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The Next Bitcoin Market Catalyst?

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bitcoins-exchangeSince the collapse of Mt. Gox, the Bitcoin market has been stuck in the doldrums, with lower volumes leaning firmly towards the sell side of the market, and positive news being largely ignored. This suggests most strongly that existing participants have either been wiped out or demoralised by Mt. Gox or reluctant to commit until the market sentiment turns more positive towards a definite up-trend.

The Bitcoin market clearly needs a catalyst turn it around. 

The question is, where will this catalyst come from?

It seems likely that many of the major high volume Bitcoin participants came in to the market for speculation as the Bitcoin price was rising at a meteoric rate, committing as much funding as they had available in the hope of making quick profits. This can clearly be seen from the 1 year chart where volume increased dramatically with the increase in price from around October 2013.

1-year-bitcoin-chart

The highest volumes around December 2013 coincided with the peak highest price of around $1200, implying that most trades were on the buy side until issues began surfacing at Mt, Gox when the volume coincided with a 50% fall in the exchange rate on selling volume. Between February and March another spike in volume coincided with the collapse of Mt. Gox and were predominantly on the sell side with buy side orders taking advantage of the lower price. Since then the price has been drifting down on negative news.

Some, or even a good many of participants may well have fallen victim to the Mt. Gox failure as historically the favoured exchange and arena for speculating in Bitcoin as witnessed by nearly $500M worth of Bitcoin lost as well as fiat currency. 

Market participants who survived Mt. Gox are either holding or selling, but not buying Bitcoin in the current market environment.

While all this has been playing out there will of course have been, and still is a steady stream of new participants, but it would seem likely that these are venturing in to Bitcoin for other reasons than speculation, such as curiosity, enthusiasm for a new mode of payment, small scale investment, and as an alternative to local currency and so on. These are not participants then who are changing fiat currency for Bitcoin for speculation purposes in market moving volumes. 

Wallet number growth has been and still is exponential, but probably hold minimal Bitcoin per wallet. For example, one third of Kenyans now have a Bitcoin wallet, which is a very large number, but it is doubtful whether these wallets contain a significant amount of Bitcoin, and this is likely to be the case generally.

So in conclusion it would seem likely that Mt. Gox took out many speculators responsible for the past volumes and price highs, leaving the survivors who are holding or selling, and casual participants who are unlikely to move the market one way or the other.

For remaining speculators who are not holding to re-enter the market in volume, and to attract new speculators from other markets a definite up-trend will need to be established similar to the one commencing 13 November 2013, or Bitcoin will need to attract a large number of general participants acquiring Bitcoin for the first time. Until that happens the market is likely to remain range-bound at best or drift lower at worst, the latter seeming most likely.

Reigniting The Bitcoin Market 

There are any number of ways in which the Bitcoin could regain its former bull market and move to new highs and beyond, here are just a few.

1. More major retailers accepting Bitcoin.  The more major retailers such as Overstock and Tiger Direct introduce payment by Bitcoin, the more the mainstream becomes aware of of Bitcoin while adding to credibility at the same time. it would only take one major merchant such as Amazon to start accepting Bitcoin make a big difference to general acceptance, participation and therefore the price.

2. Financial crisis - store of value. Anyone who follows the global financial systems and "economy" will know that the global financial system is in big trouble and on the verge of imploding under the weight of massive debt in all sectors and rampant money creation causing inflation. While the official US debt is approaching $18 trillion, the actual debt including funded and unfunded liabilities are orders of magnitude greater, and together with toxic derivatives almost certainly run in to the quadrillions of Dollars which is unsustainable and can never be repaid - or is it the intention to do so. The private "Federal Reserve" is printing Dollars out of thin air like crazy to prevent a much worse re-run of the 2008 financial crisis which was never resolved. The US Dollar is basically worthless and would only take a major economy such as China or Russia - very likely under the present circumstances - to refuse to accept payment in Dollars for the Dollar to totally collapse along with every major bank in the world.

Gold and Silver have been historic stores of value for thousands of years and the only real money, and will continue to be the case, but Bitcoin is now also a viable store of value and will likely benefit greatly as the global financial system unravels, and could make huge gains if there is a sudden financial crisis. 

3. Public relations, marketing and positive media. Bitcoin has been under relentless attack in the mainstream media, especially since Mt. Gox and very little or nothing is being done to counter this adverse publicity. Mainstream people watch and believe mainstream media, so it is hardly surprising that Bitcoin has failed to make much impression with the general public, and is still regarded as a "scam", "ponzi scheme", "vehicle for terrorists and drug dealers" and so on. Bitcoin is going nowhere fast until Bitcoin awareness is greatly increased and presented to the mainstream in an honest and truthful manner. Bitcoin requires a major mainstream consumer awareness campaign, with regular appearances in mainstream media, marketing and publicity campaigns, information centres and so on. But who should be taking this responsibility?

This is currently very clearly the responsibility of The Bitcoin Foundation who declare the following as part of their mission:

 

As the Bitcoin economy has evolved, we have all noticed barriers to its widespread adoption—botnets that attempt to undermine the network, hackers that threaten wallets, and an undeserved reputation stirred by ignorance and inaccurate reporting.

To us, it became clear that something had to be done. We see this foundation as critical for bringing legitimacy to the Bitcoin currency. Only then can we increase its adoption and positive impact on the world’s finance

 

The Bitcoin Foundation could be doing considerably more to defend Bitcoin in the mainstream media by regular TV appearances, articles in printed media as well as public awareness events and education and so much more. If The Bitcoin Foundation actually did this with all the money they are raking in from members, then the demand for Bitcoin would soon be much greater as mainstream interest increases. If The Bitcoin Foundation cannot or will not execute their declared mission statement for the future of Bitcoin, in line with the official image they portray and funds being accumulated, then clearly an alternative means of officially representing the best interests of Bitcoin will need to be found.

In conclusion - Bitcoin is going nowhere without a new catalyst, and the sooner such a catalyst emerges, the sooner the Bitcoin market will resume its strong upward trend.

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