Bitcoin Rising: Will it Take More than Movies and Crises?

It is commonly said that the Cypriot financial crisis of 2013, in which the Central Bank literally emptied the bank accounts of everyday people, is responsible for the first serious rise in the price of Bitcoin.

In response to the forced closure of one of the Cypriot banks and the emptying of thousands of bank accounts, an unprecedented move, the price of Bitcoin jumped from the low double digits to over $150 in a matter of hours. A rise in price of any asset only means one thing: growing demand. Here is a short film that was released right after the events.

Major Events or Normal Events?

There are some, like Nathaniel Popper, who tell quite a different story. While he admits that crisis in Cyprus contributed to the rise, he says it was in fact the efforts of one early adopter, Xapo CEO Wences Caceres, which really drove the price. Here is what he told Epicenter Bitcoin not long ago:

It wasn’t something you could see on the message boards or at conferences. I mean, more recently he’s spoken at conferences and all that. But this was all kind of in these private, exclusive events with Silicon Valley people and Wall Street people and it sort of began slowly in 2012. He got David Markus, the president of Paypal at the time and a good friend excited. That was one of the first people he sold on it, and David began buying a lot. And then he got the guys at Fortress Investment Group, which is one of the biggest private equity firms around. […]

And it kind of went from there and I think the culmination of that, to some degree, was March, 2013. I mentioned this big spike in price then, and a lot of people at the time attributed that spike to the problems in Cyprus or there was a guidance from the treasury department, people kind of thought, oh, that’s why the price is going up so fast. I think hearing it through Wences and sort of getting to know some of the people who he convinced, what you see is that was the month where there was a conference where he got some of the biggest names in Silicon Valley excited.

And they were buying like hundreds of thousands of dollars, you know, orders, that I think may have been cumulatively responsible for that big spike in price. And that’s something that people aren’t necessarily aware of when they think about that. They think about big world events as having caused that. But usually when you look at the spikes in price it’s because somebody put some big orders in and it pushed the price up.

Greece: Cyprus the Sequel?

For years, Greeks have been seemingly regretting their entry into the Eurozone, and much like Cyprus, citizens have taken to the streets time and again to protest austerity measures. The economy there is under similar pressures to early 2013 Cyprus, and much of the mainstream press and pundits are predicting a similar outcome. There are even some who believe they can chart the recent price of Bitcoin along the destabilizing events in Greece, such as this website that pegs events to price levels.

It could very well be that these people are grasping at straws, as any of us, when it comes to understanding what goes into the value of the world’s first successful, completely digitized currency. For if it were true that the Cypriots were on an exodus into the arms of waiting Bitcoin sellers in March, 2013, then, as the price of the time shows, the demand was massive, more than doubling up the price in short order.

If the same were going on with the events in Greece, then wouldn’t we see a much larger spike in the price? While bears have been getting slaughtered in recent days, short limit after short limit getting whacked, this spike doesn’t represent the wealthiest members of any country exiting its currency. That would be billions of dollars in movement, not millions.

Thus from my perspective, I’m going to take the low road and say it’s not the Greek troubles that are contributing to the spike in price. I’m not going to participate the folly in pretending that this market is scientific. The actual value of an asset as limited in supply of Bitcoin should be much higher, but people will sell it regardless of what the offer is. We’re all guilty. Any time we spend Bitcoin at regular outlets, or convert to the pay the light bill, we’re doing nothing to move the price upward. Which is fine, since an accessible price is better than no price at all.

Hollywood and P. Diddy

An unexpected development for some of us this past week has been the news of the movie “Dope,” which is a comedy film coming out officially on Friday. It talks about Bitcoin a few times, with the cryptocurrency even playing a pivotal role. P. Diddy, or Puff Daddy for those of us that remember the 90s, is a producer of the film, and to this day he maintains a massive following. His Twitter followers are more than 10 million, and his Instagram followers are in the many thousands. Both of these people were recently told about Bitcoin in an off-hand way.

P. Diddy is a millionaire, and so are many of his friends. If a lot of millionaires get interested in something at the same time, and start buying it, and that thing happens to be a limited supply asset like Bitcoin, well, lo and behold, the price is going to rise. Similarly, if a lot of smaller orders also get placed, as folks who were familiar with P. Diddy but not with Bitcoin start to research it, that could

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Managing Expectations

Bitcoin has seen this all before. We’ve seen good news and bad news and everything in between. We’ve seen very famous people like Richard Branson, Kim Dotcom, and 50 Cent say good things about Bitcoin. None of these things have moved the needle in a sustainable way.

There is no easy way to read this market, and the purpose of this article is not to try to do that. The events in Greece could very well be a contributing factor, and so could the media blitz by the movie “Dope.”

These are not sustainable sources of growth, however, and that’s the real point here. We must limit our expectations and hope for the best. The long-longs amongst us have a decreased chance of losing it all with every good month like this one, but events like this will not necessarily mint new millions for them either.

Updated: June 17, 2015 at 5:21 pm CET.

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