Markets Weekly is a weekly column analyzing price movements in the global digital currency markets, and the technology's use case as an asset class.
Bitcoin prices fluctuated within a tight range of $405 to $420 during the seven days ending 25th March, maintaining relative stability even as the bitcoin community faces questions of scalability and an upcoming drop in the number of new bitcoins minted per transaction block.
The modest price fluctuations followed the trend of the last several weeks, with prices generally enjoying stability and consistent trading volume. During the week ending 18th March, for example, bitcoin prices wavered between $410 and $420 while market participants traded 30m BTC.
This level of trading volume continued during the seven days through 25th March at 12:30 UTC, totaling 32.6m BTC, Bitcoinity figures reveal. Chinese exchange OKCoin accounted for 50.31% of this volume, while Huobi took up another 46.90%. The remaining exchanges all claimed less than 1% of the remaining volume.
Bitcoin experienced a modest week-over-week decline during the seven-day period through 12:00 UTC on 25th March, starting out at $418.31 and ending at $414.34. However, the digital currency did experience some fluctuations in that time, falling to $404.62 at 12:00 UTC and then recovering to $409.01 at 09:00 UTC on 19th March.
Several hours later, bitcoin prices declined once again, hitting its weekly low of $404.45 at 09:00 UTC on 19th March before recovering to $412.20 at 18:00 UTC on 19th March.
The currency kept zig-zagging, rising to $418.41 by 21:00 UTC on 23th March.
In addition, the digital currency ether has been generating substantial visibility, a development that could draw attention – and trading activity – away from bitcoin.
While bitcoin experienced these modest fluctuations, ether saw increased trading volume. The digital currency enjoyed transaction volume of 31,821 transactions and 36,947 transactions on 18th March and 24th March, respectively, Etherscan.io figures reveal.
This compares to the beginning of the month, when traders generated 21,778 transactions and 23,562 transactions on 1st March and 2nd March, respectively.
In addition, the digital currency’s average daily hash rate has been rising steadily, reaching as much as 1431.6 GH/s on 22nd March, nearly three times as much as the 498.6 GH/s that existed on 1st January and more than 60 times the 23.8 GH/s attained on 30th July, 2015, Etherscan.io data shows.
The development is a sign that miners are beginning to see value in protecting the network and winning its block rewards as the price shows stability.
Bitcoin holding steady
Even though ether seems to be making progress as an alternative digital currency – or at least becoming an attractive option for day traders – bitcoin prices have held up, a positive sign according to market observers.
"The price of BTC has not collapsed, people aren’t selling BTC to buy Ether,” Bart Stephens, managing partner of Blockchain Capital, told CoinDesk. “I think it’s new capital."
While Stephens emphasized ether’s impact on bitcoin, other market experts pointed to the looming issues of upcoming network subsidy halving in bitcoin – a looming prospect highlighted by Joseph Lee, founder of bitcoin derivatives trading platform Magnr.
"The steady bitcoin price shows strong faith in bitcoin’s underlying halving mechanism, this will be the network’s second major halving event," Lee told CoinDesk.
Bitcoin's underlying code calls for a drop in the number of newly minted coins per block as time goes on. Currently, when a new block is successfully found on the network, 25 bitcoins are introduced. The next halving, estimated to take place between early and mid July, will reduce this number to 12.5 BTC per block.
For his part, Lee sees the impact of this subsidy drop largely baked into the price of bitcoin today.
“Because the event is predictable and the dates known, it is likely that the price has already factored in the new changes," he said.
While Lee’s statements reflected confidence in the bitcoin network, not everyone is so optimistic. Some are hoping that bitcoin developers will resolve the question of network scalability in the near term.
Tim Enneking, chairman of Crypto Currency Fund, a digital currency-focused hedge fund, stressed the urgency of finding a solution.
"The whole thing depends on the hard fork at this point," he told CoinDesk. "It doesn’t matter which solution is the best. We just need to pick one. We need to select one and move on."
Enneking went on to comment on price, stating:
"We've really moving sideways, and the fact we are at $400 means that everyone thinks the problem will be solved. It also means it hasn't been solved yet.”
Christopher Burniske, analyst and blockchain products lead at investment management firm ARK Invest, told CoinDesk that "the whole community is just holding its breath".
However, the comments come as network technologists continue to suggest a hard fork will not be needed to address bitcoin's short-term scalability challenges, and that contrary to what critics say, increased fees are not a deterrent to new users.
Charles L. Bovaird II is a financial writer and consultant with strong knowledge of securities markets and investing concepts.
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