Bitcoin transaction fee Chart

Currencies / Bitcoin

David Zeiler writes: One of the biggest knocks on the Bitcoin market has been the volatility of the price of Bitcoin, and looking at the price charts over the past six months, it's easy to see why.

But as crazy as the Bitcoin market has been - just take a look at the timeline - the lack of any major news over the past few weeks has had a distinct calming effect on the digital currency.

After the CoinDesk Bitcoin Price index sunk just below $450 on April 25, it traded in a narrow range between $460 and $420 for the next couple of weeks. And the week leading up to yesterday (Tuesday), the Bitcoin price was very quiet, trading in the mid $440s.

The drop in Bitcoin price volatility - and the decrease in sensitivity to news and rumors - is a step toward the maturation of the Bitcoin market.

That's not to say a major announcement won't affect the Bitcoin market. All markets are affected by major news. But from here we should see less severe reactions to big news in the Bitcoin market and much more muted reactions to minor news and rumors than we saw last year.

Part of the reason is that the big price drops, combined with such disasters as the Mt. Gox bankruptcy, have flushed out many of the speculators that were driving the volatility.

Replacing them are more buy-and-hold investors looking at Bitcoin as just another asset class, and, most importantly, people who are buying Bitcoin to spend as more merchants agree to accept the digital currency.

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More stability going forward should prove another crucial factor in the broader adoption of Bitcoin. One of the issues that has held Bitcoin back is that it's too risky to bother with. As that changes, more and more people will feel comfortable using it.

There's another effect of increased stability:
a slow, gradual increase in Bitcoin prices. That will be much different than the insane parabolic rise we saw last fall that inevitably led to a crash.

The price of Bitcoin is destined to rise not just because people are using it and investing in it, but because its digital nature gives it value beyond serving as yet another form of payment. For example, the blockchain that verifies each Bitcoin transaction can also verify other digital properties.

The 9% rise in the price of Bitcoin on Tuesday - for no apparent reason - could be the first stage in a gradual appreciation that will get Bitcoin back to its all-time high and beyond. That would be good news for Bitcoin enthusiasts as well as Bitcoin investors.

"While I'd like to see a huge rally in prices, the first step before that happens is to see steady trade, " said Money Morning Defense & Tech Specialist Michael A. Robinson. "That way when the big move comes, existing investors will have established a long-term solid foundation."