The price of Bitcoin has witnessed a continues  fall recently. Value of Bitcoin now stands in the range US $350 to $400 in all major Bitcoin exchange sites. Despite some good news such as Paypal’s announcement of integration of Bitcoin into its payment processor and the news of Dell accepting Bitcoin  payment, the value of Bitcoin has not appreciated considerably. Many skeptics have jumped to conclusion that the end days of Bitcoin has arrived. Such a conclusion is definitely  premature. We need a deeper analysis.

So, why price of Bitcoin continues to fall?

Experts vary in their opinions. While some attribute “Volatile” nature of Bitcoin and see it as a temporary phenomenon while others feel Bitcoin is going to be a history soon because they believe  it is essentially a Ponzi scheme.

Many experts attribute the fall to borrowers borrowing Bitcoin from Bitfinex with a hope of some positive news from New York State regulators but regulators were not friendly as they hoped. I beg to disagree with them for following reasons.

First, Bitfinex is not another Mt. Gox. What I mean is that Bitfinex is not the only Bitcoin exchange. It is not even the largest Bitcoin exchange site. What happen there will have a very small impact on the price of  Bitcoin. Therefore attributing fall in Bitcoin price to borrowing in Bitfinex is not plausible.

Secondly, the USA Government has been hostile to Bitcoin throughout the short history of Bitcoin. The Bitcoin community has given up hope on regulators in USA long back. That is the reason why we see major mining operations and Bitcoin exchange sites have their base outside USA, especially in Europe, CIS states and Canada.

There must be other reasons for fall of Bitcoin price recent.

The Bitcoin community has not lost their hope on Bitcoin. You can ascertain it from the fact that there is no panic selling despite continuous fall in the price over last couple of months. Rather the Bitcoin community using this as an opportunity to stockpile Bitcoin in their armory. Therefore fall in value is not related Bitcoin community losing their hope on it.

The fall in Bitcoin price is due to accumulation of some events this year. It is more a trading market phenomena than anything else. After collapse of Mt. Gox people have hoped BTC China to take the place of Mt. Gox. In fact, in a short period of time trading of Bitcoin in BTC China grew exponentially. Unfortunately, the Chinese government subsequently banned Bitcoin trading in the country. Compounding the problem further a series of fake Bitcoin exchange sites mushroomed – like the one in Australia, where an 18 years old running a exchange site, which was hacked by hackers. Most of the Bitcoin exchange sites are run by individuals than legal entities. Bitcoin community has no confidence in them.

The situation now is such that Bitcoin community is without a good exchange site. There are some of course but the geographical and other restrictions are too stringent for an ordinary Bitcoin enthusiast to take interest in them. All major exchanges regularly report hacking and other type of bugs. This has undermined the confidence of Bitcoin community not on Bitcoin but on Bitcoin exchange sites. Because of this phenomena, Bitcoin trading has declined considerably.

Despite the enormous success and promising features of Bitcoin, no country has taken serious interested in it except Germany, which recognized Bitcoin recently as “private money”. Thailand has banned Bitcoin in the country while China prohibited its trading. A governmental agency has raided the office of large Bitcoin exchange site in India. The New York state department is proposing to regulate Bitcoin through a licensing scheme called Bitlicensing. In short, there is no encouraging news for Bitcoin so far this year for its value to appreciate.

There is certainly no reason to panic. Last year too value of value of Bitcoin depreciated to less than US $500 just after  a mammoth rise of its value over $1000 during the second half of last year. All the present circumstances indicate that it is a temporary phenomenon. The enormous advantages Bitcoin offers is too big to see its  quick downfall.