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Forget Rakuten, BTC/USD Snooze-Fest Is the Big News

Shutterstock photo
Shutterstock photo

Shutterstock photo

For many casual observers, the most positive news for Bitcoin this week was the announcement by Japanese e-commerce giant Rakuten that they had begun accepting the digital currency. When taken in context, though, that news was neither surprising nor momentous. Not surprising because Rakuten had already invested heavily in Bitnet, a rival to Coinbase and Bitpay that was started by some ex-Visa (V) executives. Supporting that investment by utilizing Bitnet themselves is, as a surprise, on a par with the stunning news that the Pope is, in fact, Catholic.

Nor is it particularly momentous, given the limited nature of the acceptance. Rakuten is integrating Bitnet’s payment system in the U.S. initially, and then in Germany and Austria, with other international markets gradually joining in. The key word here of course is “international.” There is no mention so far of plans regarding Rakuten’s largest market, Japan. It is a start and while not being quite as momentous as some have tried to paint it, it is yet another sign that Bitcoin is becoming somewhat more mainstream, while at the same time solidifying its position as dominant over other altcoins.

Maybe it is just the product of twenty years in the interbank currency market, but to me, the price action in BTC/USD over the last couple of weeks is far more interesting and, in many ways, much more positive for Bitcoin than yet another retailer embracing the currency; especially when said retailer owns a part of the payment processor involved. What has happened in the market, you may ask, that is so significant? The answer is, not much, and that is good news.

At first glance, the 1-week Coindesk BPI chart above seems to show a fairly normal period of Bitcoin volatility. Look a little closer, though, and that bouncing around has all been done in an approximate range of $280-$295. For major fiat currencies a 5% trading range in a week would be big, but not that unusual (EUR/USD anybody?). For Bitcoin, which from a trader’s perspective is more akin to a commodity, a 5% range represents extreme lethargy.

Relative quiet in the markets is good for the long term health of Bitcoin for two reasons. First it discourages people like me: trader types. Well, not so much discourages them as controls their expectations. They will still trade, but will look for a smaller profit on each trade, thus adding, rather than removing, liquidity. That liquidity in turn will reduce the likelihood of wild swings in the future, narrowing the parameters of traders even further. A virtuous circle of declining volatility and increasing liquidity would answer a lot of critics of Bitcoin.

What it would also do, though, is to hasten the day when a major firm decides to not just accept Bitcoin, but also to hold them. Rakuten or any other company accepting Bitcoin payments is one thing, but holding them would be a real game-changer. Instead of using Bitnet, Coinbase or Bitpay to immediately convert Bitcoin payments into Dollars, Yen or whatever, imagine the effect if somebody, say Microsoft (MSFT), started to keep Bitcoin reserves and, where possible, remit them for payment.

I know that there are many in the Bitcoin community who maintain that the Bitcoin market is an irrelevance. Price, in terms of conventional currencies, they maintain, is no indicator of the true value of a disruptive alternative to government issued money. What should be understood, however, is that until corporations don’t see the need to dump Bitcoin immediately once they receive them, it is Bitcoin’s inherent value that is irrelevant; and until market stability is achieved, those corporations will continue to use payment processors that are essentially currency converters.

That is why the relative quiet in Bitcoin, even as the conventional currency markets have been in turmoil, is the most welcome news of the week. Rakuten’s announcement may help with overall recognition, but it was both limited and predictable. BTC/USD becoming a giant snooze-fest, however, could have long lasting effects.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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Martin Tillier

Martin Tillier spent years working in the Foreign Exchange market, which required an in-depth understanding of both the world’s markets and psychology and techniques of traders. In 2002, Martin left the markets, moved to the U.S., and opened a successful wine store, but the lure of the financial world proved too strong, leading Martin to join a major firm as financial advisor.

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