The Rise of Bitcoin and the Decline in Altcoins
I believe that bitcoin is in a bubble, but I'm not upset about it. I think of transaction activity as the 'fundamental value' driving bitcoin's value. Excluding speculative activity, the long-run price of bitcoin will be dictated by the need for reserves and transactions on a day-to-day basis, determined by the actual use cases.
In the short run, solid improving fundamentals drive speculative activity to a certain point, and then price momentum drives it still further. If price action gets too far out of reach of fundamentals, the momentum will eventually run out, leading to a pull-back. If the pull-back is a severe enough crash, the price momentum will work against it. For a while, fundamentals will improve faster than price. Eventually the improvement in fundamentals will outpace price movement enough that accumulation to support use-cases will start to create positive price momentum and the cycle starts over.
Right now the dominant factor is the prospective futures contract in bitcoin. While there will be some arbitrage activity aligning the futures with bitcoin, most of the trading will be USD-settled, meaning you won't have to own bitcoin to speculate in bitcoin. I actually see that as a negative for fundamental value. At the same time, there is a fork coming and previous forks have resulted in the total value of the two versions after being greater than the value of the single version before.
Meanwhile, Steem and other altcoins are traded in BTC markets, not in fiat markets. Most altcoin traders also have positions in bitcoin. With the price run-up in bitcoin, traders take money out of altcoins to ride the bitcoin wave. Also, few traders are thinking about adjusting their Steem price expectations and buying Steem at 'discount' with their BTC profits. So the BTC price can dip a little or hold mostly steady and it results in a significant decrease in USD price.
Full disclosure: I'm long bitcoin and a few altcoins. I have been paring bitcoin exposure and putting it into my preferred altcoins at these discounted prices, but I never take off principle from bitcoin, only profits.
(Special thanks to George Soros and Ray Dalio for informing my overall perspective on markets, and to @eternalsunshine, @motoengineer, and @ew-and-patterns because the overall framework of this post came from discussions with them.)
Good take on the possible bitcoin bubble
Thank you. I appreciate your feedback.
This statement is of great concern to me:
(Special thanks to George Soros and Ray Dalio for informing my overall perspective on markets)
My questions are:
Thank you for your response. My attribution to George Soros is for his market philosophy of reflexivity, which is an important part of how I see the markets. I have not studied his life or actions outside of financial markets. If he is a very evil man, then I'm sorry to have caused offense.
With respect to the votes vs. views... I do use bidding bots and have posted on this extensively. Some of the larger bidding bots, such as @buildawhale, @bellyrub, and @booster, have bidding trails or people that watch the bids and upvote posts before, to capture curation rewards from the predictable large upvote that is about to come from the bot. I don't like that aspect, as I would rather attract actual readers, but I usually get more interaction on my posts after I start summoning the bots than I do in the first day after I post. (I typically give my followers a day to see my posts and respond before the bots start showing up.)
showing your process is very cool and somewhat inspiring
I've resteemed your post!
Thanks for the feedback and resteem. I appreciate it!
Interesting thoughts, but don't you think that there is enormous potential for altcoins that have some distinct value as compared to bitcoin? For instance, the possibility to create Turing-complete smart contracts on ethereum, or the transaction rate of litecoin, or the privacy offered by zcash, etc.
I still think it is wiser to invest in different cryptocurrencies. The bitcoin bubble may burst at any moment, but cryptocurrencies will definitely change the world.
You may find this article interesting : https://steemit.com/cryptocurrency/@raci/surfing-the-cryptocurrency-investment-wave-or-drowning
What are your thoughts?
Yes, I absolutely do. In fact, this was meant to be more short-term to explain bitcoin rising and altcoins declining right now. I am working to identify the altcoins with the most long-term potential and taking advantage of the current pricing to build positions in the altcoins that I like the best.
Makes sense. Do you recommend buying, mining, or both?
I'm not sure yet. To be honest I was focused on building my career for the last few years and haven't caught up on all the current mining info. When I first got into bitcoin, I didn't trust the exchanges so I started mining. That turned out to be prescient- if I bought instead, I would have made more initially and then lost it all to Mt. Gox. As it was it paid off all my equipment purchases within a few months.
Now there are actually reliable exchanges, etc. and mining is more competitive than ever, so buying might be better. On the other hand, if you have already bought mining gear, definitely use it as long as it generates more profits than the electricity costs you.
In my honest opinion i see bitcoin going down after the fork and seeing altcoins reach all time highs. Eth will catch up to btc in market cap then when it does bitcoin will go up again. Just a few months ago eth and btc were close in market cap and i see that happening again.
Thank you for your perspective. I took a hiatus from crypto where I didn't pay attention at all for a couple of years, and I missed the whole bull run on Ethereum.
Now I do have some investment in it, but I'm just dipping my toes a little. I think the next big move after Bitcoin slows will be right here in Steem.
Steem will be big in the next 1-2 years. I see it hitting around a $1 billion market cap in that time range. I don't know if it'll make any moves rn maybe it'll go to $2 per coin when the bull run happens but i can see the coin easily being worth $4-$5 per coin in the future.
img credz: pixabay.com
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