Self-Fulfilling Prophecy or Positive Feedback Loop? Bitcoin Traders Question Price Rally

By June 14, 2016Bitcoin Business

While the price of bitcoin surged more than 16% between 11th and 12th June, the exact reason for the increase remains a matter of debate. As reported yesterday , market observers have pegged the rally on a wide range of potential inciting factors, including concerns about China’s economic strength, fears of a potential UK exit from the European Union and anticipation surrounding ‘ the halving ‘ – an upcoming change to the bitcoin network that will find bitcoin miners receiving fewer bitcoins in exchange for transaction processing services.

But the variety of responses would seem to point to larger questions about the recent rally and the dynamics of the bitcoin market.

For example, market experts remain interested in the role miners are playing in the current price increase, and how they, as the sole recipients of all bitcoins minted, may impact trading in the weeks ahead.

As bitcoin prices climb, miners bring in more value for every new block of bitcoins they create. In turn, miners are now able to sell fewer bitcoins and keep more of the reward they obtain by minting new bitcoins, thereby potentially reducing supply.

In short, some like Marco Streng, CEO of bitcoin cloud mining service Genesis Group, believe the bitcoin market could be entering a "positive feedback loop" powered by reduced supply.

Streng told CoinDesk: "The price of bitcoin influences miner activities and miners influence the price. It’s both ways. If the price rises miners need to sell less of their mined returns in order to cover their operating costs. In consequence of this, there is less BTC sold per day by miners which reduces the sell pressure, and therefore gives the price room to rise." Still, others pushed back against this idea. Guy Corem, former CEO of bitcoin mining firm Spondoolies-Tech, said that regardless of the behaviors […]

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