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For true devotees of Bitcoin, the price of the digital currency is almost irrelevant. They believe in its inherent value or, more frequently, cannot see any value at all in the alternative of government issued fiat currency. Price is therefore not a concern. At the other end of the spectrum, for those that harbor what appears to be an irrational hatred of Bitcoin and anything to do with it, the exchange rate also matters little. They were screaming that it was all worthless when the price was at over $1000, and somehow convince themselves that an exchange rate of over 200 times what it was before that bubble proves their point. For the vast majority of people somewhere in the middle, however, the price of the currency in Dollar, Euro, Yuan or whatever terms is important.

Many hold out hope that over time Bitcoin will perform as it should in theory and become a store of value, while others simply cannot bear the thought of losing purchasing power in the short term. Even if their motivation for buying crypto-currency in the first place was convenience or just curiosity they can’t stop themselves looking at it as an investment. Whatever the reason, if you see Bitcoin purely as a currency, price matters.

There are other, more subtle ways in which price matters as well. At the start of this year I wrote that I expected Bitcoin, following a short continuation of volatility, to settle into a tighter range. In that respect it is no different to any other commodity or currency; volatility following a bubble is normal (think gold on the way down or, more recently the Euro) but eventually it subsides. The potential advantage that I saw then was that when that happened it was likely that at least one of the major companies toying with Bitcoin would commit fully, and begin keeping the coin received in payment rather than immediately converting to Dollars. Over the last couple of months we have experienced relative calm on the exchanges and while that transition hasn't happened yet, the calm has at least cut down on the number of uninformed “It’s all a scam!” stories in the mainstream media.

That in turn has probably been a contributing factor in two very important developments this quarter. Yesterday it was announced that the Princeton professor Ed Felten will join the White House Office of Science and Technology. Of course there is nothing new in a Princeton professor becoming a White House advisor, but this particular one is known to be somewhat “bitcoin friendly.” That probably had little to do with his appointment but it certainly won’t hurt to have somebody in the White House who both understands and appreciates Bitcoin and the technology surrounding it. If the price of Bitcoin hadn't stabilized to some degree, however, his association with the currency would probably have made the appointment less likely.

Similarly, some degree of stability also helps when academic institutions seek to expand their study of crypto currencies, and Bitcoin in particular. Is it likely that MIT would have been able to offer a home to three Bitcoin core developers if we were in the midst of a full on crash or another bubble-like spike? Given the politics that is ever present in academia, probably not. The fact that MIT has a Digital Currency Initiative at all should say a lot to Bitcoin’s critics, but the fact that its director Brian Forde thought it important to give these developers a place to continue their work after the Bitcoin Foundation ran out of funds speaks volumes.

Like it or not, if Bitcoin is to really fulfill its potential, it has to achieve some degree of mainstream acceptance. The events of the last few months have shown that that is far more likely if the price is at least relatively stable. If for no other reason than that, whatever those on the extremes may say, price does matter.

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.