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Bitcoin and the November Rally

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9th Nov 2015

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Kraken 30 day volumes
A November rally is breathing wind into the sails of Bitcoin the currency, following a year of negative returns in which attention shifted toward blockchains, the core underlying technology of the bitcoin system.

With prices up 60% in just the last few weeks, the question is whether or not the gains are steadfast or just another opportunity for profiteering among larger volume holders of the currency.

Generally, the network benefits from a higher bitcoin price, as it creates incentives for miners to add processing power to the distributed network that underpins maintenance of the databases that run bitcoin. With a low this year of around $235, concern was mounting by observers that the community was approaching a point where mining would become unprofitable. This would cause miners within the system to give up mining activities, a scenario that further depresses returns and mining viability for those remaining. The November rally has helped to push pricing back into a more healthy range for miners, providing incentives to diversify and expand mining capabilities within the network.

What is driving the rise in value? Experts in the bitcoin community are pointing to a seachange in the perception of bitcoin centered on large banking institutions, which are now publicly acknowledging blockchain related initiatives. While not necessarily backing Bitcoin as a currency, these blockchain initiatives largely derive from bitcoin itself, putting upward pressure on transaction volumes for the network and providing an implicit use case opportunity for 'Bitcoin the currency' that powers all network transactions.

The rise of private chains and the flood of investment into creating consumer friendly applications is also beginning to bear fruit, with over 30 major financial institutions working on bitcoin technologies for financial services. These traditional firms are now actively working with bitcoin companies, including the well-funded Coinbase, Chain, Kraken, Bitnet and others. What remains to be seen is if the November rally will stick, creating a new "floor" for the value of bitcoin at large. Previous rallies have pointed to the establishment of new pricing floors - previously at around $50, $95 and $200, and almost always in the last financial quarter of the given year.