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Market Review: Consolidation Continues

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bitcoin-chart-small-march-15The Bitcoin exchange rate continues to trade sideways between $600 and $650, totally unmoved by both positive and negative news this week in line with our previous predictions that the price would remain range-bound between $600 - $700 during March. While short term speculators and those who purchased at a higher price may be disappointed, this is actually very positive for Bitcoin.

At these levels the Bitcoin price is very resilient and consolidating and poised to move to new highs as the year advances.

bitcoin-chart-march-15

On the negative news side we have seen respected figures in the financial world such as Nouriel Roubini and Warren Buffet slamming Bitcoin, as well as several threats of regulation, particularly in the USA.

On the positive side we are seeing the relentless roll-out of ATM's around the world, upbeat support of Bitcoin by a variety of respected figures, and the news that Tiger Direct has reached the $1 million milestone in Bitcoin related revenues. 

In the meantime the fallout from Mt. Gox rumbles on in the background, while Bitcoin has moved on, apparently largely indifferent to the collapse of the exchange. There is no question that Mt. Gox was directly responsible for much of the volatility of the past, and now that factor is out of the way the market is behaving in a much more stable manner, and more like a real financial instrument.

 Based upon all of these factors the future performance of Bitcoin is much more predictable, and with volatility greatly reduced will appeal to increasingly more merchants like Overstock and Tiger Direct.

Given the relatively low liquidity, with only 12 million Bitcoin in circulation, probably 50% of which is being accumulated and hoarded for future gains, it would only require a moderate increase in demand to move the price to a higher trading level - but where will that catalyst come from?

In order for the Bitcoin exchange to move beyond the $700 level in the near term there would need to be some big news, such as a major retailer offering Bitcoin, or some extremely positive news on the regulatory side, neither of which looks likely in the short term.

Market Outlook To The End Of March

In the longer term, months and years, the Bitcoin exchange rate can only go one way - up - as more and more merchants and individuals compete for the Bitcoin in circulation thus increasing the price based on liquidity and demand which suggests a price many order of magnitudes higher than it is today. The market will of course still be volatile, so the price will not progress smoothly in an upwards direction, always being news sensitive.

For the remainder of March the Bitcoin exchange rate looks set to continue to trade between $600 and $700, and probably in the middle of that range around $650 unless there is dramatic news in the meantime.

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