This week on Planet Bitcoin - 4 September 2015

Friday 04 September 2015

Weekly market report and news from Dynacoins, first community-supervised mutual bitcoin fund.

After a turbulent fortnight towards the end of August – likely prompted by a combination of China’s own volatile markets and uncertainty following the release of Bitcoin XT – the markets have once again become placid and uneventful. Climbing from its low at $200 on 25th August, bitcoin has since remained in a range between $225 and $235 – a range that has become narrower and narrower as it continues, until the fluctuations are only a few dollars in magnitude. This blog doesn’t go in for detailed technical analysis (there are plenty of places you can find it around the web), but the triangle pattern that these movements describe is bound to break sooner or later, with a significant movement either up or down.

Chart

Zooming out to a wider timespan, we are still at a low-watermark for the past three months. Only on a couple of occasions during the last six months has bitcoin settled where it is now, just below the $230 line. There has been the occasional spike downwards as the market panics – not least in the brief fall to $155 in January – but bitcoin has never stayed at these prices for long. Either it will recover and we will see a rise back to the mid-to-high $200s, or there will be another dramatic fall below $200 as traders decide to give in to their fears.

With so much VC money and positive news about bitcoin’s progress and adoption, the latter scenario seems impossible. However, it is worth remembering John Maynard Keynes' maxim that ‘the market can stay irrational longer than you can stay solvent’. Moreover, price and news share little correlation; good news is ignored in the pessimism of a downtrend and bad news is discounted in the irrational exuberance of a bubble.

Around the Bitworld

Bitcoin XT, the 8MB fork that was the trigger for the volatility at the end of August, has not made great leaps forward; support is slightly reduced, if anything. This isn’t something that will be decided overnight, and given the backing from the cartel of Chinese miners that is supposed to represent 60% of network hashrate, it should be a done deal. Nevertheless, it’s a development we watch with interest.

Amongst the good news that seems to have made no impact on the market is Barclays’ announcement that it will be trialling activities with bitcoin. Britain’s banks have previously been highly ambivalent about virtual currencies, making it difficult or impossible for traditional exchanges to run in the UK – many have seen their banking facilities withdrawn, effectively forcing them to close down overnight. Barclays has said that it will test a system to allow people to make donations to charity using bitcoin. It is one of a large number of banks that are exploring the potential of blockchain technology more broadly, recognising the benefits in terms of speed and costs.

Meanwhile, Interpol has been testing its own virtual currency, which it will use to train agents to track down criminals who operate on the darkweb. The agency has also created its own simulated version of the Silk Road – raising the prospect of renewed and organised efforts against the darknet’s thriving economy of vice.

 


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