Bitcoin is Not for Sale

There is an interesting anomaly associated with the drop in Bitcoin's value. The entire time, there has never been a 24 hour volume spike greater than 220,000 Bitcoins traded.

In the stock market, this simply does not happen. When investors lose faith in a stock, a much larger percentage of shares end up being traded than what we've been seeing with Bitcoin. An example I will use is Research in Motion (RIMM), the maker of BlackBerry. Although the company hasn't gone under, it's had a very rough year. On the worst day, 113 million of its 520 million shares were traded, or 22% of total outstanding shares. On that day, the stock dropped from $35/share to $26/share, or a 26% drop:

On October 17th, Bitcoin dropped from $3.50 to $2.50, or 29%, but only 220,000 of the 7,500,000 Bitcoins were traded, or 2.9% of the total Bitcoins.

The drop in value, alone, should be driving a volume increase, since each Bitcoin is worth less and therefore easier to buy or sell.

What this tells me is that a) investors are holding on for the long-term, and b) this drop is only temporary and driven by a small percentage of Bitcoin holders. If investors were truly of the belief that Bitcoin had no future, you would see volume spikes into the millions of Bitcoins.

If you are an investor in Bitcoin, this should be looked at as an opportunity to add to your position.

Posted in: investing,trading