The price of bitcoin plunged $120
over the past week, and one analyst told CNBC the crypto currency will
fall further as it becomes less sensitive to 'good news.'
Bitcoin
dropped to $451 in early Asian trade on Tuesday from $571 a week ago,
according to CoinDesk. On Monday, the price briefly plummeted to $309 on
Bulgarian bitcoin trading platform BTC-e before recovering to $460, the
New York Times (NYT) reported, in what some analysts described as a 'flash crash.'
The move has gone largely unnoticed. A few months ago volatility was
the focus of myriad bitcoin headlines after prices rose around 8,092
percent from the start of 2013 to early December and halved two weeks
afterwards. The crypto currency has since fallen out of the spotlight,
but as regulation efforts and speculation continue there's no dearth of
opinions on what's next.
Regulations and speculation
Experts attribute some of bitcoin's recent losses to margin traders
that were caught out by the price direction and sold into the market in
an attempt to cover their positions, depressing prices further.
The New York Department of Financial Services' 'BitLicense' framework
is another source of price pressure. Posted on July 17th and open to a
45-day notice and comment period to solicit public feedback, the
framework aims to "strike an appropriate balance that helps protect
consumers and root out illegal activity - without stifling beneficial
innovation," Benjamin Lawsky, superintendent of financial services said
in a press release.
Initial responses to the framework suggest that some BitLicense
regulations are stricter than current regulations for existing money
transmitting businesses and could stifle innovation, undermining
bitcoin's appeal.
Read More Bitcoin gets bit by a summertime swoon
Good news loses push
Peter Schiff, CEO of Euro Pacific Capital, believes bitcoin will fall further.
"The fact that prices have not rallied on recent good news, like eBay (EBAY) announcing it will accept payment in bitcoin, is a bad sign," said Schiff.
Bitcoin in a new payment method that is yet to be fully regulated and
accepted internationally; previously news on developments in this area
tends to move prices.
According to Schiff, as more merchants accept bitcoin payment, the
impact on prices will likely be downward as "those merchants all sell
their bitcoins as soon as they are spent. So if there are not enough new
buyers the price will have to fall."
"Also, the recent move to
regulate bitcoins is lessening their appeal with early adopters as is
competition from 400 other digital currencies," he added.
He has a short-term price target is $350 and expects more downside in
the long term prices have become less sensitive to "good news."
Rays of hope
Not all bitcoin commentators agree. Zennon Kapron, managing director of research firm Kapron Asia said bitcoin's time in the sun is certainly not over.
Kapron told CNBC that even though there has been less news around
bitcoin lately, it's important to remember there is still an ecosystem
of bitcoin supporters working to increase its acceptance, usage and
smart regulation.
"As more
people start to use bitcoin for transactions with an increasing number
of businesses that accept bitcoin, we would expect the price to rise,"
he said.
"In addition, we
are seeing more professional funds coming to market including the recent
launch of the bitcoin hedge fund from Global Advisors.
As more of these funds are approved and launched, demand will increase
and we should see further increases in price," he added.
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