It’s been a rough day for Bitcoin. China slapped a ban on it, Bank of America said it is “at risk of running ahead of its fundamentals” claiming it has little short-term upside, and Alan Greenspan laughed at it. In response, investors in the cryptocurrency sent it under the $900 mark.
Bitcoin, buoyed by the endless optimism of its acolytes, bounced back over the $1,000 mark on the Mt.Gox exchange in short order. The market turbulence also hit rival coins, including Litecoin, which saw its trading range ease by up to 25 percent.
Adding somewhat to Bitcoin’s woes was Alan Greenspan, who recently mocked its value: ”You really have to stretch your imagination to infer what the intrinsic value of Bitcoin is. I haven’t been able to do it. But if you ask me, ‘Is this a bubble in Bitcoin?’ ‘Yeah, it’s a bubble.” The Independent notes that “[when] asked if Bitcoin is the new gold, Greenspan laughed out loud.”
So it’s not really a time of irrational exuberance among all sets.
The move by China to ban its banks from using Bitcoin in any sort of transaction could greatly hamper its ability to grow. As Bank of America Merrill Lynch Global Research reported recently (via Barron’s), Chinese Bitcoin volume has become the vast majority of total transactions:
If the move to ban Chinese banks from dealing in Bitcoin lowers its potential transaction quantity and inherent utility, its price could be cut.
For now, however, Bitcoin remains stubbornly over the $1,000 mark, where it appears to have found a comfortable floor. Here’s an hourly chart showing its recent dip and recovery:
What is the fair value of Bitcoin? You tell me.
Top Image Credit: Flickr