CEX.IO -2

Wednesday, July 30, 2014

Recent drop in Bitcoin price

So, if you haven't noticed, the price of Bitcoin has dropped about 10% in the past week or so.  It's down from about $630 to the $570 range at the time of this writing.

Usually there is some big story to explain a big move in price, but this time it's really not easy to find.

The Bitcoin haters and skeptics are out writing about how Bitcoin sucks and this is the triumph of big central banking over anarcho-capitalism and freedom.  They have been saying this since Bitcoin was at $0.001 each.

One article that made the most sense of it to me, explained that one of the biggest complaints of the haters and skeptics is the volatility in Bitcoin price.  It would move as much as 10% up or down each day.  This made it difficult for the old farts on Wall Street to think of it as a "legitimate currency".  Though currency traders like the people on Forex, love it because volatility is how you make money as a trader - you can't buy low and sell high if the price is the same all the time.

Finally, this year the price of Bitcoin stabilized and what did the haters do?  Hated on it more... articles about how it won't last are all over the net.  They then lamented for the traders who can't make money because the price is too stable.

The Market Capitalization (value of all the Bitcoins in circulation) for Bitcoin is about $8 billion roughly, while that may seem like a big number, as far as currencies go, it's not that big.  That means that big traders can move the price pretty significantly.  Let's not forget that the government just auctioned off those 30,000 Silkroad Bitcoins that they stole from the (alleged) Dread Pirate Roberts.

The article goes on to speculate that the reason for the price drop is because of the recent stability, the Bitcoin traders are shifting over to more volatile currencies (crypto and otherwise).  So, it stands to reason, that with the return of price volatility will come more traders coming back into Bitcoin trading, which will bring the price back up.  The hard part is guessing where the bottom will be.

If you look at the big picture, this drop is insignificant compared to past price volatility.  People got used to the recent stability, which really only lasted a couple months.  Let the haters hate, they're never going away.  Some are speculating that the bottom will be in the $350 range.  I don't think it will drop that much.  If it does, that's simply a good time to buy.  Bitcoin will find a bottom and come back up.

Remember, buy low, sell high.



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