Want to Trade Bitcoin?
Nothing new on the price front for everyone’s favourite cryptocurrency. Bitcoin rallied to a high of $517.85 today but toward the close BTC/USD fell back down to the $510 figure. We are still trading well inside the $50 range mentioned in our daily roundup yesterday. Until we break either of these extremes, prices will likely remain unpredictable. Here’s an updated chart.
Bitcoin will continue the downtrend, according to a research note by finance giant Citi. The two main factors that the Bank blames for the price going down are miners and merchants. Citi estimates that mining adds around 3,500 new bitcoins ($1.75 million) every day. Because of the ever increasing difficulty of mining, the majority of these coins are quickly liquidated on the market to cover electricity, cooling and other costs.
”If the miners are a steady source of supply and there is no increase in final demand, we have this overhang of bitcoin being sold in the market. In consequence, we have downward price pressures.”
Citi also thinks that the large merchants that have recently adopted bitcoin (DELL, DISH) will be a net negative for the cryptocurrency. Due to regulatory and accounting rules, these corporations can’t hold the bitcoins they receive, even if they wanted to do so. They have to sell them as soon as possible to avoid taking on ”speculative risk”, thus contributing to lower prices.
The Bank has a ”mixed” record when it comes to predicting bitcoin prices. On June 29th, in anticipation of the results for the US Marshall Auction, Citifx said that:
””Pumping such a large quantity into the market should weigh on prices. The terms of the auction make it difficult for small bidders ($200k deposit, each of the nine blocks valued around $1.8m), so the downward pressure is probably exacerbated by the limited number of investors interested in and capable of bidding.”
The following day (June 30th) bitcoin rallied almost 10 percent, from $590 to $642.