If you have been paying any attention to the latest Bitcoin news you know that the price of bitcoin has been taking a major dive. What you may not know is that this sub $200 decline marks one of the lowest prices of Bitcoin since October 2013. While this is not exactly good news for people bullish on Bitcoin gains, this does not spell the end of the digital currency.
2014 saw a sharp rise in interest for Bitcoin, from massive investments in Bitcoin related startups to exciting innovations around the blockchain, and we believe that this excitement caused speculators to come out in droves, driving the price up. Given this, it makes sense that Bitcoin is seeing a major bottoming out event. New markets experience a high range of emotions that have a major effect on volatility, with Bitcoin being no exception. And this is a good thing! Especially if you’re interested in getting into the Bitcoin market at a prime time, because baby, you can bet the price is going back up. See graph below for more detail:
Cycle of Market Emotions
Another reason the drop in price is not as disastrous as it seems is that the number of Bitcoin users continues to rise. To be more specific the number of daily Bitcoin transactions has recently hit an all time high, indicating that, despite the wild price, more and more people across the globe are finding valuable uses for digital currency. In line with this trend, more and more merchants, both of the online and brick and mortar variety, are accepting bitcoin as a valid payment option. The current state of price may be a headache for some, but the proof is in the numbers and the benefits of Bitcoin are finding uses in many aspects of business and consumer life.
Number Of Bitcoin Transactions Per Day. Source: blockchain.info
Something we’ve seen at Harborly is that, with the high price of Bitcoin, there can be a barrier effect on people trying to buy their first Bitcoin. Whether it’s a matter of being able to afford it, or simply just waiting for a better opportunity, lower prices means higher volume. That’s why we believe another benefit of the lower price is that in 2015 we’re going to see more new people buy into the Bitcoin markets. While this isn’t a general rule, we also believe these new adopters, given the increase is fantastic merchant solutions, could be less interested in speculating and may be more likely to actually use their coins to buy things instead of sitting on them until the price goes up.
There needs to be a robust economy in the Bitcoin world so the price is not dependent on investors looking to strike it rich. A speculation driven market is more likely to face frequent boom and bust cycles, and less likely to be useful as an actual currency.
We look at the drop in price, and the associated stability in price swings as a sign of maturity in the Bitcoin community. The responsibility is now on developers and entrepreneurs to create the technologies to facilitate a digital currency economy, with nurturing startups being the focus of 2015 and beyond.
Harborly is the simplest, quickest and safest way to buy and sell Bitcoin globally using your local currency. Sign up today to get started!