This has had to have been one of the fastest bubbles I had ever seen in my experience with financial markets. Let’s be honest. Who really thought that Bitcoin could go from around $900 to $19,000 in a year? Yes, you can say that this is new technology and that it’s not like a stock and all that. Although, what really puts a dollar figure on things we view to have value? Us. We as people give value to things and that value can be translated into a dollar amount (or any currency amount depending on where you live). The point is that people fixate cryptocurrency with how much it can rise against the dollar and then make them money. How many times have you heard someone (even the founder of NEO) that their coin can shoot to the moon? What does that mean? It means how much USD can this coin be worth so I can sell it at the peak and make away with the bag.
One of the only reasons for the creation of Bitcoin itself was to break away from the financial institutions and to provide an ecosystem for a decentralized way of life. Bitcoin itself has proved to be a store of value at this point. It paved the way for others to come into the market and improve on the flaws of its predecessor. This coin is digital gold and how often are you going to the store and paying for groceries with gold? Hopefully never. You store value in gold just as you now store value in Bitcoin. Bitcoin itself is inflation proof and with a mere 21 million to ever exist it’s easy to see why people can go out and say that its price can hit $1,000,000. This is extremely limited! You see, the fear and greed cycles can sway heavy especially when the supply is as limited as we see here.
That leads to the next point, the fact that Bitcoin did lead the way and other platforms have been created to improve upon the technology. The birth of the “Altcoin” occurred. Now people can base their software on that of Bitcoin’s and give the technology an even more specified task. For the very few examples that are actually worth talking about, you have something like Ethereum, which can revolutionize the way we conduct business interactions or any sort of interactions. But for a coin like Dogecoin to even be in the top 50 market cap is scary. This hype is fueled even greater by corny YouTuber’s who try to gain publicity for themselves and offer you give ways and “insight” when really it’s someone who has no business in cryptocurrency, let alone stocks! Imagine some teenager on YouTube sitting in a gaming chair talking to you about why you should invest in Apple Inc. Why even give the person your time then go out and buy the coin in question when he explains that he is not giving professional financial advice. First off, he’s right, he’s nowhere near a professional and should stare CLEAR of crypto investing in the first place.
Fear, Uncertainty, Doubt. We really need to stop telling ourselves that every time the market drops and someone in the crowd tries to be reasonable and thoughtful and give an opinion as to why the market is acting the way it is. This FUD is a necessary part of the cycle if you didn’t know already. The market is a game for fear and greed. When you buy a stock (or a coin) somebody else is on the other side selling you that stock (or coin). And during times like this where the market is dropping fast, you’re selling your coin to somebody who knows exactly what the potential value of that coin is. To the “newbies” out there, just remember that they’re people who know A LOT more than you do and by selling off your coins in herds, you’re giving the smart people an advantage to buy in at a cheaper price. Look at 2008-2009, all those people sold all those shares because the belief that the market was in limbo (which it was at the time), but to act like you’ve never seen a crash before shows the lack of experience in some of these people.
In the short-term fear and greed rule the markets, but in the long run, sound fundamentals rule the whole arena.
As with the fear from governments threatening to ban cryptocurrency and to regulate it, people forget that the latter means adoption. When governments start paying attention to cryptocurrency, you damn well know you’re doing something right. It may seem bad at first sight that government is trying to place regulation on crypto but, remember we live in a civilized world where the government will always have a say in what we do. This is not the caveman days, we have organization and hopefully “class”. If you want to go political, I can give you a good example. People are always complaining that the rich don’t pay their fair share – now think about this, if millions of people are buying and selling crypto all day 24/7 we’d have a lot of people not paying their fair share. Not that I agree with taxes on cryptocurrency, but you get the picture that I’m trying to paint with government wanting some oversight as to what is happening in the new markets.
Liquidity and exchanges. People are getting all upset and wanting to act like lead investigators when it comes to potential scams. The headlines in today’s markets: Bitfinex and Tether. First off let’s establish the use of an exchange, a place to which you buy and sell goods and services (or stocks, commodities, and currency etc.). The same rule applies with cryptocurrency, you are there to buy and sell cryptocurrency and hopefully put it away in cold storage (like you’re supposed to). Well, the basic idea for USDT was to have liquidity in the cryptocurrency market and help eliminate the fear protocol from these investors. Instead of having to sell your coins THEN convert them back to fiat (if you could ever figure it out in the first place) you could just sell your coins for USDT and still have the same amount of money in there like you did in the first place. The obvious problem with today’s crypto is that prices aren’t stable enough to consider them good short-term stores of value. Could you imagine being at a coffee shop and paying $5 worth of Bitcoin for a coffee then by the time the transaction clears they make you pay $2.50 more because the price of Bitcoin fell by 50%? This is ridiculous!
P.S a subpoena is not necessarily a bad thing. In fact, it is more or less like a confrontation of a business from law enforcement to see whether or not a rumor is true and give evidence backing why they are in the clear or not. Simplified, but don’t let news tell you something is as bad as they make it seem.
What do I think in general about this market crash (or correction)? Let it have its course on the young market and it’s new-found participants. Just remember, people who didn’t even care to invest in stocks, bonds, or precious metals are here for the first time throwing money into something they thought could get them rich in a hurry. No, that’s not how investing works my friends. In the end, the people who damn well knew about blockchain technology and its potential in the world stuck around, while the hungry soul looking for quick profits ended up flat on their backs when the herd left them in the dust. The people who are buying now, are buying from the people who are taking huge loses because of fear and greed. The people buying aren’t going anywhere and that’s what is going to keep this crpytocurrency market alive for the long-term. (more…)