In this week’s Roundup, we continue our forensic examination of bitcoin and its curious price movement, and let you know why your guess about its future is as good as anybody on Wall Street’s. We also talk about the Twitter Effect, why Vitalik Buterin is so popular to imitate, and discuss what separates bitcoin apart from every other tradeable asset or asset category. 

BTC Slides to Sub-$8,000 Levels

The price of bitcoin continued its steady downtrend, capping a week of fresh lows with a nice bounce upward going into the new week. This time, BTC’s frenzied sell-off is being blamed on Twitter’s decision to ban cryptocurrency related ads on their platform. The move is being made to protect its users from potentially fraudulent or legally precarious investments, as well as in response to the constant flood of celebrity imitation accounts posting in crypto-related comment threads with solicitations for cryptocurrency.

Ethereum founder Vitalik Buterin has so regularly been the subject of Twitter impostor accounts that he frequently takes to the social media vehicle to remind people that he would never ask for personal donations, and that any account doing so while claiming to be him is clearly an impersonator running a scam. The problem has become such a nuisance that Twitter is vowing to change its previously lax stance on impostor accounts and scrutinizing everything crypto-related posted on their website. Their crackdown has thus far been indiscriminate, even inadvertently banning the support page for bitcoin exchange Kraken.

With the recently-established technical “floor” for the price of bitcoin hovering around the $7,400-mark, price dips below $8,000 have historically been met enthusiastically by big-monied investors, ready to scoop up coins at a “discount.” In last week’s instance, the price climbed over $700 in less than three hours on substantial volume, proving bitcoin is hard to sink to a much lower level.

Media & Wall Street Divided on Future of Bitcoin

Financial analyst predictions about the future of bitcoin remain as diverse as ever. Some see it going much lower based on technical analysis of price charts. The most commonly-attributed factors to a continued downtrend include a declining public interest, a failure to achieve substantial user and merchant adoption, as well as increasingly present regulatory hurdles which have the side effect of diminishing its usability as a currency.

On the other end of the spectrum, some technical analysts are using the same price charts to make predictions that bitcoin still has room for more exponential growth, with the potential to rise above $90,000 by March 2020. Those familiar with the curious history of bitcoin are quick to recount how many times it has already been declared “dead” by the media, and that the most recent bitcoin “crash” is nothing new. Another interesting metric being trotted out in favor of bitcoin bulls is the “Bitcoin Misery Index” (BMI). The BMI graph below spans nearly the entire history of bitcoin trading and measures market “happiness” and “misery” based on accumulated trading volume.

According to the BMI graph, the market is currently in a relatively deep period of “misery”, perhaps signaling that bitcoin is “oversold” and ready for a sharp bounce upward. For those who believe that bitcoin prices are cyclical, the chart suggests that the time is right for another major price move in the positive direction.

Regardless of personal forecasts, bitcoin’s nature as a self-sustaining digital commodity renders it much different than any other asset that has ever been traded or the basis of technical analysis. For this reason, it continues to baffle well-established Wall Street traders who think its price movement is subject to the same trader psychology as the price of a stock or a piece of gold. Most professional traders remain unaware of the fact that, unlike a share of stock or piece of gold, the properties of bitcoin are constantly changing, and the change is due to its price and popularity; not the other way around. It was designed to act as a currency, and its ability to do so lessens as it becomes more expensive. In short, as bitcoin’s price and popularity increase, its intrinsic value as a currency decreases.

During bitcoin’s approach to $20k in December 2017, as it reached its most expensive and popular levels of all time, the Bitcoin Network suffered a serious decrease in average confirmation times and a serious increase in transaction fees. Big-time traders paid upward of $100 per fee to rush their transaction into the next block. Before long, the average fee to get a transaction processed within an hour’s time was $30, rendering bitcoin unusable as a currency for purchase of most every-day items. Recent implementation of SegWit and the Lightning Network has already helped to bring fees and confirmation times down drastically, but bitcoin’s problems with scalability will likely remain an issue into the foreseeable future.

 

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