Friday 01 May 2015
Weekly market report and news from Dynacoins, first community-supervised mutual bitcoin fund.
The last week has seen a now-familiar pattern of periods of level trading and gentle slopes interspersed with just one or two sharp movements in the space of a few minutes. Last week’s surprise jump into the $230s, caused by an unlucky trader getting a margin call, didn’t last. In the short term, the market hovered well above its previous level, but later drifted back down to the mid $220s, finally culminating in a further $10 drop.
Despite threatening a return to $200, the market stabilised at $220. Confidence then returned with another sharp jump upwards, before another drift down and then spike back up into the mid-$230s. There is still plenty of uncertainty, reflected in the long periods of sideways movement or the slow grind downwards, punctuated with moments of more intense activity.
As with last week, there have been some oddities in the activity on exchanges. Tuesday’s unexpected spike was led by BTC-e, where high volumes briefly pushed the price up into the $260s – leading to (unfounded) speculation that the exchange was insolvent and customers were removing their funds in bitcoin at any price. BTC-e also saw high volumes on Thursday, with the continued rally up from $230.
BTC-e has always been unusual and opaque, due to its shadowy nature; as it caters to many Russians who cannot legally buy bitcoin in their own country, its KYC requirements are lower than other exchanges. It’s not the first time odd activity has occurred there. Back in February 2014, as the market was coming down from its bubble at the end of 2013, the price on BTC-e flash-crashed down to $102 from a starting point of over $600. In this instance, normal service appears to have been resumed and the market quickly levelled off and found its own equilibrium.
Elsewhere in the Bitworld
A couple of pieces of big announcements have dominated the bitcoin landscape this week. One is a slew of news from wallet startup Circle. Firstly, Circle have attracted a further $50 million in investment by Goldman Sachs and IDG Capital Partners (a China-based company), in addition to existing investors who include Breyer Capital, General Catalyst Partners, Accel Partners, Oak Investment Partners, Fenway Summer, Digital Currency Group, Pantera Capital, and a number of individuals.
Secondly, Circle have implemented a ‘US dollar’ feature that enables customers to hold, send and receive dollars, using bitcoin behind the scenes so that they are never exposed to exchange rate fluctuations. For example, when paying a merchant in bitcoin, the customer pays in USD and Circle manages the conversion instantly – and the same when customers receive bitcoins.
Lastly, they are making a push into the Chinese market: a tricky undertaking, given China’s attitude towards bitcoin. As Circle write, ‘This will take time, as companies and services like Circle’s must address a complex and evolving legal and regulatory landscape in China.’ Nevertheless, it’s a promising step.
The second development is that GBTC, the listed stock for the Bitcoin Investment Trust, is due to start trading. Bids equivalent to many thousands of bitcoins have been placed (1 GBTC = 0.1 BTC), some of them well above the current market price. The fund was created as a ‘paper’ vehicle to give investors the chance to benefit from price rises in bitcoin without being exposed to the underlying asset themselves, along with the technical and security requirements that brings.