Bitcoin has been on an accelerating run for most of October now and has gone over $200 on the major exchanges leading many to speculate that it is in a bubble.
Last night though Bitcoin saw a large correction down from $230 to $190. Despite this though the trend has picked up again and is edging towards $210 again.
If the current increase were fuelled purely by speculation then such a large and sharp correction would undoubtedly pop the bubble, likely provide a 'bounce' and allow bitcoin to settle at a reasonable value again, however the drop has worked out more like a blip in a long run.
Many are speculating as to what the source of the increase in value might be and most point to the recent story that Baidu (dubbed the 'Google of China' since it is the largest search engine in China and the 5th most visited website in the world) has started accepting bitcoin for its CloudFlare-like Jiasule service. The idea is that this has increased public knowledge about bitcoin and a slightly larger share of the masses are once again gravitating towards buying a few. Certainly the increase picked up speed after the Jiasule story broke around the 16th but bitcoin was already making significant gains since SilkRoad closed around the 8th. While it is perfectly possible this is exactly the driver of the recent increases it ignores an entire section of growing and large scale buyers.
What we may be seeing is simple buying pressure from the wealth of startups around bitcoin.
Not every startup needs to retain large sums of bitcoin but some certainly do. Recently Bitcoin Magazine reported that Western Union recently presented at a payments conference and assessed bitcoin as being 'not ready for primetime'. Their criticisms though centered largely around the end user experience of bitcoin citing taxation issues, liquidity and consumer interfaces as the problems.
Western Union though are in a position to resolve all of these problems and install themselves as the 'go-to' place to make in-person bitcoin exchanges around the world. Bitcoin Magazine themselves point out that Fox News ran an article back in April about bitcoin drawing Western Union but the article has since been deleted.
It is quite possible that Western Union can see the writing on the wall and, while publicly downplaying bitcoin are preparing internally to launch themselves as a large scale worldwide exchange or provide bitcoin based remittances in some other form.
Regardless of whether we think this is the case or not we know that VCs are investing heavily into bitcoin businesses right now and we will see a lot of startup activity over the next 12 months. If we use Western Union as an example of this activity and as an example of some business that is adopting bitcoin to provide a service which does need to retain a large store of bitcoins for liquidity purposes it becomes easy to see how even one such business could cause significant price movements for bitcoin.
Looking at BitStamp's order book today with the price at $193 we can see that it would take just $250,000 to move the price by $10 to $203. This would equate to a purchase of around 1,250 bitcoins. While this is a large sum for an individual if Western Union were fulfilling an internal plan to soak up bitcoins to use for liquidity in a worldwide exchange / remittance service they would need far more than this and could alone end up pushing bitcoin prices tens of dollars.
Whether Western Union is the culprit or not it isn't difficult to imagine that some startup might be quietly filling its boots to launch its liquidity-sensitive service.
Last night though Bitcoin saw a large correction down from $230 to $190. Despite this though the trend has picked up again and is edging towards $210 again.
If the current increase were fuelled purely by speculation then such a large and sharp correction would undoubtedly pop the bubble, likely provide a 'bounce' and allow bitcoin to settle at a reasonable value again, however the drop has worked out more like a blip in a long run.
Many are speculating as to what the source of the increase in value might be and most point to the recent story that Baidu (dubbed the 'Google of China' since it is the largest search engine in China and the 5th most visited website in the world) has started accepting bitcoin for its CloudFlare-like Jiasule service. The idea is that this has increased public knowledge about bitcoin and a slightly larger share of the masses are once again gravitating towards buying a few. Certainly the increase picked up speed after the Jiasule story broke around the 16th but bitcoin was already making significant gains since SilkRoad closed around the 8th. While it is perfectly possible this is exactly the driver of the recent increases it ignores an entire section of growing and large scale buyers.
What we may be seeing is simple buying pressure from the wealth of startups around bitcoin.
Not every startup needs to retain large sums of bitcoin but some certainly do. Recently Bitcoin Magazine reported that Western Union recently presented at a payments conference and assessed bitcoin as being 'not ready for primetime'. Their criticisms though centered largely around the end user experience of bitcoin citing taxation issues, liquidity and consumer interfaces as the problems.
Western Union though are in a position to resolve all of these problems and install themselves as the 'go-to' place to make in-person bitcoin exchanges around the world. Bitcoin Magazine themselves point out that Fox News ran an article back in April about bitcoin drawing Western Union but the article has since been deleted.
It is quite possible that Western Union can see the writing on the wall and, while publicly downplaying bitcoin are preparing internally to launch themselves as a large scale worldwide exchange or provide bitcoin based remittances in some other form.
Regardless of whether we think this is the case or not we know that VCs are investing heavily into bitcoin businesses right now and we will see a lot of startup activity over the next 12 months. If we use Western Union as an example of this activity and as an example of some business that is adopting bitcoin to provide a service which does need to retain a large store of bitcoins for liquidity purposes it becomes easy to see how even one such business could cause significant price movements for bitcoin.
Looking at BitStamp's order book today with the price at $193 we can see that it would take just $250,000 to move the price by $10 to $203. This would equate to a purchase of around 1,250 bitcoins. While this is a large sum for an individual if Western Union were fulfilling an internal plan to soak up bitcoins to use for liquidity in a worldwide exchange / remittance service they would need far more than this and could alone end up pushing bitcoin prices tens of dollars.
Whether Western Union is the culprit or not it isn't difficult to imagine that some startup might be quietly filling its boots to launch its liquidity-sensitive service.
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