The long term slow drop in Bitcoin value, is it the result of ...
It's probably a combination of things, really:
(1) Cyclical nature of markets. Biggest bull market ever -> pretty spectacular bear market only to be expected.
(2) Price outran fundamentals means that, eventually, price will be brought back to earth. Maybe
too much even, so now fundamentals are starting to catch up with price, and eventually will probably outrun the price.
(3) Professionalization of the entire market: both trading and mining.
(3.1) Professionalization of trading mainly means: the ability to short, to scale, which wasn't really possible until this year.
(3.2) Professionalization of mining means, competing industrial scale actors taking easy profits by selling newly mined coins at a small reliable profit, as opposed to the classical miner who held in anticipation of a less sure but higher profit. Race to the (profit) bottom started as a result: once enough miners sell, it becomes rational for the other, previously "hodling" miners as well to sell.
(4) Growth of network is solid, but possibly not as strong as previously thought. Had enough discussions with Jorge Stolfi about this topic in the wall observer thread, so I don't really feel like arguing why I believe there
is significant adoption slash network growth happening. However, I also do believe we saw a "dip" of sorts on several metrics (no. of tx, tx volume, to name two). Network is still growing, but at least over the last 1 and a half years, the rate of growth is arguably lower than in the previous 2 or so years.
(5) OTC transactions distorting price discovery / hiding buying pressure from the public market. This one is more speculative, but it's a point I have been making for now more than a year: there is (maybe by now: was) this naive notion that "big money" would buy into BTC large scale, as a way to secure their wealth in the coming crypto world. The problem is: even if that
would be happening (I'll remain agnostic about this going or not), there was never any chance big money would "buy in" on the exchanges in a straight forward way. It would have been always preferable to bind large mining operation's output to you contractually, possibly even sell a portion of the acquired coins to depress market price. NB please: I'm not saying that "big money is buying OTC". I'm just pointing out that
if this happens, it will present as lower buying pressure than if it would happen on-exchange.
(6) Mtgox. Enough said.
(7) Various stuff I forget now... ETF still not listed. Looming bear market in general. Correlation with gold price, which isn't doing so hot either lately.
If I only had to pick the three biggest reasons, I would say:
market cycle + large scale shorting + professional short term profit mining.
