Will Grexit Force Bitcoin Price to Spike like the 2013 Cyprus Collapse? (Op-Ed)

Bitcoin prices are on the move upward. Bitcoin volume trading is on the move upward. Greece is on the move downward to a total collapse. Coincidence? I think not.

Why? This has all happened once before, over two years ago and maybe we can all learn from the experience, especially all the day traders and speculators out there.

Lessons from Cyprus

So let’s take a look at where we’ve been as far as bitcoin price and where we may end up going in the near future. Let’s all be bitcoin speculators, in a week where the Greeks have an entire week to speculate on their economic future, with an extended bank holiday in effect.

Let’s travel back to March of 2013, when less than 1000 km away, Cyprus was going through a similar economic turmoil. The fine details aren’t of great importance here, but what did happen was an economic “bail-in” following a “bank holiday,” which is beginning in Greece today. The holiday in Cyprus lasted over a week, with banks not re-opening on Monday, March 19, and remaining closed until the 28th.

The bank returned at that time with a nice levy of capital controls against the people, a punishment for keeping their funds inside. Throughout the month of March, similar acrimony and public rhetoric ensued, leading many to pull their funds, and some to begin investing in economic alternatives, only not in the trusted old standards like gold, silver, and real estate. The market moved toward a relatively new digital currency called bitcoin.

As of March 1, 2013, bitcoin (BTC) was commonly trading at major exchanges at less than US$40 per digital coin. What would happen next is what made many people worldwide start to notice the little-known cryptocurrency for the very first time. As the situation in Cyprus became more and more dire, interest and prices for bitcoin moved up in an inverse fashion. Bitcoin prices had more than doubled by the time Cyprus banks reopened, and when the capital controls initially took effect, prices skyrocketed on the demand.

Bitcoin had risen from less than US$40 to more than a 400% increase within the forty days ending on April 9. Gold and silver prices were unaffected, moving hardly at all through this specific period of the economic collapse of Cyprus.

Why this was the case is as speculative as the interest only in the digital currency at the time, but the facts remain. Upon peaking in the US$230 range, prices quickly plummeted back to US$60-70 within days as short-term capital controls eased in the region.

Grexit: a boon for bitcoin?

Will Bitcoin price relive its previous speculation glory upon the coming Grexit restabilization? The evidence is already signaling its beginnings. Bitcoin prices have risen approximately 10% in the last two weeks, the most upward movement in months.

Sure, Bitcoin will probably bust loose and rise by 500% or so on #Grexit, but @start_coin will outperform by a wide margin.

— Max Keiser (@maxkeiser) June 28, 2015

However, the situation is different now over more than two years ago, with tens of thousands of merchants like Dell, Microsoft and Expedia selling BTC for fiat currency. This is done on a daily basis, to pay daily expenses, creating constant downward price pressure. This certainly wasn’t the case globally in March of 2013.

Bitcoin today will have a much tougher road ahead if it wants to gain anything close to that much upward price momentum, so a 400+% price increase is highly unlikely within the next few weeks. Interest in Bitcoin from Greece has more than doubled recently, according to Vaultoro, which specializes in Gold and bitcoin exchange sales. This supports the price increase.

Supporting evidence of a groundswell of interest in Bitcoin comes from the last week of trading in multiple major markets. LocalBitcoins.com is posting 2015 record volume trading for bitcoin in several markets including Russia, India, Sweden, South Africa and even Europe’s region overall. Activity hasn’t been this high since the end of 2014 when prices were almost double their current rates.

Prices are up, interest in Bitcoin is up, and another looming economic collapse is a recipe for incredible highs for currency speculators. Should anyone expect US$1000 bitcoins by August? No, but don’t be surprised if history repeats itself, and bitcoin gains much more than the current 10% increase.

Now seems to be a good time to ride the wave for speculators. Bitcoin is a high-risk, high-yield investment, and should not be speculated on by novices for short-term gain. This economic history based on a nation’s turmoil also shows that prices will return to near normal after a short-lived bull run, so keep this in mind.

Are millions of Greek buying Bitcoin and driving the price up based on the nation's local demand? Highly unlikely. Greece is a very small market with a big brand name. It is a fraction of the size of major players like France and Germany when it comes to GDP or any economic metric. There may be a bunch of new BTC owners in Greece over the last couple of weeks, but far from enough to move the global bitcoin market alone.

Most likely, speculators all over the world are seeing the Grexit as an opportunity to stimulate the BTC market, and are just buying against each other’s greed. This is why I don’t put a great deal of stock into the USD price, because it is a metric for speculators, not a good measure of Bitcoin’s overall value.

It may be a great time for all you day traders, but for those of us with more of a long-term vision of this currency, your life shouldn’t be affected much. Bitcoin price may be going somewhere shortly, but the currency is here to stay.