Yesterday was a very sad day for Bitcoin enthusiasts and investors around the world, as we were all witness to another massive price drop. It is not the first time this year that we see the Bitcoin value go below US$250, but there was a shimmer of hope when the digital currency managed to climb back to US$300 and higher a few days ago. But what could be the reason for this sharp price drop? We will try to find out.
Rather Positive Bitcoin News For Several Days Straight
Over the past week or so, we have seen several interesting Bitcoin-related news headlines, both in crypto news and in mainstream media. After all the dust settled after the previous “Bitcoin Flash Crash”, everyone pointed their nose in the right direction again. And to be honest, there have been some interesting and positive announcements these past few days.
When this announcement was made, it came as a bit of a surprise to most of us. We all know the Winklevoss twins are heavily interested/invested in Bitcoin, as they also plan to take their ETF to Nasdaq in the near future. Launching and running your very own regulated Bitcoin exchange is a whole different ball game though, but a lot of people have faith in Tyler & Cameron, so we’ll have to wait and see how they fare.
It does not happen all that often we see a proper opinionated piece on Bitcoin in the mainstream media, as most journalists have no clue what they are talking about. But it has to be said that CNBC surprised many of us with this opinionated piece, and we can only applaud them for doing so. Positive mainstream media for Bitcoin even when the price does not hit US$1,000; who would’ve thought?
Colu is an Israel-based startup which is working the most important aspect of digital currencies : the blockchain. This is also a key element we should put more focus on, and not just on the currency tied to it. Colu’s US$2.5m in funding will be used to digitize ownership of all your things, assets and more through the blockchain. Definitely an interesting company to keep an eye on in 2015.
Not too many people had heard about Tim Draper before 2014, but this venture capitalist has certainly made a name for himself by purchasing a hefty amount of bitcoins during last year’s US Government’s Bitcoin auction. According to the Bloomberg article, Mr. Draper purchased another 2,000 coins at roughly US$200 each.
There are other positive news stories out there, but we simply can not list them all at this point.
Coinbase Announces Their US Regulated Bitcoin Exchange
As soon as Coinbase made their announcement, things started going south for the Bitcoin value. Even though there is a lot of optimism regarding this regulated Bitcoin exchange, several US states have indicated there is either no regulation available in their state, or that Bitcoin exchanges are not legal in their jurisdiction.
Like usual, the media is focusing all their attention on saying that CoinBase is operating illegally in several states, which is not even close to the truth. In the original Coinbase announcement, they clearly stated they comply with regulation in a lot of different states, while some other states don’t even have any regulatory measures at this point in time. All in all, CoinBase can legally operate in 24 States without any problems.
And this is where the problem lies : two of the “support states” include California and New York. According to a California-based regulator, the Coinbase exchange is not licensed nor regulated in that state. However, they are leaving the door ajar, which makes California a “Gray Area of Operations” until they decide whether or not to regulate virtual currency transactions.
“The California Department of Business Oversight has not decided whether to regulate virtual currency transactions, or the businesses that arrange such transactions, under the state’s Money Transmission Act. California consumers should be aware Coinbase Exchange is not regulated or licensed by the State,” DBO Commission Jan Lynn Owen told the media a few days ago.
A similar story can be heard in New York, where a spokesman for the top financial regulator in that state recently said Coinbase does not have the licenses necessary to operate as a Bitcoin exchange in the state of New York. According to Coinbase’s blog however, New York is a green zone where their exchange will operate legally. I’d rather trust the top financial regulator spokesperson to be honest.
“We are working with several companies, including Coinbase, on licensing and will continue to move forward expeditiously,” said Matthew Anderson, a spokesman for Benjamin M. Lawsky, the superintendent of the state’s Department of Financial Services. “That said, we have not yet issued any licenses to virtual currency firms.”
Whichever way you want to look at it, Coinbase may have jumped the gun a bit by declaring themselves “legal” in several states without having the necessary license to operate. No one is saying these licenses won’t be obtained in time, but it was poor PR management to go ahead and call yourself “regulated” when it isn’t so.
Bill Gates : “Digital Currency Can Help The Poor, But Not Bitcoin”
Even though Bill Gates is a very charismatic personality, a lot of Bitcoin enthusiasts do not take a liking to his statements on digital currencies. Earlier in 2014, Mr. Gates said that “Bitcoin has nothing to do with terrorism”, which was a fairly positive reaction to virtual currencies, which many among us did not necessarily expect.
However, a few days ago, Bill Gates came up with the statement in this section’s title. And it has to be said that he raises a few valid points. Poor people should not have a currency whose value goes up and down compared to their local currency. Unfortunately for Bitcoin, prices going up and down is a daily aspect of life in our “niche” community.
On the other hand, Mr.Gates also raises the point that Bitcoin transactions are non-refundable. This is a flaw in its own right when people make payments erroneously, as everything would have to be sorted manually by the recipient. However, that doesn’t mean that we won’t see a system
allowing Bitcoin transactions to be reversed through fair means in the future.
Note from the author : Personally I don’t see a problem in non-reversible payments. People have been far too lackluster when it comes to paying attention to financial transactions, and Bitcoin is not too kind on people making mistakes.
Maybe none of the above has anything to do with the recent Bitcoin price crash, or maybe they all have played their role in this downtrend. It is hard to judge what is causing these wild and volatile value fluctuations, as we have not seen them occur that often in the past few months. We can only hope prices do not fall below the US$200 mark at this point in time.