Markets Weekly: Price Slump Continues While Transactions Rise

The bitcoin price continued its decline this week, deepening losses that began last week. However, fundamentals suggest there may be reason for optimism in the long-run.

Bitcoin was trading at $352 at the start of last week, close to its high for the period. It dropped to a low of $320 on Saturday. It closed the week at $325, losing $27 over the seven days. That's a drop of about 8%.

To put the latest price movement in context, last week's Markets Weekly reported the Bitcoin Price Index at a high of nearly $390, before losing $40 over the week. The last two weeks, then, has seen the price of bitcoin drop some 17%.

The bitcoin price has fallen by 58% since the start of the year. It hit a high of $951 on 6th January and is at its lowest level for the year this week, according to daily closing prices on the BPI. The lowest price recorded this year was $286 on 29th September, although it rebounded to close at $319 that day.

Amid the red candlesticks and declining bitcoin price, some market participants see reason for cheer. Barry Silbert, who invests in companies in the digital currency space through his vehicle Bitcoin Opportunity Corp, tweeted that bitcoin had crossed a milestone threshold of 50 million transactions last week.

Bitcoin has now been used in 50,000,000 transactions https://t.co/LbYNroU8zQ

— Barry Silbert (@barrysilbert) October 30, 2014

The total number of bitcoin transactions has almost doubled from 26 million a year ago.

Total transactions, however, may not give a complete picture of bitcoin adoption. Breaking down the number of transactions for each day may be a more accurate indicator of the robustness of bitcoin activity.

By this measure, bitcoin use is steadily increasing. Daily transactions is close to an all-time high of 98,921 transactions on 28th November. It hit 93,667 transactions on 29th October.

The Financial Crimes Enforcement Network (FinCEN) published more detailed guidance for companies dealing in bitcoin in the United States this week. The latest guidance was largely seen as a dampener to the activities of bitcoin companies.

Observers believe the new guidance means FinCEN has increased the regulatory barriers for bitcoin firms, suggesting that merchant processors are considered money transmitters. This would require these firms to obtain licenses at both the federal and state levels, a potentially expensive and time-consuming process.

Speaking of state regulators, Ben Lawsky, New York state's top financial regulatory official, keynoted the Money 20/20 conference in Las Vegas this week. Lawsky, who's spear-heading the 'BitLicense' regulatory framework in his state, made more positive noises about proposal. He said startups might get a watered down version of the license – a 'Transitional BitLicense' – that wouldn't put them out of business before they had even begun.

About 7,000 members of the payments, technology and retailing industries will have access to Money 20/20's series of talks on digital currencies, called 'Bitcoin World', which the conference is running for the first time. Announcements from merchants or payment processors could be made over duration of Bitcoin World on Tuesday and Wednesday.

Total trading volume improved marginally week-on-week by 6%. A total of 1.97 million bitcoins changed hands this week compared to 1.86 million in the previous seven days.

On the individual exchanges front, ANXBTC, BTC China and Bitfinex showed the largest increases in trading volume in BTC terms. Hong Kong-based Bitfinex is making a strong bid to become the fourth-largest exchange by trading volume outside the 'big three' exchanges on mainland China, reporting a mid-week surge of 56,274 coins trade on 30th October.

Indeed, one rapidly growing exchange is said to be preparing an overhaul of its systems to accommodate the increased trading volume it's experiencing.