For reference, here’s a one-year price chart (via Blockchain.info):
What is interesting about the current price decline is that it’s happening amid what appears to be record transaction volume. So, the bitcoin network is seeing larger amounts of activity and a dramatically falling price. (Coinbase data mirrors the price, volume divergence.)
If bitcoin is more popular than ever, what is driving the price down? I have seen it speculated that bitcoin mining operations may be forced to quickly sell more of the bitcoin that they mine in order to cover costs, such as electricity. A lower price per coin means that more coins might be sold off to cover nearly fixed infrastructure costs that miners face. More selling, without more buying, leads to lower prices.
For now, bitcoin enthusiasts are responding to the situation with something close to gallows humor. I suppose bitcoin is most interesting to watch when it’s doing something dramatic in either direction when it comes to price.
Usual caveat: The price of bitcoin only has so much impact on the health of bitcoin itself. I don’t think that it is zero: More media attention on a rising price helps raise public awareness of the concept of bitcoin itself, but the work going on now inside of the bitcoin universe is presumably still chugging along. And constituent firms — the Coinbases, Bitpays, and Blockchain’s of the world — remain very well-capitalized, presumably placing them well out of any short-term chop.
Featured Image: Bryce Durbin
