Sizzle/Fizzle: Bitcoin Gets Bitten

What happens when you cross a psychological barrier? If you’re bitcoin, you see a huge spike above the $1,00o price level and then a break below that threshold. The yo-yo effect must be dizzying for investors. But even while the merits of cryptocurrency get debated on exchanges, where buyers and sellers vote with their bids and asks, be thankful you’re not trading department stores — a retail currency that may be all but broken.

SIZZLE

Fulfillment By Amazon

Amazon must be feeling pretty fulfilled right now. In what seems more like a McDonald’s ad — billions and billions served — the company said this week that, in 2016, it delivered more than 2 billion items globally. That’s spiked in part by holiday sales, which grew a whopping 50 percent. Not bad for a company that once was known as a warehouse play.

Gig Economy

Remember when gigging meant playing with your band at the local high school dance? Welcome to the new gig generation. New reports suggest that freelancers can support themselves, on their own terms, through a single gig. And the inaugural PYMNTS Gig Economy Index found that the gig economy has outpaced growth across the whole U.S. economy, in terms of employment, up 50 percent in roughly the last decade. And those freelancers might just have enough time to start garage bands to, you know, gig.

Subscription Commerce

Recurring payments are the holy grail of some companies, from software to online newspapers. And the business model is gaining traction, as evidenced by the holiday season, where “the gift that keeps on giving” gave a boost to sales — up mid-teen percentage rates during Black Friday and Cyber Monday, according to Recurly. Not a bad way to have customers stick with you through thick and thin.

FIZZLE

Department Stores (Sears and Macy’s)

One day, there may be a museum devoted to the retail concepts of yesteryear, now extinct. Exhibit A might be department stores. If Sears and Macy’s are any indication, real estate alone is no panacea for the business model. Both chains are closing hundreds of stores nationwide. The savings from the store closures will be diverted to boosting online presence. This may be a case of bricks and mortem.

Internet Privacy

Along with the newly installed Congress and the Trumpian promises to roll back regulations, one casualty may be the privacy rules in place — and data may be up for grabs. Trade groups, lobbyists and the Hill are girding for battle.

Equifax/TransUnion

Two credit reporting agencies — $23 million in fines from the CFPB. Misleading consumers about the usefulness and cost of credit scores may have been good business for awhile, but trust may have been a casualty.

Bitcoin’s Big New Year’s Sizzle — And Fizzle

It’s not easy managing to be both the biggest sizzle story of the week and the biggest fizzle. It’s even harder a feat to pull off in a short week, since much of the world was off on Monday owing to the new year. But bitcoin has always been remarkable in many regards and thus managed to pull off two big surprises right in a row — all in under four days.

First, bitcoin was up — in a big way. Though the official count over at CoinDesk indicated it didn’t quite manage to tip over its Dec. 2013 levels, by some measure (particularly on Chinese indexes), bitcoin broke its all-time high — a certain sizzle.

But just as bitcoin was hitting, or approaching hitting, the height, gravity came to call and, in a few short hours, managed to shave over 20 percent off the price of bitcoin.

So, what happened, and what happens next?

As is often the case with bitcoin, trying to predict the future is always something of a challenge, and opinions vary. The consensus so far — a little more fizzle than sizzle.

The Big Bounce

Bitcoin’s big rally started with the year 2017 as the price started to dramatically rise during the holiday weekend when the digital currency broke past $1,000 in value on its first day of trading in the new year.

Bitcoin’s official peak was marked at $1,216 per coin in late Nov. 2013, before falling off sharply in the wake of the Mt. Gox hack.

Since Aug. 2015, however, bitcoin’s overall trajectory, while volatile, has been generally upward. In 2016, bitcoin’s value was up 100 percent year over year, with a 50 percent spike in price over the last three months of the year and a 20 percent increase over the back six months.

Overall, bitcoin hit a reported high of $1,153.02 and spent about a day hovering over $1,000.

Bitcoin fans began predicting a big year for the currency in 2017 — the particularly bullish predicting an end-of-year price per bitcoin of $3,000. The more conservative bitcoin bulls placed their bets more in the $1,400 range.

But as it turns out, gravity was quicker to catch up with bitcoin than the bulls were expecting.

The Drop

Going by CoinDesk’s figures, on Thursday (Jan. 5), bitcoin’s price dropped sharply from $1,150-ish at 2 a.m. EST to $887 by 8 a.m. For those keeping score at home, that is a 23 percent drop in value in about six hours. At one point, bitcoin lost $200 in value in an hour.

As for why the market suddenly went weak, the favored explanation of the day is the increase in value of the Chinese yuan, since China has become a hub for bitcoin activity over the last several years. Bitcoin’s three largest exchanges are located in China, most trading occurs within China and the largest mining pools on Earth are found within China. Moreover, China has two particularly bitcoin-interested classes. One group is speculators, and they are among the most active on Earth. The other group consists of those looking to ship devaluing yuan out of China and exchange them for more stable currency forms. Chinese nationals buy bitcoin with yuan and sell it for dollars on foreign exchanges.

But after weakening for months, this week, the Chinese yuan jumped to its highest level against the dollar since mid-November, after actions by the PBOC to push more liquidity into the Chinese market.

“This is proof that bitcoin tracks the yuan,” a trader at the Chinese bitcoin trading site WhalePool noted. “Welcome to bitcoin.”

“People got wrecked in here,”said another anonymous bitcoin trader from WhalePool. “I’m very underwater.”

So, Now What?

As with bitcoin, it is hard to say. It is a volatile currency that is highly susceptible to volatile situations. In fact, much of what has driven the price of bitcoin up over the course of 2016 has been waves of volatility. Brexit, the surprise election of Donald Trump, the yuan’s (previous) weakness, the banning of high value bills in India — all have combined to make the digital currency more attractive to a variety of buyers.

Moreover, globally, attitudes toward bitcoin adoption and legitimization have softened some over the last few years, and large institutional interest in developing the blockchain for international payments and money transfers has continued to progress.

But will bitcoin hit the $3,000 mark in 2017? Will it really be quite the New Year’s sizzle it was looking like two days into the year?

Probably not. But then, that’s the thing about bitcoin. The next big sizzle or fizzle is often hard to call.