itBit Bitcoin Market Report: February 2016


January was a tough month for the financial markets and bitcoin was no exception. Bitcoin opened the year at $432 and briefly broke $450 before falling to $365 to close the month of January. The key driver of the downward price movement was Mike Hearn, a former bitcoin core developer who sold out of his positions and called the bitcoin project a “failure” in mid-January. The market fell over 13% after his comments and never really recovered. The unresolved block size debate and the growing popularity of private blockchain and distributed ledger technologies (built independent of Bitcoin) among financial institutions hasn't helped the price either. 


January 2016 Price ChartJanuary-Chart-Summary.png

There were some positives this month including an announcement by the People's Bank Of China that they are exploring Bitcoin and potentially launching a digital currency. This news sent the price soaring 9% and this could lead to more countries embracing digital currencies. 



January Bitcoin Market Moving Events 



January BITcoin Market Moving Events summary

1 /5 Cryptsy, an altcoin exchange, suspends trading unchanged
1/6 Gem closes $7.1m Series A funding round          -0.2%       
1/15 Mike Hearn, former bitcoin core developer, claims bitcoin is a “failure"          -13.1%     
1/19 Kraken acquires Coinsetter and Cavirtex          -1.6%       
1/20 China’s central bank discusses the launch of a digital currency         +9.1%       
1/22 Digital Asset Holdings raises $50m, announces blockchain project
with the Australian Stock Exchange
1/28 Bank of England explores Distributed Ledger Technology for settlements         -3.3%        
1/29 SBI Holdings teams with Ripple to launch new payments company unchanged

February Price Outlook

The price of bitcoin fell below two key support levels at $400  & $378 in January. In order for the price to start a sustainable run up, it needs to recapture those key levels and break above $415. The price broke above $380 this week which is a good sign for the month ahead. Should the price turn south again, strong support can be found at $345. If that level does not hold, a test of the low $300s is in the cards. 

Volume has been low  during the recent price decline and one would expect it to remain there as Chinese New Year approaches. Aggressive traders may try and move the price up over the holiday. 




February Market Trend to Watch

Bank of japan's negative interest rates

The Bank of Japan lowered interest rates into negative territory in an effort to stimulate their ailing economy and to curb the growing strength of the yen. This event should not be overlooked as it is one of the most important policy measures from a major global central bank in the last ten years. This sets a dangerous precedent for other countries and the ECB could act in similar fashion. The Federal Reserve already has had one voting member calling for negative interest rates in 2016 and now Ben Bernanke has come out and said that this should become a policy tool for the Fed if necessary. This may cause major volatility in the currency markets and could lead investors to allocate capital to alternative assets (like bitcoin) in search of a higher rate of return. 

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