In January, our forecast was : 2015 will be tough for Bitcoin. Around the time of our initial forecast, the USD/BTC price was on a stead downward trajectory falling all the way down to $177. The year certainly did start off pretty tough for Bitcoin enthusiasts. It's now June, and with the half way mark approaching, 2015 seems to be proving our forecast incorrect. The price bounced off it's January low, and has taken on a somewhat sideways movement, it even appears to be losing some volatility. This is shown below:
The USD price of Bitcoin is relatively stable compared to what we have become accustomed to. Perhaps 2015 will be the year when Bitcoin finds price equilibrium. Looking at the above chart, Bitcoin could settle somewhere between $225 and $250. . The Bitcoin Community will see price stability as a major positive. It is something which will help with the current goal of increasing Bitcoin adoption. We'd expect that as volatility falls, the volume of Bitcoin traded would increase, but that has not been happening. We thought we'd have another streetonomic look at the Bitcoin market
Bitcoin Volume is Falling
A look at the average trade volume for Bitcoin tells an interesting story. During the second half of 2014, the 30 day average bounced between USD $50 Million and USD $60 Million per day. That was at a time when the price was falling. Currently the 30 day average is struggling to stay above USD $40 Million per day.
What's the Big Deal? - If price volatility was a major hurdle toward mass adoption, then we'd expect to see an increase in Bitcoin adoption and usage as the price has become more stable. Instead, we've seen the opposite. The average transaction volume per day is down more than 20% for 2015. We see this as a strong indicator that there has been no significant increase in adoption. In fact, we'll go as far as saying that the adoption rate for 2015 appears to be negative. The number of people quitting Bitcoin outnumbers the number who are joining.
It could be that a drop in volatility has caused a matching drop in speculative trading. The previous volatility in the Bitcoin price, made it a popular instrument for day traders who looked for opportunities to either go long or short on Bitcoin, in an effort to profit on the rapid changes in the price.
Indifference is the real hurdle
I understand that it is possible to use Bitcoin to pay for things from Microsoft, Dell, and a whole bunch of other places. The question is, 'If I already have cash, why would I want to use Bitcoin?' There is no added benefit for me to use Bitcoin rather than pay with a credit card or with an online cash payment. Cash is convenient and fast. Cash is federally insured, why would I want to fix a system that isn't broken?
Let's look at some of features of Bitcoin one by one and see if any of them appeal.
There are less fees - It may be possible to transfer Bitcoin without paying fees, but right now I have cash. In order to use Bitcoin I'd first need to buy some. That's easy enough, I can do that online, but wait, the act of buying bitcoin would trigger the same fees I would incur if I just made the purchase online with cash.
Bitcoin offers anonymity - this would be a great feature, if I had something to hide. Do I really care if my bank records show that I paid for a copy of Microsoft Office? No, it doesn't bother me at all. If I really wanted to spend money off the record, I'd use actual cash, or the visa debit gift card my mother gave me for Christmas
Transactions are irreversible - So if I pay for something, there is no way that the money can be sent back to me? Wait how is this a benefit? If a merchant is worried that customers are going to reverse their purchases, then maybe they should focus on the quality of what they are selling, rather than try to find a way to prevent this.
It seems we are not the only ones who can't be bothered using Bitcoin. ACTION Buses in Canberra recently removed Bitcoin payments from their MY Bus 2.0 APP. Stating a lack of interest as the reason. In 9 months, the company received a grand total of 23 Bitcoin purchases. This represented 0.7% of all transactions for that time. A spokesman for the company said:
"We realised it wasn't going to work. People were more confused about it and one of the biggest questions was, 'What is bitcoin?'
Our new years forecast has thus far been inaccurate. 2015 is not looking like it will be a tough year for the price of Bitcoin. It is instead turning out to be a quiet year for Bitcoin. We think a little too quiet. Unless the Bitcoin community can find a way to 'turn up the volume', we expect that Bitcoin will slowly deflate like a balloon.
What would make you try Bitcoin? Unless somebody finds an answer to this question, the only disruption Bitcoin will cause, is financial losses to those who hold it. This is just our opinion and we'd love you hear yours. Please feel free to comment below