Causes of Bitcoin Price Breakout on May 20th, 2014

Today we are noticing a a price breakout on Bitcoin, with a current price of $480.43 on Bitstamp. This comes after a long slippery downhill slope for Bitcoin over the past 5 months from $900 and it’s all time peak of just over $1160 on November 30th, 2013. This breakout may represent a trend reversal for Bitcoin on it’s way up to $1,200 per Bitcoin by July 2014 as predicted in my previous Bitcoin price analysis here.

Bitcoin Price Breakout-5-20-14

Bitcoin Price Breakout-5-20-14

Also to note is how the previous Bitcoin bubbles relate to current Bitcoin prices. Taking a look at the chart below you can see that after each dramatic raise in Bitcoin price there is a crash that leaves the Bitcoin price much higher than it was prior to the bubble. The increases in Bitcoin price in-between each bubble are unpredictable and the increases range anywhere from 146% to 830% after each bubble crashes.

However, what is predictable is that the angle from the average Bitcoin price after each crash to the next Bitcoin price peak is about 72 degrees. Also to note is that these Bitcoin price bubbles are about 234 days apart. Using this data we can project that if we are currently at the average Bitcoin price after the November, 2013 bubble that the next Bitcoin price peak will be at $1356 on July 19, 2014.

Bitcoin Price Prediction May Through July 2014 Update

Bitcoin Price Prediction May Through July 2014 Update


Causes for the Current Bitcoin Price Increase

Possible causes for this breakout are vague, but lets go over a few of the possibilities.

  1. The first possibility may be due to Bitpay raising another $30 million dollars in funding in order to expand their team, including a focus on international Bitcoin Trading. This round of Bitpay funding was largely backed by the founder of Yahoo, Jerry Yang, and Peter Thiel who is the founder of Paypal.
  2. The second possibility in the rise is simply due to the undervaluation of Bitcoin over the past several months and now people are realizing its utility such as transferring money worldwide for almost no fee, it’s usability in both online shops and “brick and mortar” stores and personal payments to friends and family.
  3. A third factor that could be helping the current Bitcoin price rise is due to the Winklevoss brothers attempting to get their Bitcoin ETF on to the Nasdaq stock exchange, which could bring a lot of Wall Street investors into the Bitcoin buisiness. The Bitcoin ETF that the Winklevoss brothers will be starting up states that for every 5 shares of their ETF bought by investors, there will be 1 Bitcoin backing it up. Therefore if the Bitcoin ETF is highly bought, the Winklevoss brothers will have to buy even more Bitcoins than they already hold.
  4. The fourth, and final current news that could be aiding the Bitcoin price increase is that there was an announcement today that the Thai Bitcoin Exchange is coming back online. The Thailand Bitcoin exchange was taken offline in July, 2013 after the Bank of Thailand had initially stated that Bitcoin may not be legal in their country. Now the Bank of Thailand has retracted that statement and now the Thai Bitcoin Exchange is reopening and it plans to be completely transparent by listing all transactions in the blockchain, which is very important as we all know what happened with Mt. Gox’s insolvency.

With this being said we are interested in what the Bitcoin community thinks of these numbers. Leave your comments below.


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2 Comments

  1. Matt says:

    Very well written. I love having a place to go to try to make sense of the price jumps. Thanks!

  2. anonymous says:

    Great article. And supper great picture http://www.geekcipher.com/wp-content/uploads/2014/05/Bitcoin-Price-Prediction-May-Through-July-2014-Update.png

    You are miss 2 things:

    1) There is no more MTGox.

    From one side this is bad for the bubble formation. From the other – there is no place where the owners of MTGox says: “Stop!” and locks every trades.

    What do you think? Methinks this shall make bubble more chaotic and non-stoppable.

    2) Each bubble make at least 1000%. Recalculate your Math.

    This one shall give at least 500%. 400$ in 500% is about 2000$.

    My math give me 5000$ and one-day crash, when price for one day reach 1k$ from 4k$ to 5k$.

    The same picture with bubble over 1k$. And similar picture with bubble around 100$.

    Continue with pretty numbers, with-out logic ( This is bubbles ), there shall be 10’000$.

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