By Liam Ball

In early 2014, interest in Bitcoin was at a feverish pitch. The national media were running stories about this new cryptocurrency, and many traders began to offer the coins on their systems. That enthusiasm was short-lived when one of the main online exchanges, Mt. Gox, shut down its website and skipped out on giving deposits back to its clients. As a result, the market price of Bitcoins dropped like a stone.

At this point, Bitcoin is trading in the mid-$300 area. Prices have dropped by almost 60% since the beginning of 2013. The peak in January of 2014 was over $900, and bottomed out in the high $200 range in September 2014.

Transactions On the Rise

Despite the wild fluctuations, confidence in Bitcoin is on the rise. Part of the new belief in the trendy cryptocurrency is based on the fact that transactions went over 50 million for the first time in the last few days of October 2014. In fact, transactions have nearly doubled in the last 12 months.

On the other hand, The Financial Crimes Enforcement Network (FinCEN) has called for increased guidance for American Bitcoin companies. Many people feel this is the beginning of increased regulation for these firms that both the state and federal level.

However, Bitcoin trading continues at a rapid pace; more than 1.8 million transactions are taking place each week. Trading exchanges like Bitfinex and ANXBTC have had the biggest increases in trading. Another exchange is reportedly renovating its entire operation to handle the large increase in volume it has had lately.

Square and Paypal

In addition, businesses continue to incorporate Bitcoin into their sales process. For example, Dell Computer had been offering 10% discount on with Bitcoin. Also, Square and PayPal continue to integrate Bitcoin into their payment offerings. Still, the “State of Bitcoin Q3 2014” report from CoinDesk says that merchant transactions will have little impact on Bitcoin prices, because there are not that many transactions to consider. As an example, Overstock.com was recently only doing around $15,000 a day in Bitcoin-based sales.

Interestingly, the CoinDesk report reveals a new tool called the Bitcoin Sentiment Index. It uses mobile advertising data to create an index of the prevailing attitudes about Bitcoin in America and United Kingdom. It indicates whether people feel that Bitcoin’s long-term prospects are up or down on any particular day.
In addition, Bitcoin venture capital is off from the second quarter, but up slightly over the first quarter of 2014. Europe had the largest quarter to quarter percentage increase in overall investment. The United States still dominates Bitcoin venture capital investment, but its overall share is down worldwide.

Merchant Adoption

More than 75,000 merchants in stores accept Bitcoin. That number is up from 63,000 in the second quarter of 2014. However, the estimated number of merchants that will offer Bitcoin by the end of the year was reduced to 90,000. The aforementioned Dell Computer is the biggest retailer to accept Bitcoin. In fact, they sent out a Tweet that told retailers they had no reason not to accept it.

All of this indicates that Bitcoin will remain a viable cryptocurrency for the foreseeable future. Potential government regulation may put a few speed bumps in the way of adoption and expansion. It merits constant monitoring, but the long-term picture for Bitcoin and other cryptocurrencies remains bright.
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About the Author:

Liam Ball is a well-regarded Forex trader and financial expert who blogs on the latest financial topics including iforex promotions. His views and opinions appear regularly in high-profile financial blogs around the globe.