I’ve been invested in crypto since 2012 and here are a few observations:
- 90% of the trading volume on the NYSE are algos (bots); I would venture to guess that in a largely still unregulated market like crypto, these algos make up a significant portion of trading volume. Most algo strategies are trend following; right now the crypto market is in a downtrend and the algos are creating a self-fulfilling prophecy by perpetuating that trend with bearish trading (i.e selling strength, painting order books with fake buy walls just to raise retail bids to dump on them at higher prices..). If the stock market is an ‘irrational actor’ then the cryptomarket is his bi-polar cousin who forgot to take his meds. Bad news is going to be amplified and good news is going to be half-heartedly received. Trading on headlines in the current state of crypto only works if they’re negative.
Crypto is not a scam, it is as real as the binary digits that display your checking account balance, but just like you cannot redeem your USD for a bag of ‘full faith and credit’ you cannot redeem your Bitcoin for anything tangible (i.e it’s not backed or securitized to another asset). People then jump to ‘it’s a Ponzi scheme’; the people dumping their entire portfolio every time a coin goes down 5% are exacerbating these declines. Every investor in your coin is your neighbor and you could have the best house on the block but if you have crappy neighbors (e.g see the above example) it ruins the neighborhood. When you have mostly HODLers who aren’t day trading spreads, freaking out from CNBC posts.. you have more stable pricing.
Just my two cents. If you HODL any crypto coin you’d dam better be sure to have some conviction in their feasibility and use case because this market will test your commitment 24 hours a day and seven days a week.
Be safe out there; I think this gets worse before it gets better - the weak hands need to get shaken out (for some they’ll be shaken out permanently).