Can Stability in the Price of Bitcoin Last?

bitcoin price - Can Stability in the Price of Bitcoin Last?

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Over the last three months, we haven’t heard much about bitcoin (CCC:BTC-USD) as an investment. The bitcoin price has bounced in narrower-and-narrower arcs, usually between $6,000 and $7,200 per BTC. As of this writing, it was around $6,600.

This may be the best news bitcoin bulls have had all year.

That’s because price stability is essential for anything to be a medium of exchange. It’s true that the U.S. Dollar, Chinese Yuan and the Euro fluctuate in price. But they do it within relatively narrow bands, and over periods of months or years, not minutes or seconds. It means that if you’re sending a tanker full of oil from Saudi Arabia to Bombay, or from Houston to Rotterdam, you’re speculating on the value of the oil, not on the currency used to buy or sell it.

The Price of Bitcoin Rises

The story is not completely told, because while bitcoin prices have stabilized, other crypto-currencies have not.

Ethereum (CCC:ETH-USD), created as a primary alternative to bitcoin, with improved technical features, has seen its price nearly cut in half over the last three months. Bitcoin’s share within the greater cryptocurrency market has risen, to 52%.

Cryptocurrency traders, in other words, seem to be consolidating around bitcoin.

The media frenzy around bitcoin, meanwhile, has cooled. Mainstream outlets still run bullish and bearish stories, usually quoting the same “analysts” who bicker in the “crypto” press.

Despite the headlines, most of the bullish and bearish predictions are coming within a narrower range. The bull, Mike Novogratz, thinks bitcoin can rally 30% from its current price. The bear, Jani Ziedens, sees it falling below $6,000 … a drop of 20%.

Gone from the discussion are predictions that bitcoin will soon be worthless or hit its $20,000 high. That’s the good news.

Behind the Good News

Behind this good news, of course, is the growing institutionalization of bitcoin.

The Securities and Exchange Commission has begun policing the market.  The tax man is getting serious. Bakkt, formed by Intercontinental Exchange (NYSE:ICE), the same folks who run the New York Stock Exchange, is continuing to move ahead with its plans to offer futures contracts against dollars, pounds and euros.

The total market cap of all cryptocurrencies remains modest by global standards, just $219 billion. That’s about the same as the GDP of Portugal, or the market cap of Verizon (NYSE:VZ).

That also describes the remaining problem. Stability depends on size. The trustee winding down the failed Mt. Gox exchange recently sold $230 million worth of bitcoin and its companion, bitcoin cash, when the price crossed $8,100. This did a lot to drop it back it to its present level.

So long as a single “whale” can sink the market, or a single wild bull trade can send the bitcoin price rocketing up, you don’t have price stability. While central bankers hold the bulk of the world’s “fiat” currencies, they’re not trading — they’re not looking to get out. Too much of bitcoin is still held in too few hands. Just 126 addresses, by one recent count, own 20% of the market.

Bottom Line on the Bitcoin Price

The less I read about the bitcoin price over the next three months, the better.

The more bitcoin that big owners liquidate, the more dispersed the asset becomes among its holders, the easier price discovery becomes.

The more that big institutions move in to organize the trade, and improve price discovery, so you can trade other things with bitcoin than just bitcoin, the closer we’ll come to knowing the true fate of cryptocurrency.

We’re getting closer.

Dana Blankenhorn is a financial and technology journalist. He is the author of a mystery novella involving bitcoin, The Reluctant Detective Saves the World,  available now at the Amazon Kindle store. Write him at or follow him on Twitter at @danablankenhorn. As of this writing, he did not hold a position in any of the aforementioned securities. To follow the value of cryptocurrencies bookmark

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