Bitcoin trading prices are known for their volatile nature. At times, the same percentage drops occur in just a matter of hours or days. With the current price status, it appears as though the decline is slow and measured.
Bitcoin was introduced in 2009 by a programmer whose identity has remained anonymous. Since that time, the price of Bitcoin has fluctuated randomly. In the latter part of 2013, it reached a peak of around $1150, which it has enjoyed on a prolonged period. In August, bitcoin suffered from a flash crash and dipped on a little higher than $300 in its exchange, a steep drop from almost $500.
As the use of Bitcoin became widespread, it began to attract the attention of several regulatory offices in the U.S. These include the Internal Revenue Service, Securities and Exchange Commission, and Consumer Financial Protection Bureau.
In September, using Bitcoin as a cryptocurrency was first accepted by Overstock.com, a major online reseller. Other merchants that currently accept Bitcoin are Dell, newegg.com, TigerDirect.com and gyft.
There is a speculation that the increase in the number of merchants that recognize Bitcoin as a type of crytocurrency could have an effect on its price. Normally, these merchants would use third-party payment processors such as Coinbase, which can quickly perform conversion of Bitcoin into dollars. This would mean that more Bitcoins are now in circulation, which may have affected its price decrease.
There are others who have attributed the pricing of the Bitcoin to the distracting events in the market. One of these is the recently concluded initial public offering of the Alibaba Group and the surge in the U.S. dollar.
"It's hard to tell what exactly causes these price movements, but what I think makes most sense is that as Bitcoin merchant adoption grows, there is increasing sell pressure in the market," says Jerry Brito, executive director of Coin Center. "Because there are not yet very good hedging instruments for Bitcoin, merchants that accept Bitcoin for payment will immediately sell, so as to not be exposed to any volatility."
There is a so-called "sell pressure" among the merchants that accept Bitcoin as payment. Most merchants don't want to keep Bitcoins longer in their possession. The pressure to sell may have triggered the cryptocurrency's downward trend.
In order for Bitcoin price to become more stabilized, it should be identified with an established general use.
"Right now, Bitcoin is in this transition stage where it's a commodity trying to become a currency," said Rafael Corrales, a partner at venture capital firm Charles River Ventures. "When Bitcoin becomes a currency, it realizes its potential."
