Giving in to Your Fear: Does the Current Market Warrant this Magnitude of FUD?
What Does the Market Need?
Bitcoin is going through a massive trough that has undoubtedly led to widespread fear in the market. The entire cryptocurrency market, which is essentially a replica of Bitcoin (for the most part) at this time, has been pulled down with it. Projects and investors in the cryptocurrency space are going through a massive confidence crisis. There are a lot of similarities from the 2014 Bitcoin bubble, but 90% of investors today neither existed in the market then nor did they care to read or educate themselves about it.
In the hostile environment that is the 2018 cryptocurrency market, it takes a lot of self control to stay put and keep oneself invested. It isn't easy to stay put with so much of daily action so we definitely cannot blame those who are cutting their losses and exiting. It is naive and ignorant to say if they wanted to exit they should've done so at a higher price like $6000 or above. Many people idealized the flawed notion that Bitcoin cannot break below $6000 as the cost of mining is around that region. This is similar to saying a commodity cannot have a market price below its production cost. This occurs regularly with commodities, bullion, and even stocks. Additionally, it is easy to forget that Bitcoin touched $6000 for the first time in November 2017, so it isn't some long held barrier, just an important level of support (which are broken all the time).
So it all boils down to one thing; what do investors want now? The answer to that is Wall Street adoption. The biggest news in cryptocurrency today seems to be getting institutional investors on board. The frenzy in the Crypto community is focused on Bakkt, the cryptocurrency platform set to be launched by ICE, the parent company of the NYSE. Apart from this, the proposed VanEck ETF is also creating quite the ruckus. People are seeing these events as the main factors to drive the market out of the depression it is in. At this point we will see surges in the market when Bakkt is launched and if an ETF is given permission from the SEC purely from a behavioral perspective. At the end of the day, buying drives the market upwards and news like this is likely to cause buying. But is this really what the cryptocurrency market needs in order to develop?
Inorganic Growth
Just like traditional finance has inorganic expansion i.e. acquisition of companies, cryptocurrency is looking for inorganic growth by trying to drive the market without real development. What is good for Bitcoin may not be in the short term interest of investors and the masses. As of now, people still see it as the asset that went from $3000 to $20000 in 4 months. Nobody sees it as a breakthrough in payments and banking. The day Bitcoin is looked upon by the masses as the genesis for a new era of financial protocol is when it will truly serve its purpose. By getting institutions who do not really believe in the technology but are there for the prospects of a 1000% gain, the market grows and obtains that much wanted liquidity but also leads to the possibility of centralization; the nemesis of Bitcoin. Just as companies shouldn't focus on the short term gain and jeopardize their long term development, the same concept needs to come into focus in the crypto markets.
So What Does the Market Need?
In order to maintain long term sustainability as a valuable asset and for cryptocurrency to fulfill its purpose to the world, the focus must be shifted away from the price and onto adoption, ease of use, merchant acceptance, and the development/betterment of platforms. One of the top cryptocurrencies, Ethereum, cannot sustain above 20 transactions per second. This is not the hallmark of a coin worth $1400. Other protocols with similar capabilities are overlooked because Ethereum has first mover advantage. While their development team is top notch and Ethereum is one of the best prospects in the market, I have no doubt it will one day be a world changing platform. But is it truly worth even $100-200 today? Probably not. The co-founder and one of the most well-known personalities in the market, Vitalik Buterin, has issued a warning to traders and investors that this is an extremely volatile and irrational market that can crash to near 0 at any time, any money put in should be money you can afford to lose. While liquidity is important, it isn't everything. Rome wasn't built in a day, don't expect a $10 billion market to become a $750 billion market and sustain over there. Bubbles happen and leave people destitute. NASDAQ saw a bubble during the dot com crash, it recovered after being allowed to retrace and recover. The market here is doing the same thing. Alt coins with good development teams, frequent updates, and potential to disrupt shouldn't be overlooked for a lack of liquidity. All the big companies of today started from the ground up. The tough part is sorting the good projects from the mediocre ones that exist for short term gains.
Future Outlook
The current scenario of over thinking and jumping to conclusions is toxic to the market. Bitcoin recovered from a 90% dip 3 times since listing on exchanges. Equities have fallen 60-70% multiple times and rebounded and soared past previous highs. If you want to take advantage of short term volatility, look into Bitcoin futures. But if you really believe in the technology that blockchain has to offer, nobody has to convince you to hold on to your crypto assets because you understand what the future holds for cryptocurrency.
If you're hesitating because your facing a huge loss, look at this chart for some long term perspective. Buffett bought stocks in the 2008 recession when it was only 10% down and bought the whole way down because he understands market cycles. Hold on for as long as you can. You've made it this far, a few more months or even years will be worth the pain.
- AB
ReverseAcid Monthly Recap
Crypto Analysis Series
- Part 1 - Basic Attention Token and How It's Revolutionizing the Internet
- Part 2 - Golem Network Token as a Potential Giant Killer
- Part 3 - Augur and the Future of Decentralized Predictions Markets
- Part 4 - Dogecoin - Such Meme, Much Value
Previous posts:
- DLT, Blockchain, and Cryptocurrencies: What it all Means for FinTech and More
- Confidence Crisis: HODL on to Your Horses
- Bitcoin Technicals: In Depth Breakdown of the Current Move
- The Scalability Trilemma
- Online Retailer’s Incentives for using cryptocurrencies as a medium of exchange
- Bearish Sentiment is Almost Gone: Bitcoin Technical Breakdown - 21 November 2018
About Reverse Acid
)
Be a part of our Discord community to engage in related topic conversation.
I think all BTC needs is a mega capitulation candle or two! There’s nothing wrong with crypto’s, it is just the price, once the people driving it down get their fill I guarantee all crypto’s will rise! Time is irrelevant, the longer the sustained downtrend the better! I still don’t think the downtrend ends any time soon, Maybe next year or even longer??
Yes and to be quite fair, when you take a value perspective you need to think 'does owning an Ethereum really provide me $500 worth of value'? The answer is a straight no and this was a much needed correction not just for price growth but so that we can get back to focussing on development and bring an order of rational thinking in as well.
Posted using Partiko Android
Congratulations @reverseacid! You have completed the following achievement on the Steem blockchain and have been rewarded with new badge(s) :
Click here to view your Board of Honor
If you no longer want to receive notifications, reply to this comment with the word
STOPTo support your work, I also upvoted your post!