Released every Monday, Lifting the Offer provides key market data, macro analysis and price outlooks to prepare bitcoin traders for the week ahead. Check out the full archive here.
Bitcoin by the Numbers
Best Bits from Last Week
- Wired: Overstock Files to Offer Stock That Works Like Bitcoin
- Wired: This Digital Wallet Could Finally Get You Into Bitcoin
- NewsBTC: UBS Begins Its Bitcoin Experiment with Experimental Job Ad
The Macro View
Impact of Bitcoin Microtransactions Limited by the Network
Bitcoin’s disruptive impact on remittances and payments has been well-documented. The role the Bitcoin network has played in reshaping microtransactions has received less attention but could ultimately be just as impactful.
Before Bitcoin, small cash transfers were not possible without long processing times and hefty fees. Bitcoin technology has allowed businesses to eliminate fraud, avoid high merchant fees associated with smaller transactions and create a new way of accepting micropayments.
ChangeTip and Bitwall offer good examples of the new innovative ways bitcoin microtransactions are being brought into the mainstream. ChangeTip taps into social media to allow users to casually “tip” others with micropayments through social platforms including Twitter, Facebook, YouTube and Reddit. Bitwall allows subscription-based publications to offer non-subscribers a simple way to pay for an article using bitcoin.
Traditional organizations, particularly charities and nonprofits, are also taking advantage of bitcoin microtransactions in their fundraising efforts. Noteworthy organizations accepting bitcoin donations include the American Red Cross, World Aid and Wikipedia.
Although Bitcoin addresses many traditional pain points associated with microtransactions, key limitations remain with regards to the network’s scalability. Critics argue that as microtransaction volume grows, it could put additional stress on the already taxed Bitcoin network. As such, it would be best if these transactions are conducted “off-chain”.
This scalability issue stems from the fact that the Bitcoin network can currently only handle seven transaction per second (tps). By comparison, Visa is able to handle 24,000 tps and PayPal’s average tps is 133.
The Bitcoin network’s limited tps is acceptable at this early stage. However, if Bitcoin is to become the de-facto P2P payment rail for microtransactions, serious enhancements will need to be made to the network infrastructure.
Bitcoin Price Outlook: Bullish
As expected, a few Bitcoin companies used the Inside Bitcoins conference in NYC as a platform for announcements. The biggest news came from from Circle Internet Financial who announced $50 million in fresh funding from Goldman Sachs and other notable investors.
The bitcoin market has always reacted sharply to major news headlines, especially those that include Bitcoin interest from traditional financial institutions. The announcement from Circle caused a 3% price jump and may have helped break up the market’s ongoing sideways activity.
One thing to note here: volume figures over the past week were similar to previous weeks. Total XBT/USD traded volume last week was 312,787 XBT which is in-line with the weekly average of 292,600 XBT traded over the prior four weeks. This indicates that the price increase was lead by existing traders trading on the news and not new traders entering the market.
The Week Ahead
For last week's price movement to be sustained or improved upon, the market will need to see another catalyst. It would be shortsighted to believe that the gains from last week's price spike have built a stable support level. If anything, this week is shaping up nicely for sellers (miners) as the price has held steadily above a new short-term support level of $233. This is a roughly 6% increase from previous short-term support levels.
Even with the jump in support levels, the key metric to watch this week is volume. Despite being in-line for much of April, Weekly XBT volume traded has been down since the start of March. Comparing last week’s total volume traded to the average weekly volume traded over the past two months shows a decline of over 8% (see graph below). This metric should serve as a caution flag to traders that support levels are still weak and prices could easily dive down to last week’s levels.
This Week in Bitcoin’s (Limited) History
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Bobby Cho is the Director of the Institutional Client Group at itBit. Previously, Bobby was Vice President of Trading at SecondMarket specializing in trading bitcoin and illiquid asset-backed securities.