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Bitcoin Market Report: 29 May 2014

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bitcoin-exchange-newsAfter its dramatic break out from the medium term down trend and subsequent steep climb, the Bitcoin exchange rate has paused for breath, consolidating between resistance at $588 and support at $569. After the meteoric climb of the last week or so this period of consolidation is crucial to prevent the market becoming over heated, the pull back not compromising the new up trend.

Many are questioning the reason for and authenticity of the recent price break, but the fact is it was long overdue.

Bitcoin 14 day chart 29 May 2014

For several months the market has completely disregarded a constant flow of positive news while reacting immediately to negative news, which is what you would expect in a classic bear market. Since sentiment became bullish the reverse is true with negative news being largely ignored, with the focus on the flow of positive news which collectively ensures the future integrity and value of Bitcoin.

Another notable factor in the latest phase of the long term bull market is increasing volume, particularly on the buy side of the market. This can be attributed to many players sitting on the sidelines waiting for the opportunity to enter the market in a definite up trend which then became self-fulfilling.

Although the new up trend is becoming established, from a technical perspective on the charts the new phase of the long term bull market cannot be considered to be confirmed until the exchange rate reaches $740 to $770, but the way the market has performed so far makes this important milestone look achievable in the next couple of months.

One of the biggest barriers to Bitcoin commercial and exchange rate growth has not been lack of innovation and venture capital investment which continues apace, but lack of awareness and take up by the mainstream public. Most participants in Bitcoin remain the enthusiasts and technically competent as opposed to the man or woman in the street which is where the real future of Bitcoin awaits.

There are several main factors to be considered and overcome before this can happen.

1. Awareness. There are few initiatives being carried out to really bring attention to Bitcoin to the  mainstream, and in particular to overcome the extremely negative publicity that followed the crash of Mt. Gox. The organisation that purports to represent Bitcoin and has its members money to conduct ongoing promotion is the so called "Bitcoin Foundation", but which are proving to be more of a liability to Bitcoin than an asset, being largely managed by past and present directors with various criminal allegations levelled at them including moment laundering and pedophillia, which is the opposite to the image Bitcoin needs. They also appear to operate as a secretive clique for their own benefit as opposed to any real interest in Bitcoin. Bitcoin needs a powerful, crowd/community funded alternative to Bitcoin Foundation with democratically elected, fully accountable representatives where all business is conducted in  the open in accordance with the wishes of the collective community.  

2. Exchange. The mainstream public will want to exchange fiat to Bitcoin and vice versa quickly, easily and conveniently.  Few if any people will want to use Bitcoin exchanges due to the inconvenience, risk and lack of privacy. The widespread deployment of the Bitcoin ATM which does not require ID and peer to peer exchanges are the future here. Bitcoin exchange should be private, totally anonymous, simple and reliable.

3. Regulation. The IRS has, probably intentionally, killed Bitcoin for eCommerce in the largest market, the USA, by ruling that Bitcoin is property, requiring onerous tax accounting requirements that few will tolerate. This ruling is clearly wrong and detrimental to the future of Bitcoin. Until the IRS and tax authorities in other countries follow the lead of the British tax authority, HMRC, and consider Bitcoin to be currency and free of tax, Bitcoin take up will be seriously held back.  

4. Usability. Bitcoin needs to be as simple to use if not simpler to use than a credit card. The current generation of wallets are beyond the capability of the mainstream public along with all of the very serious security considerations that go with them. No mainstream user will want to be involved with 2FA, multi-sig and cold storage. Even sophisticated and technical users are losing Bitcoin to trojans, hackers and mistakes, so the general public have no chance. The future therefore is in push button hardware devices based on the smartphone and dedicated devices such as the Bitcoin Trezor, which can also be used in conjunction with computer based wallets for security.   

5. Merchants. Availability of a wide range of goods and services from a wide choice of merchants is another key to the Bitcoin future.  Consumers will expects to be able to purchase a wide range of goods and services from a choice of merchants, shopping around for competitive pricing etc.  Although this process is well under way there is still a long way to go yet. A major boost to thee process, and the Bitcoin exchange rate would occur if Amazon began to accept Bitcoin.

All of these factors will play out eventually, probably in the next three years or so. The future of Bitcoin has never looked better.

Bitcoin Market Outlook

Bitcoin year to date chart 29 May 2014 

Despite the pull back and consolidation, the new up trend remains firmly in place. There is nothing on the horizon that could shake the market generally, although there is always the risk of the market being manipulated by large players due to lack of liquidity. Even a large player would be unwise to bet against the current bullish trend and sentiment.

It is most probable therefore that the market will continue to consolidate for a few days at current levels before going for the $600 level and over the next couple of months on to the pivotal $700's.

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