This week on Planet Bitcoin - 1 January 2016

Friday 01 January 2016

Happy new year! Put aside your hangover and take a look at what’s been going on while you were partying.

Last time, two weeks ago, we noted that if the rally could continue at the previous pace, bitcoin would reach $500 by Christmas. Well, it couldn’t and didn’t. Instead, we saw a high of around $465 on the 19th, after which we saw a fall, recovery and heavier fall back down to the low $400s - just after Christmas, in fact, the price dropped over $60. For a while, it looked as if we’d see a return to the $300s, which would have been bad news. As it happens, we have instead bounced around between around $415 and $435, though it wouldn't come as any surprise if the next move was another leg down.

 Chart

Volumes have not been particularly high overall (a measure of how convincing any move is), something that can be attributed to the Christmas break. Once the new year is underway in earnest, we are likely to see a resolution of where the recent price rise will end up: whether it’s part of a broader uptrend, whether it’s unsustainable and traders will return to lower prices, or whether the low $400s are the new normal for a while, before the next big move. There is some anticipation around the halving that is due to occur in the coming summer, when block rewards will drop to 12.5 BTC. That will see a fall in new supply that is likely to have an effect on the market. The months leading up to it will probably see some volatility as traders seek to second-guess what the ultimate effect will be, and quite possible higher prices in the long run. 

Around the bitworld

Many alts have staged a recovery in the last fortnight. This is probably the result of the bitcoin market settling somewhat, and traders converting funds back into underpriced alts once they concluded that bitcoin was not going to rise further in the short term.

However, there are also some warning signals in the rise. One exchange, Cryptsy, has seen significantly higher prices than other exchanges for certain alts. This pulls up the average and makes it seem like these coins are doing better than is the reality (the genuine rise notwithstanding). Herein lies the red flag: there is no good reason for one exchange to have consistently higher prices. It is often a sign that something is badly wrong, as was the case with Gox: bitcoin prices were higher there than anywhere else because no one could withdraw in fiat, so they bought BTC and withdrew that instead. There is widespread anecdotal evidence that Cryptsy is experiencing problems of some kind. Whilst many people have not had any problems, others have found it hard to withdraw funds in one or other currency and have been waiting for weeks.

To round off 2015, it’s nice to note that December was the month that bitcoin saw its 100 millionth transaction. In the last year, the virtual currency has come a long way, shaking off much of the baggage of its early and less respectable years. It is pushing into the mainstream, with interest and action from banks and regulators, but it is growing at the all-important grassroots level too.

2016 should be a good year.


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