Two scenarios for Bitcoin

Cutting right to the chase: we don’t support any short-term positions in the Bitcoin market at the moment.

Forbes’ Kashmir Hill posted an article yesterday in which she discusses the possibility of sending bitcoins to people living in emerging markets:

Earlier this week, many in the Bitcoin community got very excited about a short film that demonstrates a promising use for Bitcoin. Ronah, a Ugandan woman who emigrated to Brookline, Massachusetts in 2011, regularly sends tuition money to her 20-year-old brother, Ronald, who is studying accounting and finance in Kampala. (…)

And it works beautifully in the video. (…) Except it is still a system dependent on intermediaries. Until every business takes bitcoin, people need to change their bitcoin into the local currency. I checked up with Ronald by Facebook to see how that’s going, and it turns out that it’s not going so well.

The short documentary breezes over who helps Ronald exchange his BTC for shillings. “It was a guy, downtown doing mobile money business,” says Ronald by Facebook. He sold bitcoin to the guy twice. “Though after a couple of days, I went back to the same guy but I found he had closed. Then this girl who used to work with him told me he had better things to do and that he did not have a lot of customers. And the lady told me he used part of the employer’s money in his bitcoin deals and when the boss [realized] that the guy was using his money in his personal deals, he fired him.”

As easy as sending money to whoever you wish to might be, exchanging bitcoins for the local currency may prove to be painful. The benefits resulting from seamless transfers of funds from one Bitcoin wallet to another might be denied by the mere fact that it may not be too easy to find somebody who would be willing to accept your bitcoins.

This is actually one of the most pronounced obstacles the whole system will have to overcome. The more the currency becomes known and accepted all around the world, the less such problems one would encounter. But the number of users is dependent on how problematic the transactions are. If Bitcoin manages to attract more users in emerging countries, the network effects could prevail and the system would become viable as a money transfer method there. 

For now, let’s turn our attention to the charts.

Yesterday was a day of strong appreciation and the first day since Apr. 24 with a daily close above $500 (dashed red line on the chart above). The move up was confirmed in volume. The bullish short-term implications of the price/volume action were, however, weakened by the possibility of a reversal which seemed only natural after a period of strong moves up.

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