The Bitcoin ecosystem continues to expand with even more customers and businesses accepting the digital currency as a cheap, reliable, extremely fast, and no frills payment system. The cryptocurrency has recently also caught the attention of several central banks who view it as a potential tool to reform the obsolete financial system. The Bank of England in its One Bank research initiative has equated the alternative payment system to the Internet revolution of 1989. The European Central Bank echoes the views of the Bank of England and has called the digital currency space “potentially transformative” if the stability issues can be sorted out.
So, what’s holding back the Bitcoin price?
Even as the world’s leading central banks investigate the technology behind Bitcoin’s success as a peer-to-peer network, there are compelling factors working against the price rise.
- Lack of regulation
In the wake of timely scams hitting the bitcoin market, such as the MyCoin scam, where the bitcoin exchange duped investors of $8.12 million. Investor as well as consumer confidence took a severe hit. The Ponzi tag continues to stick and investors look at every rise as an opportunity to dump their investments.
- Are the central banks really supportive?
As much as the individuals and the Bitcoin community would appreciate strong, unquestionable backing of the central banks, there are genuine doubts over their support. The concept of Bitcoin completely undermines the working of the central banks, which have been resorting to currency devaluations in order to continue with lower interest rates. While the banks resort to unprecedented money printing, there is only a fixed number of Bitcoins that can ever be mined, i.e. 21 million. And it seems highly immature to expect honest cooperation from them when they are waging an undeclared currency war.
- Bears continue to have the upper hand
A simple look at the weekly price chart below clearly reveals that bears have a strong hold on the price. The first sign of the breakout from the long-term downtrend would be a weekly close above $300. Sustaining above this may lead to immense short-covering and a slingshot recovery in the price up to $600. However, a failure to break free from the grip could lead the price to $100.
Image: https://www.tradingview.com/x/EqyjmTcZ/
Conclusively, it can be said that Bitcoin markets need strong structural changes and sincere, reformist measures from the government to rid the currency of the “ponzi” tag and restore investor confidence. If that happens, the ride to $500 should be a cakewalk!
