed by a revitalised interest from prospectors and a price rise. Even though some other Silk Road copies have sprung up in the meantime and use the currency for transactions; it’s deemed a lot more clean cut now and its value reflects that somewhat.
In addition, Baidu – China’s largest search engine began accepting the currency as payment for some of its products. It joins WordPress and Reddit as businesses that currently do so. In addition, Chinese moves away from the US dollar and towards its Renminbi have seen uncertainty in the country and BTC China is now among the top three exchanges on the planet for the currency. In short, China is the Bitcoin driver at the moment. It’s a move that’s down to financial uncertainty – similar to the Cypriot and Russian pushes towards the currency in the past.
To add to this near perfect storm, America’s shutdown also had its part to play. The USA’s political games and fears about its debt sealing saw the Libertarian right chuck money at the currency. During the two weeks of turmoil in the US, Bitcoin rose by almost a fifth to $168 and upon the realisation of a temporary spending agreement; it rose another 16% in the following days to $196.
An E-Commerce Dream
As we can see there are a variety of external reasons that explain this notable increase in worth. Of course, it’s not out of Bitcoin’s hands. The currency has a lot going for it as regards ease of transactions, security and in terms of its hassle free approach to commerce.
For instance businesses don’t have to worry about chargebacks when using Bitcoin, nor is there a need to pay for payment fees and other profit eating services. In fact, it’s an e-commerce site’s dream. Well, that’s the case if it were more stable. The varying worth of Bitcoin is one of its main problems. Fluctuation in prices is quick and common as anyone can see from a chart of its worth and as anyone who’s followed the cryptocurrency will know it’s not too hard to create these instabilities.
As we’ve said before, social media and sentiment are significant parts of the Bitcoin puzzle. Thinking back to its previous heyday the currency’s worth rose on positive social media sentiment and then was spooked by the Reddit Bitcoin Millionaire issue. Following on from this MTGox’s server failure was the blow that caused it to hit rock bottom and caused mass selling.
Conversely, Coindesk has released an iPhone app in recent days, Baidu among others are utilising it as a form of monetary exchange as payment for specific services. In China it’s also possible to use it in conjunction with PayPal, another move that creates confidence in the currency. In addition, many well respected publications have also spoken reasonably positively of the currency – the Wall Street Journal wrote a piece about Bitcoin investment last week.
Of course, confidence is a pretty fickle thing, so who is to know what will happen? As we saw from the previous fall and rise Bitcoin is a resilient mother and though easy to damage it’s a hard one to kill off. However, though it may not be a fad that’s built on a foundation sand, we’re not completely sure if it is one of granite either. Time will tell for sure but one thing we are sure is that its story would make a hell of a movie.