Bitcoin Price Hits $1,000 After Doubling in 7 Days. What Next?

Today bitcoin reached a whole new milestone, with the price of bitcoin on Mt. Gox reaching $1,000.

AccessTimeIconNov 27, 2013 at 2:52 p.m. UTC
Updated Apr 10, 2024 at 2:55 a.m. UTC

Today bitcoin reached a whole new milestone, with the price of bitcoin on Mt. Gox – the world's largest USD-BTC exchange – reaching $1,000.

The price briefly topped the equivalent of $1,000 on Chinese exchange BTC China back on 19th November, but this is the first time this level has been reached in a US dollar denominated exchange rate. The current price on the CoinDesk BPI is $942.

With the passing of this psychologically important milestone the question now is where to from here? Bulls and bears abound on both sides of the price debate. What we can say is the price of bitcoin has been relatively consistent in terms of its response to certain classes of events.

Upcoming market forces


As with all freely traded instruments, the price of bitcoin is ultimately determined by supply and demand. Demand for bitcoins has been broadening based on measures such as the number of bitcoin wallets downloaded and the growing list of merchants joining the digital currency ecosystem.

On the supply side, the Fred Wilson-backed bitcoin startup Coinbase recently made headlines when it ran out of bitcoins. A squeeze in the supply of BTC available for purchase, particularly during periods of more frenzied trading we’ve seen of late, may also be putting upward pressure on the price. On the flip side, profit taking for holiday spending or other reasons may affect supply.

There was speculation earlier in the spring that part of the reason for the late-May/early-June price decline was due to selling pressure by bitcoin miners who needed to finance their purchases of new ASIC hardware. However, recent reports suggest many of those who purchased ASICs have been unable to mine bitcoins in sufficient quantity to earn a positive return on investment.

A secretive Who’s Who of Silicon Valley-backed mining startup may also be scaring off would-be mining competitors. So the next major upgrade to ASIC technology may not generate the same increase in the supply of bitcoin offered for sale as during the last upgrade cycle.

The big price driver

The price action around regulation has been fast and furious, and regulatory news is likely to remain a dominant force for the foreseeable future.

Several times already in 2013 we’ve seen the price of bitcoin increase dramatically around the time of major regulatory events. For example, the Bitcoin Price Index increased from $47 to $95 in 10 days after the US Treasury’s FinCEN issued its forward guidance back in March. Last week’s highly publicized US Senate hearings delivered an even more dramatic result, with the price jumping from $478 on the morning of Monday 18th November to $744 at midnight (GMT).

 In March, the price of bitcoin increased from $47 to $95 in the space of 10 days.
In March, the price of bitcoin increased from $47 to $95 in the space of 10 days.

While positive comments from US federal regulators at the Treasury and even the chairman of the Federal Reserve have created the appearance of an amenable regulatory environment, much uncertainty still exists at the U.S. state level and outside the US.

as a massive bitcoin market. Digital currency regulatory guidance there has, so far, been positive, with the government adopting a seemingly paradoxical position. China is arguably the largest enforcer of financial repression, so the benign Chinese regulatory situation could shift unexpectedly, leading to a significant impact on bitcoin's price in China. However, as the price of bitcoins traded in China has fluctuated wildly around prices at exchanges located outside of the country, it is unclear what effect, if any, a clampdown by Chinese authorities would have on bitcoin's value in the rest of the world.

What big catalysts are on the horizon?

Great enthusiasm in the bitcoin community followed the announcement by Richard Branson that Virgin Galactic was to accept bitcoin as payment for tickets for its suborbital space flights. With space tourism a luxury of the elite, it is unlikely this move will drive mass bitcoin adoption. But Branson’s bold move is indicative of a growing willingness by entrepreneurial branded companies to embrace the formerly taboo bitcoin.

More companies are looking to piggyback on bitcoin’s publicity. In addition, bitcoin is rapidly minting a new class of affluent consumers around the globe, and businesses are keen to market themselves to this community. We can expect more high technology companies, particularly ones with unique and/or expensive products that can be purchased across borders, to adopt bitcoin as a means of payment. For example, given Elon Musk’s prior history as a payments system entrepreneur I wouldn’t be surprised if we soon saw Tesla automobiles priced in bitcoin.

An important breakthrough for bitcoin would really occur if a major consumer-facing business implemented bitcoin as a means of payment.

eBay and PayPal bosses have issued murmurings of interest, if not quite support, of bitcoin, but what is really needed is some decisive action and a bit of risk taking. If an eBay or Amazon added bitcoin acceptance to its payment platforms, digital currency would well and truly be in with a fighting chance of becoming a go-to payment option for a much wider group of consumers.

Featured image: Antana / Flickr


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