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Bitcoin Market Report: 31 May 2014

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bitcoin-dish-networkAfter consolidating for a few days in the $570 region, the Bitcoin exchange rate has shifted up another gear, blasting straight through the $600 level, reaching a peak of $629. Bitcoin Reporter has been reporting for weeks that once the medium term down trend was broken, the reversal and up trend would be explosive, and this is indeed what we are seeing now as shorts go long and those who were on the sidelines jump in to the bull trend.

So what fundamental, if anything is behind this move, and what does it mean for the future of the market?

Bitcoin 2 week chart 31 May 2014

In general terms the new phase of the long term bull market and its sheer strength should come as no surprise. The surprise, if there is one is that the the recently finished down trend lasted so long and reached such lows against a backdrop of a constant flow of very positive news in all areas of Bitcoin. The relentless news and rumours out of China played a large part in this process, driving the exchange rate much lower than it would otherwise have been. The market has now put China well and truly behind it and is focussing on the positives, correcting to a level which reflects this in the context of the ongoing up trend.

Another feature of the new up trend is the increasing volume which is weighted firmly on the buy side of the market as those who were waiting on the sidelines jump in to the new phase of the bull market.

From a fundamental perspective, one reason for the latest surge in the exchange rate could be the news that satellite TV provider, Dish Network, have announced that they will be accepting Bitcoin. Dish Network is the largest company yet to announce that they will accept Bitcoin, with a revenue of $13.9 billions and 30,000 employees.

The take up of Bitcoin by Dish Network is extremely positive in many ways. With 14 million subscribers, this will give Bitcoin huge exposure to the mainstream public, and therefore Bitcoin awareness and take up. The experience of Dish Network will encourage other large merchants to accept Bitcoin, both for company image and as an additional way of attracting new customers as a sales and marketing ploy and fear of being left behind. This can be likened to the early days if the Internet where only forward thinking businesses had a website, the majority not seeing the benefit, but now every business has a website to compete. The same will happen with Bitcoin in due course, the major breakthrough coming when Amazon accepts Bitcoin.

In general terms the more businesses accept Bitcoin and users use Bitcoin, the more credible Bitcoin becomes, lifted beyond the realms of being viewed as a scam, ponzi scheme, criminal instrument etc, to be a true global means of exchange and store of value for the Internet, and ultimately offline as well. Bitcoin could easily become the global de-facto monetary system. 

 Bitcoin year to date chart 31 May 2014

The market is in a steep up trend which is showing no signs of cooling off and no reason why it should do so. Given that the ultimate potential for the exchange rate is many orders of magnitude higher than current levels, in the long term the only direction is up, the only variable being how it gets there.

Dye to the lack of liquidity of the Bitcoin market it does not take too much volume, either on the buy or sell side to really move the market, in stark contrast to most other markets including stocks, bonds, commodities and foreign exchange, so market movements will be exaggerated and the market volatile. For short term traders this is a great benefit as profit cam be made from the price differences, the difficulty being the placing of stops due to the volatility. Ultimately Bitcoin is an investors market for those who see and know the potential, and prepared to buy and hold for future gains.

In the shorter term the market is most likely to be consistent with the new phase of the bull market with the upwards trend continuing with a pause for consolidation at frequent intervals. The next major milestone is around $800 - once this level is broken the new phase bull market will be confirmed and primed to take on the all time high.

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