Where to, bitcoin?
Just a day after reaching its highest value since its inception, there were many familiar markings of new bitcoin price activity. The milestone set off the typical slew of mainstream media articles, though it seems that every outlet offered a different take on the factors driving market activity.
Quartz stuck closest to the prevailing sentiment, crediting the pending decision on the Winklevoss ETF, while TechCrunch cited strong stock markets and Bloomberg pointed to the Donald Trump presidency.
Still, all combined, the reports perhaps show the lack of narrative at play in the currency market. This may be accurate, as it’s still unclear to many how the price is likely to move going forward.
So far, the price of bitcoin has encountered notable volatility since setting a new high, suffering a sharp drop in which its price again tested $1,100.
At press time, the price of bitcoin was $1,157.47, $10 below its previous all-time high set in 2013, and suggesting market reticence at testing figures above this mark.
New territory
That’s not to say there’s no direction.
As reported by CoinDesk, there is a strong sentiment that the uptick in activity is the market ‘pricing in’ the SEC’s upcoming decision on whether to approve the Winklevoss bitcoin ETF filing.
The rationale goes something like this: should the SEC approve the investment vehicle, bitcoin could rise even further. Should it be denied, it’s another case of ‘buy the hype, sell the news’.
Yet, there are other X-factors at play, not the least of which is China.
In interview, China’s traders were less certain about bitcoin’s stability, suggesting that they believe that more actions could still be forthcoming. (China’s central bank has so far spent much of 2017 issuing new edicts to exchanges, who have rushed to enact policy updates).
Kong Gao, marketing manager of OTC trading firm Richfund, conceded that “nobody knows” what will happen next with the People’s Bank of China, and suggested that fears are high that more actions could be forthcoming.
“It is generally thought that the recent PBoC’s actions toward exchanges are attempts to lower the bitcoin price,” he told CoinDesk.
Others said that any delay in the restoration of bitcoin withdrawals at major exchanges – set for around 10th March as well – could impact price.
Scaling blues
At the same time, the price increase is also coloring bitcoin’s long-simmering technical narrative – that it needs to scale in order to appeal to more users.
As noted by investment firms, bitcoin hasn’t yet emerged as a safe haven asset like gold, in part because of its unique (and volatile) relationship to its technical community.
In this light, any correlation between bitcoin’s price and technical challenges could emerge as a strong trend in 2017. Already, this week’s price rise is quickly becoming politicized by those on both sides of the scaling debate.
The prevailing argument – one over whether price is a success metric held by the whole community, or if other factors like user growth are more important – is likely to now intensify.
All the while, the digital currency is enjoying a stretch above $1,000 that recently became the longest in history. How long this lasts may yet be influenced by perception on this issue.
However, barring any changes, all eyes seem set for 11th March.
Charles Bovaird contributed reporting.
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