The Bitcoin price continues to drop this week, hitting a low of 403.59 as of this writing.
While previous price drops were easier to attach to negative events, such as the collapse of Mt. Gox, this latest collapse comes amid a season of relatively good news in the Bitcoin world.
While Russia’s threat to ban Bitcoin may trouble some, and the threat of the BitLicence looms ever higher, the Bitcoin community has made some great strides.
Large companies like Dell, Expedia, United Way, PayPal, DISH, Wikipedia, Alienware, xHamster, Hustler, and many other household names have joined the Bitcoin sphere, giving bitcoiners a wide range of options for spending their bitcoins.
And in Europe, BitPay reports they’ve seen a 1900% increase in Bitcoin sales this year when compared with last year.
What’s Driving The Decrease?
There are a few different theories on what’s happening.
Price Correction
One is that this is simply a “price correction” after last year’s bubble, which some believe was artificially inflated as a result of fraudulent trading on Mt. Gox. The Willy Report outlines what happened in further detail, but essentially it concludes that false trades artificially increased demand for Bitcoin, which drove the price up to last year’s all-time high of around $1250 USD.
Alibaba’s IPO
Others believe Alibaba is to be blamed. Alibaba, a Chinese ecommerce magnate, is going public this morning, and is seen by many as a hot investment. In fact, at $68 USD per share, Alibaba’s IPO is enormous. And as savvy investors look to free up capital to invest in Alibaba, they may be liquidating their Bitcoin to do so.
Market Flood
A third theory involves the way in which merchant adoption has been facilitated. While the above listed companies have accepted Bitcoin, and that should be seen as a major victory, the fact that they aren’t holding their Bitcoin, and just releasing them back onto the open market, means the market is being flooded with Bitcoin. And as the early Bitcoin investors, who have now found themselves to be multi-millionaires, look to upgrade their lives with travel, electronics, or other goods, they’ll end up spending their bitcoins. And so coins which were originally locked away in large caches end up hitting the market, which leads to an increase in supply.
Any one of these could be correct, or it could be a fourth factor of which no one is aware. Either way, though, Bitcoin investors and true believers will be biting their nails as the price continues to fall.
What's Driving The Bitcoin Price Decrease?
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