Bitcoin’s falling price explained

As far as polarized opinion within the financial technology industry is concerned, very few aspects have generated so much differential than Bitcoin, which last year provided its audience with a virtually heart-stopping sequence of events which ranged from the demise of cryptocurrency exchanges and anonymous marketplaces, high profile arrests and criminal prosecutions, and wildly variable Bitcoin values which ranged from $79 to 1 BTC in January last year to over $1,000 to 1 BTC toward the end of the year.

This year, a complete change of direction has occurred, with many companies, investors and governments actually embracing Bitcoin, followed by an ever decreasing bitcoin price which has provoked many questions about the market’s fundamentals.

As poignant and debate-worthy as Bitcoin is, the presence of outspoken commentary relating to the until now unpredictable path that its values have followed, has been provided by those outside the actual Bitcoin sector. This week, however, Coinsetter CEO Jaron Lukasiewicz has waxed lyrical on his perspective as to why the value has declined of late.

Mr. Lukasiewicz has stated on Coinsetter’s blog that while it is clear that the price of any asset will be determined by the interplay between buying demand and selling pressure, it is important to understand who the current market participants are and why they make certain decisions.

As a further explanation, Mr. Lukasiewicz continued tho state that “because it is easier from a regulatory and technology perspective to build merchant processing platforms versus consumer payments platforms, we have seen greater adoption of bitcoin by merchants versus consumers.”

“Why exactly hasn’t consumer adoption taken off?” asks Mr. Lukasiewicz. “First, the consumer market for private currency is very niche and not very large. Second, bitcoin gives all cost savings and benefits to merchants and not consumers. Third, American Express and other credit card companies entice consumers through rewards programs, which are not yet available to people using bitcoin. At this stage, the bitcoin industry is 2-3 years out from matching credit card companies’ value proposition to consumers, and we should expect weak price growth until that is resolved. On the remittance side, it is still difficult to place Bitcoin ATMs across the country in large quantities, which must also be resolved for consumer adoption to grow.”

“In summary, we find ourselves in a market where non-speculative bitcoin users are mostly sellers, predominately relying on speculative buyers to support upward price movement. At the moment, there is not enough buy-side demand to outweigh the non-speculative selling pressure” is his view.

In congruence with many Bitcoin proponents, Mr. Lukasiewicz concluded by stating that “The long term outlook for bitcoin is very positive, but there are a number of regulatory, technological and consumer value proposition challenges that still need to be resolved. To assess the fair value of bitcoin, users should analyze bitcoin’s current usefulness for consumers versus other payment options that are available. When its value proposition becomes meaningful to a large consumer population, demand for bitcoin will grow–as will the bitcoin price.”


To view the Coinsetter blog, click here.

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