Bitcoin Price Gets Annihilated
In the past week the Bitcoin price has gone from a high of $492 on Bitstamp to as low as $378. Volume has been high as well, leaving many Bitcoin holders wondering why the price is trending lower so violently. In previous downtrends there was usually a news event associated with the heavy selling, such as the Silk Road collapse, or Mt. Gox being hacked. Currently, there does not seem to be an obvious reason for the Bitcoin Price trending lower. In this article we will examine 5 possible reasons. And if you know the real reason the price is going down, please leave us a comment below.
1) Merchant Adoption
Many have pointed out that Merchants are accepting Bitcoins, but they are not holding Bitcoins. At first, many speculated that these Bitcoins were going back onto exchanges. In this Reddit thread, it is disputed as Charlie Shrem is saying that Coinbase and BitPay are not putting coins back onto Exchanges: Reddit Thread If the merchants are not responsible for coins going onto Bitcoin Exchanges, then who is?
2) Miners Selling
Large miners operations many be under pressure to cover costs for machines and electricity. However, it is not clear why this is only an issue now, and not in the previous months. One possible reason is that in the November rally of 2013, many mining operations were holding Bitcoins on the anticipation the price would go continually higher. And they were holding this year as well, until it has become apparent that the Bitcoin Price is not making another run to the moon (yet).
3) Inflationary Pressure
25 Bitcoins every 10 minutes, 150 Bitcoins per hour, 3,600 Bitcoins a day, and 1,324,000 Bitcoins a year. At a Bitcoin Price of $500, this means that $657,000,000 of money is being created per year. If even half of these newly mined coins are hitting exchanges, then it may be difficult for the market to absorb. The block reward only adjusts in 2016, so 2015 will require the Bitcoin market to absorb another 657 million worth of Bitcoins.
4) Options For Shorting
Bitfinex, and other exchanges have allowed for shorting positions on Bitcoins. This allows people to profit from the Bitcoin price going down, and it appears that many are interested in seeing the Bitcoin price go down as they have money investing on this occurrence.
5) Big Holders Cashing Out
Lastly, there is a possibility that a major holder is cashing out. It could be that the hacked Mount Gox coins are slowly being leaked onto exchanges. The US Government is known to be holding a large amount of Bitcoins confiscated from Silk Road. Early Bitcoin investors could be taking gains as well.
At this time, it could be any of the 5 reasons that is weighing heavily on the Bitcoin Price. Do you know of some other reason the price is getting crushed right now? Leave us a comment below to continue the discussion.