When to Buy in New Era of Cryptocurrency Regulation

in #bitcoin6 years ago

Bitcoin and other cryptocurrencies have tanked this past month and a half, peaking at $20k and crumbling down to $8k at a rapid pace. This has been for a variety of reasons, spanning from January blues to stricter regulations to concerns over Tether. Have we reached the dawn of the next era for Bitcoin?

In my opinion, we have. It is currently looking like 2018 will test Bitcoin and other cryptocurrencies as regulators discuss it more and more frequently. Opportunistic journalism will, as always, exaggerate movements in both directions (hint: It's not just FUD, it's also FOMO). More companies will feel forced to have a stance on the cryptocurrency phenomena, likely all echoing the same statement of "it's too volatile, but we like blockchain."

It should be interesting to see how this all plays out, but my investing strategy has not changed. I will still have a limit order in at around $8,300 (which Bitcoin bounced above just after this video was recorded, but will keep limit in).

I suspect the bubble hasn't popped yet as the speed of Bitcoin's rise didn't give much opportunity for many people to buy in and many felt they have missed the wave. If we start to see another substantial pump, many will jump on board, fearing missing out for a second time. Of course, this is only speculation as bubbles are difficult to call.

However, this is my viewpoint and I will stick with it. As always, moments like these illustrate why you should be diversified into other asset classes besides cryptocurrencies so that you aren't overexposed to the risks in this field. Best of luck to all of you and happy investing!

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Hello Crypto Investor,
I’ve really valued your level-headed insights into cryptocurrencies and investing strategy so far and I was wondering what your thoughts are about the US stock market right now.
Based on several metrics (below) I thought that it was over-valued in early 2016 and destined for a correction so I pulled all of my funds into money market and low risk investments like bonds. Obviously I regret that now, considering how the Dow has exploded in 2017 and the early part of 2018, and in hindsight I probably should have kept at least 25-50% of it in stocks. My questions is, would it be reasonable to try moving back into stocks if there is more room to run, or would that just be FOMO investing? I missed out on a lot of gains being on the sideline and it’s difficult seeing the S&P continue to rise. If staying in bonds is better, do you think there is a substantial risk in high-yield/corporate bonds as opposed to US treasuries/money market, especially in light of rising interest rates? I have read several articles that argue LIRP/ZIRP has caused a massive bubble in the bond market and I don’t want to make a bad move twice.

Disclaimer: My main area of expertise is in math/the physical sciences (with some economics background) so I don’t want to step too far out of my circle of competence, and would value your opinion about the current market.**

**I know you cannot offer investment advice, and all decisions are ultimately my own, but again, I would value your insight coming from a finance background.

  1. Stocks are at historically high valuations (Shiller PE Ratio (CAPE) is currently at 33.9, and Corporate Equities to GDP is at 132.2%, both last seen only in 1929 and 1999)
    https://www.advisorperspectives.com/dshort/updates/2017/09/06/market-cap-to-gdp-an-updated-look-at-the-buffett-valuation-indicator
    http://www.multpl.com/shiller-pe/
  2. At the time (2016), Industrial Production was starting to dip and I thought that was a sign of trouble, but it has since recovered significantly)
    https://fred.stlouisfed.org/series/INDPRO
  3. At the time, YoY Change in unemployment rate was starting to rise but has since recovered.
    https://fred.stlouisfed.org/series/UNRATE#0

Great video as per usual. I think the regulation aspect is inevitable and there will be more coming our way. That being said the upside of regulation is it legitimizes the market and will eventually bring in new investment.

That being said I think the BTC price will go up in the long run but what impact do you see implementation of lightning network having in the shorter term?

Bitcoin is king because of it's liquidity, but it is an old man in this market surrounded by more youthful coins and tokens. The Bitcoin crash is inevitable, but I don't believe the lighting network will save bitcoin. Even as we speak, the light network is being implemented, but the User Interface is not user friendly and it full of bugs. Also Coinbase and other wallets will be slow to implement the LN network, because they haven't even fully added support for SegWit(Segregated Witness) . Anyone else believe that 2018 will be Bitcoin's last chance to redeem itself?

you have no clue what youre talking about. bitcoin will not go below $6000. If your eyes are open you will see that the FUD is getting more and more serious and yet the effect it has on the market is a small fraction of the initial effect. The hodlers are strong and they are right to be. Any institutional investor (with 100 million to invest) who invests in bitcoin between 6000-8000$ has a extremely good chance (~80%) of making billions in the short term (next 3 years) and about a 5% chance of having bought into the world future international currency (20 + years) which would be valued between 5-13.4 TRILLION dollars. These odds are astronomical in comparison to a lottery ticket. No comparison. Your issue is you don't truly understand the technology behind bitcoin and the power that the popularity brings to the techs adaptable nature.

let me ask you something. do you really think that the reason bitcoin jumped up from 9k to 15k in a day because of regular buyers like you and me? NO. That was clearly instiutional investors getting involved. This entire crash is nothing short of market manipulation.

The institutional investors want the weak hands out so they can buy the BOTTOM STACK of bitcoin.

All institutional investors SHOULD and have BEGUN to invest 5% of their investable assets in bitcoin with the intention to hold it for 20+ years.

Most institutional investors won't invest in Bitcoin as it has no intrinsic value at it's core apart from being the first kid on the block. It's also lacking behind in several aspect that would making it a useful currency. The changes are painfully slow due to lack of consensus within the core developers. Proof of work will also be problem as it requires a certain profitability for miners to have an incentive in maintaining the hashrate of the network.

It will still hold value over time but it won't be much different than collectors items such as post stamps (which could be used as currency once upon a time, believe or not). As soon as you can easily exchange or buy other blockchain tokens without going through bitcoin, we're going to see it lose its feathers.

WRONG. They will invest in bitcoin because it has the least inherent risk. Bitcoin has not scaled yet but it is in he process and it certainly has the capacity to scale. The lighting network is expanding everyday and the block sizes will eventually be increased. The bitcoin core developers don't agree but even still, it is way more likely to succeed than the competition because it is the first kid on the block and the most well known. Proof of work will not be a problem for an extremely long time and by then they will have figured something out. Being the first boy on the block is huge. I would say that bitcoin's only competition is ethereum and cardano atm so they are probably something like a 4% and 3% chance of becoming the international currency, respectively. Here is what institutional investors are thinking about bitcoin : https://s3.eu-west-2.amazonaws.com/john-pfeffer/An+Investor%27s+Take+on+Cryptoassets+v6.pdf

Also your argument that bitcoin has it's feathers because it is the largest financial gateway makes no sense. That money comes and goes very quickly. Negligible in comparison to the 3 main reasons people buy bitcoin and keep the money in the network : HODL(the largest percentage of bitcoin has been bought for this reason), quick and consistent profits (panic sellers), and lastly to buy bitcoin only to sell it later and make the weak hands get out. The reason that bitcoin prices falling causes alts to go down isn't because of the pairings. It's because the fact of the matter is this : If you dont believe in bitcoin, if the market doesnt believe in bitcoin, then there is no reason to believe in any other cryptoasset.

Myspace was the first kid on the block. Do you use myspace?

Look im not saying that no crypto currency can take over bitcoin's spot. im saying that being the first kid on the block is a huge advantage . Bitcoin is the decentralized, leaderless standard at the moment despite the fact that it is still centralized. I do believe that other currencies can get ahead. For example, If cardano is able to decentralize and implement a treasury model in a reasonable amount of time then maybe they can get ahead but bitcoin still has the best chance as of now. Then it's ethereum, and then it is cardano.

I honestly think Bitcoin will probably have a relatively high value (maybe more or less then the current value) as it finds a niche with block chain collectors much like post stamps.

Other blockchain platforms are already ahead if you take the monetary value out of the equation. This is my opinion, I look at this from technological and utility point of view.

''Cryptotrading'' doesn't interest me in the less. I actually exchanged most of my Bitcoin fund for other blockchain tokens that solve problems. I think that's where something truly as value or not. Blockchain platforms like Cardano, EOS, Ethereum and etc do strive to solve many problems with the technology and the world at large.

Bitcoin is bogged down with many ''cryptotraders'' or miners who can't look past the $$$. Many of the criteria that held value for Bitcoin are slowly being taken over by other currencies or platform. Anonymity, exchange and storage of value have all been improved by other players in the blockchain ecosystem.

Barron's magazine featured a "value investor" Murray Stahl in Nov 2017 on why he bought bitcoin:
https://www.barrons.com/articles/q-a-why-a-value-investor-decided-to-buy-bitcoin-1511810246

Bill Miller boasted about how half of his fund was in bitcoin.

The pressure of keeping up will push other managers to follow these leaders. The big money will necessarily move into Bitcoin and Ethereum because those have the largest network effects and brand name.

stiglg, I agreed that institutional investors have manipulated the price on more than one occasion, but this does not account for the drop in the entire market. Exchanges like Binance and Bitstamp have recently opened for new customers and Coinbase is struggling to keep up with demand due to the sheer volume of money entering the market. People are frighten and don't know about the technology behind Bitcoin, they only care about the insane profit margin, that is why we are seeing a pull back. Education is key here, and it will strengthen weak hands and will secure blockchain in the future.

The institutional investors are playing around with the emotions of those who have entered the space without knowledge of the underlying technology. The institutional investors are well aware and of the tech as they are currently paying hundreds of thousands of dollars to extremely intelligent people who are explaining it to them. The whales sell in accordance with news so as to mimic AND escalate fears. People have at this point become so irrational that they believe a ponzie scheme with a market cap of 3 billion dollars has artificially inflated the price of a digital commodity that is backed by mathematics by over 200 billion dollars. The fear is working and if people keep this up then the institutional investors will obtain a significant proportion of the bottom stack of bitcoins. In my opinion this is why satoshi disappeared. It is his gamble. If the banked have been unbanked and bitcoin succeeds, he will send them 1 million bitcoin. Even if he is dead, this will be executed. But im a good satoshi guy...who knows!

Hi, I don't believe your premise of the irrationality of investors and your theory that institutional investors are ready to jump in any day now when markets finally bottom. I do not believe that either is the case. You may be right and I may be wrong though. I am willing to admit that. But I will try to explain my thoughts.

Institutional investors are professionals. They do not invest as a hobby. It is their jobs and they know what they are doing. They understand the market cycle. They understand the implications of a parabolic run and then a climatic peak and they can see one a mile away. They get out before the bubble pops when mania besets a market. They mostly got out at on the bull run to $17K in early December. You can see this in the volume of coins traded. We had big volume on that run. Who do you think was selling out? All the news stories were around were saying that bitcoin was going to $100,000 or even a million. Who was not taken in by these crazy stories? The institutional investors. They sold out into the mania that was last December. I do not think that they are coming back for a long time.

Retail investors are acting rationally. We have been exiting since the blow-of top at bitcoin $20K. When a building is on fire, the last people to leave are the ones who get burnt. Some people can afford to hold on, for what may be years, until they get their money back. Most people are not so fortunate. I know that I am not.

Almost everyone in crypto is in here to make money. Let's be honest. But people can see that there are difficulties ahead. The easy money days are gone. That's not the market that we are in now.

What happens to prices if tether and bitfinex fall? They will go off a cliff.
What happens to crypto prices if the stock market crashes and we enter a new recession? They will go off a cliff.
What happens when people realise that 95% of altcoins are garbage? The market will go off a cliff.
What happens (in the short term) if governments seriously regulate crypo? The market will go off a cliff.

But hey, there's the lightning network to look forward to... :)

I believe that bitcoin in 6-8 weeks could be $12K. It's possible. I also believe that in the same time span, bitcoin could be $4K. So that's plus or minus $4K. Am I going to put my money into bitcoin? Of course not. I would get the same odds right now taking my money to the casino and betting it all in red. That's not a rational thing to do with hard saved/hard worked for money. The market understands this position and has done since bitcoin $20K. What is happening is a great unwinding of the market.

But who knows what the future holds. This is just my guess. You might be right. Fingers crossed for you. I hope that it all goes well for you.

institutional investors are professionals. Thats why that guy the guy above linked put 7 million dollars into bitcoin when it was 700$. he also agrees with the other institutional investor that i linked who believes that bitcoin has a chance to be worth all of the world's fiat. Youre right, institutional investors are here to make money and they are educated. They have been educated about bitcoin and so they see it as money. It's value for now, and in my opinion, for decades to come, is volatile. Institutional investors will take advantage of this so that if bitcoin among all the other crypto currencies that are here now or are to come, becomes the world's international currency, they will have obtained each satoshi for as cheap as possible. They have programmed bots to watch the market and have individuals constantly looking at news entering new information as it becomes available. You might want to pretend that this market is 100% like gambling because the odds are low for any of these coins to be THE coin that becomes the world international currency (a coin almost certainly will) but in the short term (<5 years) it is easy to select which coin is most likely to become the world's international currency (<5% chance in the long term no matter which one you think it is).

I appreciate your definite views :) They are interesting to read :)

I would think that greater than 95% of people put money in crypto to make money. We all want to make money. But wanting it doesn't make it happen. Putting savings into the market in the blind hope that the market will rise is gambling. This works in a bull market and people think that they know what they are doing. Buying the dips and holding works when the market is going up. Buying the dips and holding is a terrible strategy when in a bear market. It will kill a portfolio. It will grind it down to nothing. People need to be extremely vigilant and careful in a bear market. They need to protect their capital.

I agree with you that long term bitcoin (or something else) may possibly be even bigger than now. That could be months away or that could be years away. Nobody knows.

Be careful my friend and good luck with whatever strategy you employ

There are 1500+ candidates to become future world currency at this moment alone and many of them already perform better than BTC. Have you counted in the chance that BTC might go down to zero when atomic swaps will remove requirement to use exchanges and BTC as a liquidity pool?

Bitcoin does not act as a liquidity pool for the amount of money you are talking. if you want to sell bitcoin for fiat, do it. if you want to sell bitcoin for alts...go right ahead. bitcoins function as a liquidity pool accounts for a very small portion of why the price is so high. the price is high because there are so many hodlers.

On the other hand, why are there so many hodlers? Because they know there is a demand for bitcoin. And why is there a demand? Is it a good measure for payments, can it store value reliably? No, it isn't and it can't. But it is a good pool of liquidity. And when it wont serve this purpose too then hodlers might as well turn to bagholders.

most of the "hodlers" youre talking about have left the market because well, they are panic sellers. Most bitcoins are hodled because bitcoin has the largest chance of becoming the world's international currency. By the way if you ever see it approaching this you should sell and buy gold.

That's why I diversify crypto investments and don't try to accumulate as much BTC as possible

I was really watching all these news and rumours of everyone and I were really questioning my self if you would post on this topic.

I think that recent events like Tether FUD, india, korea , chinesse ban all of these lately news have played a big role in the bitcoin's path over the last few weeks. There is also the bitcoin futures which started about 1 month and a half ago who took a big role.

I feel like Bitcoin is really manipulated right now with all these stuff and people are playing with it. One major factor of why the whole market drop is obviously bitcoin price. Cryptocurrencies interest drops towards the masses of people as the bitcoin price drops. If you go outside and take some random people who have heard by crypto once they only heard about BTC.

What is the problem? Well, lately bitcoin dominance dropped as there was a lot of ethereum potential considering ERC20 Tokens and ICOs invasion so therefore a lot of people moved away from bitcoin. Then, bitcoin lost a lot a lot while ethereum gained a lot. This chart explains it really well.

Now, the market's future is in our hands. People either move back to BTC in order for it to come back stronger, else ethereum will take #1 place in the near future and then we will need time and patience untill masses of people will get educated about cryptocurrency. There was nothing catchier than a coin who jumped 10.000$ in few weeks for an average person.

What are your guys thoughts on this? Steem on!

I do think that ETH is skyrocketing now! However, I think that ETH is the hero who save the market, as it resembled in the last 2 weeks the strongest safest Coin (especially USDT does not look like so).
Look carefully today. There is no such panic like when BTC touch 10K (15-17 Jan), although BTC went today too far lower!
Moreover, it is more realistic to think that ETH will be 10X (10K), than BTC reach 10X (100 K), otherwise, the bubble will be too ...!
Now the price correction is going smoother toward ETH rather than whole coin crash.
At least that is my opinion!

That's also what I advise most people that cant run into fiat when market crashes - to jump into ETH as its the most stable and suffers the smalles losses. If we compare all the market to ETH most of the coins are on green 💚💚

Why do y'all think ETH has been more resilient? That's my biggest question now. Do people collectively see it as a safe bet? To me that doesn't make sense. Why would be any safer than BTC? Or is there orchestrated flow of cash (or could even be Tether manipulating) ? I see all crypto going lower.

From my point of view is safer as a lot of people start to believe in Vitalik's vision and actually there is aplicability ( ERC20 Tokens, cryptokities, smart contracts etc. )

There is also a better way out when bitcoin market is manipulated by different sources like bitcoin futures.

Also whens the switch to proof of stake happening? People might be accumulating for that in this dip. Probably a flippening then...

Hey crypto folks,

I see the following headwinds for cryptocurrency this year:

  • regulation - it is coming, all governments seem to getting very serious on this matter. In the long run it could be good for the market (unless they outright ban crypto), but in the short term it could have quite negative consequences for valuations as, at the very least, it should put an end to wash trading, pump & dumps, etc, which keep prices artificially high

  • altcoin crash - there are over 1500 altcoins. The vast majority of these do not have a valid business model. Their only reason for being is speculation. Like the dotcom bubble, these will probably crash to nothing.

  • stock market crash and possible recession caused by this. Has anyone looked at the S&P 500 lately? It looks like bitcoin in December when things were going nuts. What happens to the cryptomarkets when the stock market is crashing and some people are potentially losing their jobs? I am guessing that this would hit crypto hard. Crypto has never had to deal with a recession. People tend not to gamble with their money when they don't know where their finances will be in the near future.

  • bitfinex/tether crash - we all know that this is a possibility. No need to say any more on this potentially dire eventuality.

I would imagine that any one of these on their own could hit crypto prices by 50%. I am not saying that we are going to see all four this year. But we will probably see a few at least, which would hit crypto hard.

Who knows the future, but we could easily see markets down 80% from where they currently are. I am hopeful that at some time in the future (2019?) things might have started to pick up. But I am, I think justifiably, bearish for crypto in 2018.

What does the hive mind think? I would really appreciate your views.

Thanks

Crash of stocks might have an opposite effect. What other asset classes do you see that could absorb money from stocks?
Also Tether crash would be significant, but its not the end of the world. USDT market cap is what 2B? Is it much compared to total crypto market cap of >400B?

A crash of stocks implies loses and the feel poor effect. Second order effects could be people losing their jobs. Some people even losing their homes. I don't see how any of those could be anything other than negative for crypto currencies?

When the shit hits the fan, cash is what people rush to - not risky investments? Also the safety of gold? People rush to risky investments, like crypto, at the end of the market cycle, which was the mania in December.

Your second point regarding tether is not valid. I will try to explain why. Many people confuse market cap with amount of money that people and organisations actually exchanged for crypto. Market cap is what the last person paid for a coin multiplied by all the number of coins in existence. Not what was actually paid into the system. I read somewhere recently that the amount of money actually exchanged for cryptocurrency was estimated at no more than twenty billion dollars. So you can probably now see how two billion dollars can effect the market. Not to mention the shear panic of people and organisations who lose potentially all of their money.

I hope this makes sense? These are just opinions of mine. You could well be correct. What are your thoughts?

When one side looses, other side wins. During normal times cash is a guarantied 2+% loss per year. During crisis this percentage may be much higher and those "winners" might see crypto as good investment considering its historical gains after crashes.

If market cap for all crypto is no more than 20B, then why this couldn't apply to USDT too? Can we know if all issued USDT are held by people/traders?

No I did not say market cap for crypto was $20B. I said that the amount that people and institutions have invested in crypto is $20B. Sorry if I did not make that clear. The money spent purchasing crypto coins is estimated at no more than $20B.

To illustrate...

Let's imagine that all of the bitcoins have been mined. There are 21 million.
Next imagine that first 20,999,999 were bought for 1 penny.
Next imagine that the last coin was sold for $20,000.

The market cap of bitcoin is now $20,000 * 21 million coins = $420B.

The money put into the market was $229,999 and 99 pennies.
The market cap is $420B.

Obviously this is an extreme and over-simplified example that I constructed in order to illustrate the point that market cap is not the same thing as the amount of money that people have actually spent.

Tether is a different case entirely. Each tether in existence is supposed to have been created by the exchange of exactly 1 US dollar. So tether is the only cryptocurrency that there is where the market cap also is the (supposed) amount of money that was paid for it.

Total crypto market cap = however many hundred billions
Total amount of money paid for crypto = no more than twenty billion
Total amount (supposedly) paid for all tether coins = two billion

I hope the makes sense?

In this case USDT makes for about 10% of total invested money into crypto and impact will be more significant than I imagined

Yes, it looks that way. Will have to see how things pan out...Also we have to remember that Bitfinex is basically the same company as Tether. We found this out from the Panama Papers. Bitfinex are the largest crypto exchange in the world. If Tether goes belly up then possibly Bitfinex do to. Who knows what that could do to the market.

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I’m not too worried about it considering what the price was 60-90 days ago. Got to take this crypto market with a grain of salt and hold on tight!

Never forget me bro, I knew you would make it big on this plateform...I'll promote ya another SBD just cause your doing this industry a service. Keep it up my good sir ; )

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This is still the first month of the year. We have a long way to go. Before the end of 2018 it will surpass the old ATH once again like it always does.

Almost always. The first $1000* "bubble" didn't fully recover until last year. BTC's price was between $300 and $1200 between 2013 and 2016 -- This past year the market cap exploded. Its hard for most people to adequately grasp what is happening let alone being able to predict prices in the future. My gut says a one million dollar Bitcoin could still be a part of the future. Let alone a $10k Ether and a $10k EOS. Long term crypto is a buy, but which tokens to buy / hold and when to make movements in and out. These are all matters of debate.

Good point, to add to this, last time this happened it gave space for new projects to get off the ground(Ether among them). This rush was built on the foundation of the work done since the bubble popped back in 2013.

@writewords really nicely said !

Thank you for sharing your strategy on buying at these prices. It is reassuring, given the significant drop.

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