The price of bitcoin is hovering around the all time high price of $1200 per coin from the 2013 bubble. At the time of this post, bitcoin price has been stable at over $1000 for the longest time ever and has investors wondering how high it might go if it breaks through that $1200 psychological barrier. If the price of bitcoin does go over $1200 it will re-enter price discovery phase as people all around the world start buying in rapidly.
What Factors Influence Bitcoins Price?
For years bitcoins price has been controlled by wealthy traders in China. Speculators in the United States and the rest of the western world have been avoiding investing in bitcoin in fear that they will lose their money to price manipulation in China. This may soon come to an end. In the recent months, the Peoples Bank of China have begun implementing strict Know Your Customer and Anti-Money Laundering policies on all CNY to BTC exchanges in an attempt to throttle capital outflows. Here is a summary of the major changes in bitcoin trading regulations:
- Margin trading has been banned. CNY users will no longer be able to borrow Bitcoins or CNY for leveraged trading
- 0% trading fees have been abolished. Chinese traders will now pay 0.2% exchange fees on bitcoin trades, making it too expensive for large holders to manipulate the price bitcoin with trading bots
- Stricter withdrawal polices (see below)
Since these regulatory changes have taken place, bitcoin trading volume has dropped significantly in China. Japan has recently taken the lead in bitcoin trade volume as the country embraced bitcoin as a legal form of payment. Bitcoin infrastructure in Japan is ready for citizens to spend bitcoin, pay their utility bills, and store value in bitcoin as Japanese banks implement negative interest rates on savings accounts. This is the first time in bitcoins history that CNY has been dethroned as the top trading pair against bitcoin, which shows that it is maturing as a currency.
JPY isn’t the only currency to overtake CNY in trading volume. Leading bitcoin exchange Bitfinex.com is following closely as the western world has begun flooding into bitcoin with USD. Even Kraken is beating China in EUR trade volume.
What is the Bitcoin ETF?
An ETF (exchange traded fund) allows investors to buy and sell an underlying asset without needing to store it themselves. The Bitcoin ETF is a project by Cameron and Tyler Winklevoss of Gemini.com, which intends to put Bitcoin on the New York Stock Exchange, currently pending approval from the Securities and Exchange Commission. The Winklevi began working on the ETF in 2013 and have gone through great lengths to bring bitcoin to institutional investors in the United States without them needing to understand how to store and secure their bitcoin holdings. The fund, with ticket COIN, will be issuing 10,000,000 shares at a proposed starting price of $10. Each share will be worth the equivalent of 0.01 Bitcoins, which is currently valued at roughly $11.20. The fund will buy and hold enough bitcoins so that everyone holding shares in the ETF will actually own the corresponding number of bitcoins. This allows any investors to trade bitcoin against the US Dollar without being a tech genius.
Will The Bitcoin ETF Be Approved?
This is still up in the air. The SEC has until March 11th to make their final decisions, but speculators have already begun buying bitcoins in anticipation of the fund being approved. There is also a prediction market on Bitmex.com that lets traders use bitcoin to bet on whether or not the ETF will be approved, so many people are using that instrument as a sentiment indicator. The SEC has delayed their decision twice already, in order to gather more information for the decision. However, March 11th is the final deadline for SEC to deny the ETF. If the fund is not rejected by then, it is expected that investors will be able to trade bitcoin on the NYSE within weeks. If this occurs, anywhere from $300 million to $1 billion dollars could be injected into the bitcoin marketplace very rapidly, which will send the price surging up to new highs. For this reason, speculators have already begun buying bitcoin so that they can lock in profits before the SEC makes their final decision.