Why bitcoin's price only matters to speculators

21 February, 2015

Since bitcoin first popped on the scene, both advocates and critics have watched the digital currency's meteoric rise. Recently, prices have begun to tumble and there has been much speculation regarding the cause behind the dip as well as where the future for bitcoin might be headed.

Last month, the price of bitcoin tumbled by more than a quarter over a period of just two days. As a result of that slip, the cryptocurrency has declined by more than 80 percent from the record high achieved in November 2013 of $1,150.1 This is not the first time that bitcoin has experienced a dip in price. The cryptocurrency also experienced price declines in the summer of 2011 as well as in the spring of 2013. What sets this decline apart from previous drops in price is that prices have been declining at a fairly consistent level since June 2014.

A variety of factors can be attributed to the current decline, most of which seems to have been exacerbated when traders in Asia found it necessary to meet collateral demands as a result of margin trading rules. As a result of the current price decline, bitcoin miners have found themselves in somewhat of a frenzy, with many miners opting to completely shut down operations because they feel they can no longer cover expenses related to their mining operations, such as electricity, rent, and equipment.

Naturally, everyone easily recalls the instant millionaires that bitcoin created and are hoping for a repeat of that scenario. Rather than thinking of bitcoin as an overnight millionaire-making, it is far better to enjoy bitcoin for the many benefits it offers, including as secure and inexpensive method of payment online.

Bitcoin Beyond a Currency

Bitcoin is far more than just a digital currency. Speculators tend to only see the explosion in value and subsequent collapse. As such, those hoping to make a quick fortune might naturally feel as though the sky is falling when they also see bitcoin prices on the decline. The venture capitalists that are willing funneling millions of dollars into the technology behind bitcoin recognize that it is much more than just another fad, however. 2 In fact, it has been compared to personal computers and the internet, with many people believing that it has the potential to completely transform the world. In fact, some of the advocates supporting bitcoin have even indicated that the price decline could be a good thing as it might actually get people to stop focusing as much on the price of bitcoin and instead look at the potential it holds.

Just as every other technology that has ultimately changed the world as we know it, bitcoin is currently experiencing some growing pains. The internet was no different during its infancy and it took years before the internet giants that we know so well today were finally developed and launched. In the midst of that, there was the great dotcom burst. Yet, the internet is still around today and still transforming the world.

In the end, the future of bitcoin rests on belief and support of those who buy and sell the digital currency. Despite recent price drops, there are still plenty of people who stand behind bitcoin. McGill University of Canada recently announced plans to follow in the footsteps of MIT in an effort to promote mainstream adoption of bitcoin. Later in the spring, McGill students will receive an airdrop of bitcoins as part of a fundraising campaign headed by the school's Cryptocurrency Club. Approximately 600 students will receive 30 mBTC. Across the pond, the Green Party is considering ways in which bitcoins can be used for raising campaign funds.

Despite recent price drops, bitcoin still has a strong legion of supporters and will hardly be a get-rich-quick fad that will go quietly into the night.


1) The Guardian. Bitcoin price plunge sparks new crash fears.

2) Business Insider. Why Bitcoin's Astonishing Price Collapse Doesn't Matter.