Five Reasons For Bitcoin's Most Recent Price Surge Kashmir Hill, Forbes Staff
10/23/2013
The price of Bitcoin is climbing as fast as Sandra Bullock’s post-Gravity reputation. It’s up to $200 – $219 USD on major Bitcoin exchanges, hitting highs it hasn’t seen since the spring. What’s driving the price up? I spoke with a few experts and analysts in the field for their takes. Here are five possible reasons for the fall frenzy:
1. Bitcoin is so hot in China right now.“Bitcoin interest has risen tremendously in China over the last few months,” says Jered Kenna, CEO of Bitcoin trading platform Tradehill. The largest Bitcoin exchange in China is seeing ten times its usual trading activity, says Fred Ehrsam of Coinbase.
That’s potentially due to search engine giant Baidu (a.k.a. China’s Google ) decided to accept payment in Bitcoin for its Cloudflare-like Jiasule service. That impact of that “is probably overblown,” says Ehrsam. The service has received just 31 payments so far to its public Bitcoin wallet, totaling less than one Bitcoin, but it’s certainly led to greater visibility of the coin.
2. Bitcoin survived Silk Road’s fall.Buying illegal things online is one of the most talked about uses of the cryptocoin. And the biggest marketplace to get those illegal things was Silk Road. When the feds took it down and arrested the alleged founder, Ross Ulbricht, 29, the price of Bitcoin briefly dipped, but quickly recovered. This may have reassured Bitcoin investors. The fact that the currency recovered is a sign that buying drugs isn’t the only thing people like to do with their Bitcoins. (There’s also wine and cupcakes you can buy with BTC.) Those wary of buying a drug currency may like that it’s harder to buy drugs with Bitcoin now (though there is a competitor hoping to take Silk Road’s place).
“I think a lot of investors are less afraid to get involved now that Silk Road is down,” says Ehrsam.
3. Everyone’s talking about Bitcoin because of Silk Road’s fall.Publicity breeds investment excitement. Techie types aren’t the only people who know what Bitcoin are. The virtual currency is getting explainers in USA Today and segments on PBS Newshour, so even your grandma knows what a Bitcoin is now.
4. Silk Road’s seizure just took a bunch of Bitcoins off the table.When the FBI took down Silk Road, they seized over 26,000 Bitcoin. They think that alleged founder Ulbricht may be sitting on up to 600,000 more. While I think that is unlikely, it would mean that the FBI would have 5% of Bitcoin potentially in its possession (if it can manage to possess it all).
“There’s less Bitcoin in circulation because of the seizure,” says Ryan Straus, an attorney at Riddell Williams whose work includes Bitcoin. “We don’t know what’s driving the price given the lack of transparency around ownership. But if there really is an increase in demand, it could be a function of the supply.”
5. Bitcoin is being touted as the next Twitter/Facebook /LinkedIn investment possibility.Bloomberg BusinessWeek recently reported on the excitement in the venture capital community around Bitcoin businesses. Second Market which previously made it possible for people to invest in companies like Facebook before they went public, has now launched a Bitcoin investment vehicle.
“The Bitcoin Investment Trust (BIT) allows investors to get in to Bitcoin through an investment vehicle as opposed to a direct investment,” says Kenna. “This simplifies the process of investing in Bitcoin by solving the challenges of buying, storing and safekeeping bitcoins.”
Hopefully, Bitcoin fares better than Facebook’s stock.
Disclosure: Author owns Bitcoin that remain from her week of living on them.
http://www.forbes.com/sites/kashmirhill/2013/10/23/five-possible-reasons-for-bitcoins-most-recent-surge/
